Raising money for a startup is a lot harder than it used to be.
Throughout the 2010s, low interest rates meant that investors and venture capitalists were freer with their investments. Countless companies were able to secure tens of millions in funding. But in recent years, that’s significantly changed. VC investment levels dropped 35% between 2022 and 2023. And founders have reported that it’s harder to get investment now than ever (unless you mention AI in your pitch, some say).
For this Confessions sub-series, Glossy has been speaking with founders about their fundraising horror stories. In this first installment, a second-time startup founder who just raised a funding round for her fashion-tech startup dishes on some of the insulting and traumatic experiences she had during her first go-round on the fundraising circuit, in 2019. She also discusses how that experience affected her decision to find funding for her new company. Identifying details have been removed to protect her privacy, and the conversation has been lightly edited for clarity.
Did the bad experience of your first company affect your feelings on fundraising for the second one?
“I had a horrible experience with my first investors. After that first experience, I decided I didn’t want to do any VC funding for the new company. But I was introduced to some investors by a mutual friend and only after a lot of talking to them over several months did I realize they were a great fit. I just needed to get over my trauma.”
I’ve heard stories from founders about going into a pitch meeting and being told right away, “I’m not actually going to invest, I just wanted to take the meeting to learn more about the field.” Have you experienced that?
“That happens all the time. I’m now really cautious about who I share my deck with, especially if the potential investor has something kind of adjacent to my company already in their portfolio. A lot of times they’re just looking to see what else is out on the market to benefit a company they have already invested in. It’s real ‘Art of War’ shit going on. They’re trying to keep an eye out on what their competitors are doing even though it wastes your time.”
Has the landscape gotten worse?
“Definitely. It’s gotten a lot more fierce in the last 48 months because the market was starting to tank. When you’d run out of money, it used to be, ‘Oh, whatever. Go raise another round.’ Now, everyone is under such pressure to perform right away.”
What made that first funding round so bad?
“Before my current company, I built another startup and raised money for that. The partners that I worked with for that company are awful. I remember going in for a partner pitch. I had spent five years building this company. I pitched it with all my life. The investors were all sitting around facing toward the [Zoom] camera, and I could see one of their laptop screens. I will always remember this — it’s seared into my brain. He was shopping for slides, like children’s playground slides — comparing prices and everything. I found it really disrespectful. They were barely listening. And the worst part was, they were the only ones who gave me a term sheet.”
You ended up accepting their investment, despite the disrespect during the pitch.
“I knew I had to take it, even knowing they wouldn’t be a good partner. And they weren’t. When I recently raised this round for my new company, the investors [from the first company] called and threatened me. They were going to sue me for starting this new company. They were adamant that my new company would dilute the other one. [Both companies are in the fashion-tech space focused on a similar part of the backend of fashion operations. Both also have big clients in the luxury space.]
I lament the fact that, because I was a first-time founder and a woman, I had all these disadvantages. So, even though I knew they were not going to be good partners, I had to accept it. When you’re a first-time founder, there’s no picking. You just take the money from whoever will give it to you. That’s the underbelly of the startup process. Lots of founders have told me this — that the first round is going to suck and you just have to take the dollars. You have to prove yourself.”
Editor’s Note: For our Confessions series, we provide anonymity to fashion and beauty industry insiders to allow them to openly share their perspectives and give readers genuine insight. The author of a Confessions story is aware of the identity of the speaker and has validated their title and position.
