In the Women Entrepreneur Series My Worst Moment, female founders look back on the most difficult, gut-wrenching, almost-made-them-give-up experience they’ve had while building their business—and how they recovered.
Finery is a digital wardrobe-management platform that tracks your online clothing purchases and helps create and manage outfits. (Yes, it’s the Clueless closet come true!) Founders Whitney Casey and Brooklyn Decker launched the company to make women’s lives easier, but getting the startup off the ground was anything but easy. When a well-known investor backed out of a deal, the women worried that the reputation of their operation was at stake—not to mention the peace of mind of their employees. Casey, the startup’s CEO, tells us what went wrong.
“As a new startup, having an investor with a recognizable name is a big indicator to other investors that your concept has legs. We had great, solid, top-notch investors who had put money behind big brands in our space like Reformation and RewardStyle. But one of the original technical founders of Uber wanted to angel invest, and because he was a name and outside of the fashion-tech space, it provided even more validation. Having a thought-leader behind an idea can really create buzz and lift behind a company.
When he verbally committed to the investment and asked for wiring instructions, we were thrilled. The next morning we had a breakfast to tell our team and our other investors—we wanted to get everyone fired up and keep the momentum. But that afternoon, he flaked out. We were devastated. That entire day, he kept putting us off. We sent the wiring instructions with a closing deadline, which is standard procedure, and he never responded. Eventually we got an email saying he changed his mind.
We take some responsibility here. We didn’t do our due diligence on him as an investor. How many times had he pulled out of deals? Was he trusted in the investment community? Were his motivations just about equity? What value would he bring our company? These were all questions that I didn’t ask, and I should have. Turns out, he met with a lot of companies and became an advisor to a lot of them—and what that means is, he takes equity without putting money in. Having great advisors that you “pay” with equity is often a great idea. But our need was capital, not ideas.
Related: 10 Tips for Women to Improve Their Persuasion Skills
Additionally, as CEO, I never should have told my team about the investment until the money was in the bank. But when we did tell them the deal went through, we didn’t belabor it. We just picked right up from where we left off, and filled the round with another investor within our friends and family round. The best way to ameliorate the situation is to not sulk in it (though that is what I did, personally, at home, alone). We took some great advice early on: don’t let your team go on the great emotional rollercoaster ride that you have to go on as a founder and CEO. Give them as stable a ride as possible—there will be enough ups and downs naturally without you adding to the mix. As CEO, the only person you really need to learn how to manage is yourself.
We have a much different process when we consider investors now. We interview other entrepreneurs who’ve taken money from this person, and talk to someone they’ve been on a board with. When the going gets rough, how does this person respond? We did a ton of due diligence on our lead investor, Tony Florence from New Enterprise Associates, and not a single negative comment came back. In fact, everything was beyond glowing. Taking money from an investor is a long term relationship—so do your homework.”