overview

Episode 8:

Why your Relationship with VCs is More Than Money

How to Form Meaningful Relationships with Investors

Not all money is created equal. As a new entrepreneur, you may be eager to raise capital and find a VC that says yes. But before signing on a dotted line, have you asked yourself the right questions? Are you even ready to raise funding? In this episode of WorkSmart, we’re chatting with early Blavity investor Jarrid Tingle on the relationship between a founder and a venture capital investor. It’s more nuanced than you may think, so buckle up and listen-in as they recount their journey towards a powerful partnership.

Blavity & Harlem Capital

In Morgan’s first round of funding, she faced rejection after rejection from Black venture capitalists. Feeling discouraged, she put her nose to the grindstone and decided to bootstrap her business…until a friend recommended she raise money from social impact investors. 

 

After her first round of funding, enter Harlem Capital. Harlem was a new venture at the time, focused on helping Black startups. Morgan quickly realized that her vision and Jarrid’s aligned perfectly, so after a memorable business brunch, they took a chance on each other!

In It For The Long Haul

No matter how promising your vision is, remember that venture capitalists are taking a risk by investing in you (and vice versa). For the relationship to work, you have to work together as business partners for that mutually beneficial outcome. At the time, Blavity wasn’t desperate for funding, but Morgan said yes to Harlem because she knew this partnership would benefit them both long-term.

 

In the same vein, Morgan recommends every founder have an executive coach who can advise with farsight. You need someone outside your organization to hold you accountable and point out your business’ blindspots while staying mindful of your goals five, ten, even twenty years down the road.

From Founder To CEO

When growth speeds up and your title changes from Founder to CEO, it’s time for a mindset shift. These two titles may sound similar, but leading an organization through milestones and hiccups is a whole new ballgame. Having a business philosophy is crucial and Morgan’s is – don’t sweat the small stuff. 

 

It may sound odd, but Morgan understands the need for diversity in her management team, and not just diversity skin-deep, but diversity of thought as well. Perfectionism has no place at Blavity. The more opinions at the table, the better. And when you switch to CEO, you must find things that help your company grow besides big checks from a bougie hedge fund. 

Ready To Raise?

Maybe you’re scratching your head wondering if it’s time to pull the trigger and raise that first round of funding. Knowing when the time is right can be tricky, so let’s outline some best practices. Jarrid says if you have experience in a particular sector or vertical, you can get away with raising sooner rather than later. But if you’re new to an industry, it’s probably better to wait. 

 

In general, the longer you’ve developed your vision, the better your terms will be when it comes time to raise. So don’t jump the gun. And take feedback whenever possible.

In Sum

As Blavity has grown from a tech startup connecting Black entrepreneurs to a media company blowing beyond the tech bubble, Morgan has leaned on people who share the same vision. Her partners in crime give advice that’s not short-sighted and said for the sake of a paycheck. And these partners include leaders at Harlem Capital who’ve been by her side from the beginning. So if you’re ready to raise, be mindful who you let into your circle, and make sure you’re prepared to partner for the long-haul. 

 

Remember: work smarter, not harder.

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GLOSSARY

RFP

Request for proposal. What an agency or firm will send through so a company can pitch their business to solve the problem at hand.

Cash Flow-Positive

When cash inflow exceeds cash outflow. This is not the same thing as profit.

Contribution Margin

Revenue available for each product or unit sold after deducting the variable portion of the firm’s costs. This measurement is used to understand how a specific product contributes to a company’s overall profit. Examples of variable costs include materials used in production and factory labor.

 

Contribution Margin = Sales Revenue – Variable Costs

Scalable

When it’s clear that a company can grow with additional resources

Proprietary Technology

A system, application, or tool that a company owns and either uses internally or licenses to third parties for profit.

Exit Activity

What happens after a company’s sale. Can include the sale or termination of a line of business, management restructuring, and location closures.

Revenue Multiple

A ratio used to measure a company’s value based on net sales or gross revenue.

Direct-To-Consumer (DTC)

A company is past its growth stage and is likely looking to go public in the stock market. The company is successful and searching for additional funding to expand into new markets or acquire other entities.

Anchor Investors

People who invest before a company goes public.

OUTLINE OF THIS EPISODE

[01:48] Blavity’s early days

[10:49] When Morgan met Jarrid

[22:37] Blavity today

[26:16] The impact of current events on black business

[28:50] From Founder to CEO

[31:21] Why you need an executive coach

[42:55] Morgan’s vision for Blavity’s future

[46:23] Questions for Jarrid

[48:50] Knowing when you’re ready to raise

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