•EP17 Fundraising as females•
Elsie and Dominika: This Episode we’re gonna just touch on Black Friday seeing as it’s just past. I felt we really couldn’t go without talking about it as a sustainable brand. We’re also going to touch on our take on female funding. We were just in New York actually, raising money or kicking off a fundraise. So it’s all very timely. I feel like we’re literally always fundraising. We just closed a fundraise and now we’re like, Oh, we’re fundraising again! When we get to that bit, we will also go into a bit more about the timings of fundraisers, as they always take longer than you think. We have many golden nuggets to drop guys.
How Black Friday is changing and BYBI’s Green Friday spin on the popular shopping tradition
Dominika: I have a love hate with Black Friday. It causes me a lot of anxiety. I actually have anxiety right now because of Black Friday.
Elsie: So obviously it originated in America. When we were in New York, they were gearing up for Thanksgiving and Black Friday is the day after Thanksgiving, which kind of marks the opening of the Christmas shopping season and it has traditionally seen huge discounts across pretty much every retailer or brand. We’ve now started to see it blend into the whole weekend. And then there’s cyber Monday, which just cropped-up out of nowhere.
I think this year has actually marked a bit of a shift for Black Friday consumerism. I’ve seen so many brands doing things a little bit differently which is really positive, but I think that’s generally driven by an acknowledgement that Black Friday tends to drive mindless consumption, which in turn leads to a lot of waste.
Dominika: Definitely. It’s something that we grappled with a lot because obviously it’s a great commercial opportunity for any brand and consumers do expect something on Black Friday. They actually often hold off purchasing for a couple of months in order to kind of recoup on Black Friday. So if you then don’t present a good offer to your consumer, it can then turn them away to a competitor who is doing something better. So it’s quite challenging. Christmas can also be an expensive time for people. People have to buy a lot of gifts and a lot of the time they rely on Black Friday to present them with those deals in order to really be able to purchase the things that they need for Christmas. So it is really tricky as a brand to know what to do. But definitely from a consumers perspective, it’s a really stressful and overwhelming weekend because you’re constantly thinking about the deals, are you going to buy now or are they going to be discount farther? Is your stuff going to sell out or is it going to be there forever? It’s really not a particularly enjoyable experience I think.
Elsie: Exactly. On the flip side, there is as consumer, a sense of wanting to get the best deal from, all of your favourite brands and really wanting to take full advantage of this time where you might be able to get something that perhaps you wouldn’t have been able to afford a non-discounted time of year. I feel as a consumer, I’m very aware that I’m playing into society’s much larger problem of hyper consumption, which in turn, contributes to climate change. But having said that, I want a great deal as well. My inbox has just been bombarded with, brands sustainable and not sustainable, doing these blanket discounts and I tell you something, it’s taken all of my will power not to purchase anything that I don’t need. Because, I think that we do have to start moving away from this buying thing after thing after thing, as it ultimately is harming our planet.
Dominika: Some of the ways that it is harming our planet seem to be really tangible in terms of what the environmental impact is. I think the quickest way to see that is just the sheer amount of extra deliveries that need to happen. That just in turn results in increased carbon emissions. I know our warehouse, in Melton Mowbray, they’re absolutely stacked! They cannot get all of the packages onto the trucks. All of the delivery companies are now having to send more and more vans because they’re absolutely rammed. The kind of speed for, or the need for quick delivery, is something that we’ve become accustomed to. So there’s a lot of same day, next day delivery, which places a huge amount of pressure on those logistical systems. And it means that there’s more cars, more congestion, more carbon emissions going into the Earth’s atmosphere in a short amount of time. We know that this directly results in the increased warming of the planet. So there’s a really immediate and tangible negative impact on the planet. Then you think about the inevitable waste of all of the products that are bought, they tend to be wasteful or done on the fly, not needed basis, and then are ultimately discarded and thrown away.
Elsie: Or returned. Think about that. You know, it’s taken me as a consumer who used to be addicted to Asos, a long time to really face up to the fact that that buying, you know, 400 pounds worth of stuff on Asos only to return 380 pounds worth of it. Or, think about all of the packaging that’s involved in that. Think about the garment care that has to go on when companies receive the returns back. You know, it is terrifying when you start to think about it. The good news is that people are thinking about it and as I said earlier, I think this year really marks a shift. Certainly from a brand’s perspective, putting a stake in the ground and saying that we’re going to do things differently.
So we can tell you a little bit about what we’re doing at BYBI and then maybe also call out some other brands that are doing some interesting things. Ultimately, you know, there’s a dual responsibility going on here because as brands we can push this, we can say we’re going to do things differently, but as consumers we also need to take a step back, and take a step out of the mad hype. We need to take a bit of responsibility ourselves because if we start to change our habits as consumers, that will push some of the brands who haven’t done things differently this year to reevaluate things for next year.
Dominika an Elsie: Yes, definitely. So at BYBI we’ve renamed it to Green Friday, thought it was really novel and then saw loads of people doing it. But at BYBI with every purchase of a bundle on bybi.com we are planting 10 trees on behalf of the customer. So that in our own way, we’re not necessarily turning away from Black Friday and the desire for our consumers to be recouping a deal. It’s important that we deliver the needs of our consumers as well, but we are directly counter balancing that with an environmental initiative to help reduce the carbon emissions of the activity that we’re doing across the weekend.
Elsie: So we are partnering with One Tree Planted, to manage our tree planting donations. They are a great organisation. We are directly planting into the Amazon because of the deforestation going on there, where saw the media coverage over the summer, hasn’t stopped. It still goes on. So we thought that it was a worthwhile cause and one that’s close to BYBI’s heart. You can get involved as businesses, or you can get involved as an individual as well, by donating . It’s really straight forward, and is something like a dollar a tree. And with that initiative we will release a count of how many trees we planted after the Black Friday weekend.
In order to compete with the big brands, we need to make sure that our offering is generally compelling. So, you know, that goes from things like the performance of our products, to our in-house NPD formulation and then down to seasonal offers and promotions. So, not only are we doing the tree planting, but we are also doing a free Babe Balm Bronze with every single order, as a free gift with purchase. Babe Balm Bronze is like highlighting with gold, so you’ll just look like a goddess, or it can be a really good stocking filler and just a fun present as well.
Dominika: Just to touch on bundles, the whole concept behind bundles is that it’s an evergreen discount that lives on site, to avoid this kind of panic buying around certain promotional periods of the year. Because Black Friday isn’t always the only discount time of year, there’s loads of times where brands discount, and push this panic buying. So the idea is that you always get a discount on bybi.com when you bundle three products or more, you get a sustainable, reusable pouch as well. So again, it’s not this kind of wasteful excess packaging and you get to choose every product that goes into your gift set.
This was something that we launched last Black Friday, and has been a huge success throughout the year. For us, the messaging has just been, don’t forget you can get up to 32% off today, but you can actually get that every day of the year. So if you’re not in the purchasing mind frame right now, don’t worry, you can come back next week and it will still be there. So don’t panic.
Elsie: Some other brands that we’ve also seen tackling Black Friday, like Allbirds have actually shut the store in Covent garden. Rather than selling shoes today, they will be doing a series of events centered around creativity and sustainability, which is really cool. Nimble who are an Australian sustainable activewear brand, that we are big fans of, who’ve just come over to the UK, are donating to greening Australia with every purchase bought over the Black Friday weekend. Also the brand Everlane, who are a sustainable clothing brand in the US are donating to ocean plastic clear ups as well. So many brands doing great and interesting things and it will be really interesting to see how Black Friday and Cyber Monday evolves.
The basics on how to obtain funding for your business or start-up, and what we’ve learned through-out our journey.
Elsie: So from Black Friday to funding. Our good friends over at Virgin startup, who provide a startup loans to early stage businesses in the UK have pledged to fund a 50/50 split of male and female founder businesses in 2020. Which is just a fantastic pledge. This was off the back of a ton of research that came out this year around the inequality female versus male backed businesses. In the UK and in the US, a study showed that only 20% of founders funded in the UK are currently female. So Virgin took this research and decided to be one of the first financial institutions to really put a stake in the ground and say, look, we’re going to make a change. Which is really exciting.
Dominika: For Virgin, I believe it’s super important them to make sure this isn’t just a tokenism mission, but to really help bridge that gender equality or gender gap. And balancing the equality could generate 250 billion to the UK economy. So there’s tangible benefits to us, as they are really supporting female founders and encouraging them to take the plunge. You guys probably know because we talk about them all the time, but Virgin were the first backers of our business. Back in early 2017 we were both awarded 25K each and we highly recommend it. So to anyone that’s very early on in their startup journey and have a great business concept, Virgin is just the perfect place to start, particularly if you’re a female founder now, as they’re actively looking for female founded businesses. It’s a really great initiative. The community is wonderful, hugely supportive and a great first step into the funding space.
Elsie: They’re doing some interesting work, beyond this pledge as well, that looks at why there is inequality in the first place. They’ve found that there isn’t an equal male female split of applications. Which means that, you know, there’s a disconnect much earlier than the actual funds being awarded. Women aren’t coming to the table from the outset. So they’re doing quite a lot of work around understanding why that might be and then putting things in place to help females, so a lot of that is around things like childcare for example. Just making sure that even once you’ve got that initial funding, that as a female you’re supported as an entrepreneur.
But it’s not all bad news. There’s a really interesting recent study, Pitch Book and All Raise, that looked at female funding last year. This was a US based study, but it showed that things are still unequal, but there is change happening. In 2010, there were 823 VHC investments made into startups led by women. And by 2018, that figure had risen to 3,477. There was also 46.3 billion raised by female founded startups, which is not a small sum.
Dominika: I think it’s interesting from our perspective because I guess we have always been hugely ambitious and excited about the business propositions that we we’re bringing to the table and haven’t necessarily thought about us being women and that being a disadvantage. We’re lucky in that beauty is obviously quite a female dominated area. So when we talk about our subject matter, we talk about it from a very educated personal viewpoint which is definitely a benefit for us when we’re sitting around the table in VC (Venture Capital) conversations. We’ve raised a significant amount of capital and continue to go back to tables and raise more, but it’s shocking to see that these numbers are still so low compared to male founded teams.
Elsie: I think VCs should really listen and take note.This study also found that female founded startups take less time to exit. So when we’re looking at it from a VC’s point of view, we’re basically talking about the time it takes for them to make their money back. If we’re going to do it faster as women they should come and back us. I think that is a really interesting stat and throws up a number of questions. Like why do we think females are able to build faster and exit faster? I personally think it’s because we’re probably a little bit more measured with our strategy.
So we thought it would be helpful for us to maybe round up some tips to our fellow female founders when you are looking at raising capital. It’s also worth saying that most of these tips are around the VC route.
We’ll start with Equity fundraising, which we’ve mentioned before isn’t always the right financing route for everyone. So we’ll definitely touch on other kinds of routes for people as well.
First up, confidence. I think this can not only be applicable for when you’re at the VC table having the conversation but can also be rooted through-out your journey. I think a lot of women don’t even come to the table because of a lack of confidence. There’s no denying that it is a gruelling process. But I think there are a number of things that you can do just to help you come to the table with a bit more confidence, which is inevitably going to help as you get further down the line. Firstly, you need to be really aware that you will be like basically laying your soul bare. That’s what it feels like sometimes. You are going to face rejection without a doubt. I mean, we’ve probably been rejected by like 98% of people that we have met.
What you’ve got to be aware of is, you are basically putting your baby on the table for criticism. You’ve got to get over that. You cannot take things personally. The best thing you can possibly do is take all of that feedback, just suck these VCs dry for feedback when you get to no, ask why and use all of that to build your story for the next VC that you go and see. That will give you confidence. That will really help you. But you’ve got to get over feeling rejected because if you let that affect your confidence a downward spiral, because you’re going to get nos.
Dominika: As you’re mapping out your meetings for VCs, a really good tip that was given to us, which I think really worked in New York for example, was put your best VCs who are the top of your list, as the ones you go to see last. So get a few meetings out of the way with people that you’re not particularly keen on or you don’t really think are going to invest or maybe aren’t the right fit. And just get into that rhythm of having the VC conversation and practice on them and see what their reactions are and what their feedback is. Don’t put your first meeting as the one that you desperately want to get a yes from. Put them last. Once you’re really in the groove and you’re kind of like weathered already and you know the drill.
Elsie: Yeah, that’s a great one. With this confidence, you’ve got to be really comfortable with going in and kind of singing your praises. And without gender stereotyping, men can generally be better at that, I would say. There’s a certain amount of bluffing, even if you’re not quite sure, you’ve just got to roll with it. Give yourself a pep if you need to before you go in. That confidence is infectious and if they see it, they will believe it and that in turn will make them believe in your business. So I think, just know your staff and do your research. Be ready to sing your own praises and I think be really clear about your ambitions and be really aggressive with how big your business can be. Sometimes when I say out loud like what our ambitions are and we say it to each other, we kind of almost laugh afterwards because it can sound ridiculous, but genuinely we believe that we’re going to get there and we communicate that to our VCs with such an air of confidence that they’re like, Oh yeah! Obviously that’s going to happen. So don’t be modest about what you can achieve with your business.
Dominika: They want to hear that you’re going to be the next unicorn. Just make sure your addressable market is big enough, and that you’re not operating in a tiny niche where you may never be able to reach huge scale. But if you’re operating in a big, wide open space in terms of addressable market, go aggressive and be confident that you can have those exits, like brands like Drunk Elephant and Tatcha and you will get that VC funding.
Elsie: Also learn to chat the VC language. But this comes with experience and meetings taken. There’s not really a pool of information for this, so us speaking about this today is three years worth of investing. So it’s tricky, the first few meetings, you definitely won’t know the jargon, but by the end you do, but you’ve got to get into the mindset of a VC. Ultimately they want to know that they will make their money back. So you need to go in and talk about your exit plan. If you’re on a VC funding path, you will need to have an exit plan.
Elsie: Then also try to think about the kinds of things that they’ll want to know. We get asked a lot as a consumer brand about product, so we get asked a lot about our gross margin, our D to C metrics and things like cost per acquisition. So really think about that, so you need to have a good idea of some of those metrics to come across as credible.
Dominika: Even if you’re not profitable yet, a path to profitability is quite key to be able to foresee and articulate. And that ties in to gross your margin, because if your gross margin and your contribution margin are really healthy, even if you’re loss making, VCs will be able to see your profit path to profitability. And I think the tide is slightly changing that kind allow for losses, big losses up until exit. What we’ve seen is that big loss making businesses that have raised a lot of money then try to IPO or do IPO, really suffer in the open markets because traditional businesses do need to make money. That’s kind of a fact. So I think path to profitability, not just resting on losses and making sure that you’ve got a really good business model is really key as well.
So the next tip for us and what we found really successful is, look for VCs that have females on the team. It is a lot easier to pitch to women that really understand your products. Not to say men don’t understand beauty, we have a number of investors that are men that totally get what we’re about, and get what we’re trying to achieve, who are really in tune with beauty. But, it is just a bit easier to have those conversations particularly, initially with women. Female VCs are twice as likely to invest in female founders and that’s just a fact. The VC landscape is very diverse, and even from your Cap table (Capitalisation Table) it’s great to have diversity. Gender diversity, ethnic diversity, geographical diversity, all those things that a great to have in VCs in the same way that we value internal diversity within a business. Having that on your Cap table just means that you’ve got more people with different point of views to advise you as well.
Elsie: Gender inequality is also in the VC space. There is a significantly less amount of female founders who are getting backing, but there’s a significantly smaller amount of females working in the VC space. So we’ve got to support our fellow female VCs.
Another tip from us, is that I get a better response when we go with would be thought as being more feminine traits. This can be really useful and you can often use that to your advantage. Have that confidence and do your research, be really confident, but you don’t have to override that to try and come across as a really bolshy, like a wall street man. We often find that a softer approach, often helps to build better relationships. And that’s within the VCs that you’re speaking to, but also beyond that, your clients, and with your team. There’s a difference between being, really over the top, or pushy and being soft, it doesn’t mean that you can’t be confident and assertive.
Dominika: I think women are highly emotionally intelligent as well. That trait is key when you are raising money. But also when being a founder and leading a team as well. Emotional intelligence and empathy are two key traits. And we shouldn’t be ashamed of being female and the traits that come along with that. We should be proud of them and how they can really give us an advantage over our counterpart male founders, because we are great leaders. If you’ve got a good business, people will make you offers. So don’t get like hyper excited and accept the first one that comes your way. Be confident, be calculated, assess all elements of the offer. And if it doesn’t feel good or it’s not good enough, then say no.
But remember, VC funding might not always be aligned to the long term goals of your own business. So for example, if you want to build a really organically grown, scalable, profitable business over a long period of time, which is an absolutely rational and very sensible thing to do, VC funding is not for you. It is a kind of funding that puts you on a trajectory of incredibly high growth. It’s typically loss making, although as I said earlier, you know, you do need to be mindful of your core business metrics and then that exit and that exit typically means that you will not be leading and being the sole decision maker of your business anymore. You will likely sell out a majority to someone else. So if that’s not your ambition, there’s loads of other avenues for funding to still get your business off the ground and help you scale.
Virgin startup loans, if you’re confident in your business, are a great first step because it’s a really affordable way to get quite a significant injection of capital at an early stage. We also use a company called Gap Cap, which is invoice financing for startups, they have a phenomenal system and a phenomenal platform. It’s all electronic. We have a great account manager there, Charlott, and essentially Gap Cap finance invoices. So if you’ve got great orders from, you know, retailers that are really legit, they can lend against a book of payables. So if you’ve got a number of small invoices, you can kind of put those all together and loan against it and essentially they advance your invoice amount up to a certain percentage.
You can also extend your repayment terms, so we extend our 30 day payment terms to 120 days, which is just phenomenal for a business like ours that has big working capital cycles and gaps between supplier and customer payments. We highly recommend Gap Cap. They work with businesses of all sizes and they work with a number of different parties in terms of customers and suppliers. So as long as the customer is of good quality, or the supplier is a UK limited company, they will fund, which is just phenomenal. So they’ve been kind enough to give us a referral code: bybigap50, will get you 50% off the signup fees for Gap Cap and they have a 500 pound sign on fee, so it’s a great saving.
Elsie: We have definitely covered at some length our funding journey and our tips, but I’m sure there are things that we’ve missed, so feel free to drop us a DM or an email if you have any other questions.
Dominika and Elsie: Don’t forget your discount code on bybi.com, you can enter CBI15 at the checkout for 15% off your order.