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Been There, Done That: Four Fundraising Secrets From BaubleBar

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When Harvard MBAs  Amy Jain and Daniella Yacobovsky began raising funds for their fashion jewelry site BaubleBar, which sells pieces directly from designers at deep discount, they spent more than half of each pitch meeting on the frustrating task of convincing investors that women like jewelry.

“It could take up to 45 minutes of our presentation just explaining what fashion jewelry was, who the consumer was and what their shopping patterns were,” Yacobovsky remembers of early meetings with what she says were mainly all-male teams of venture capitalists. As a result the pair often had fewer than 15 minutes to introduce their business, leaving both sides of the conference table frustrated and unsatisfied.

$5.6 million in venture capital later, BaubleBar celebrates its second anniversary this month and Jain and Yacobovsky have trimmed the fat from their presentations to investors, partners and design collaborators who’ve included Erickson Beamon, Nina Garcia and Atlantic Pacific. Since the launch the company has grown from the two founders to 50 full time employees and 2012 revenues have been estimated as high as $11 million.

To celebrate their birthday, Amy and Daniella gave us the gift of good advice, and share four hard-won pieces of advice on raising a successful first round.

Win Over The Gatekeeper

Frustrated by the amount of time spent convincing reluctant male VCs that there was a market for BaubleBar, Jain and Yacobovsky decided to make a preemptive strike in the investment offices: they sent “thank you” packages to the personal assistants and office managers who had scheduled their meetings. When a BaubleBar package arrived and was opened, VCs could see first-hand the delight of the woman on the receiving end—saving the BaubleBar founders precious time.

“It was a great opportunity to have the person we were going to pitch watch someone get excited, open the box and react to it,” says Yacobovsky. “When someone is that happy about something inevitably other people in the office would come over and ask about it and a conversation would start.”

What the cofounders discovered was that the benefits of this gate-crashing gift were two-fold. Not only was the potential investor aware of the delight a single piece of jewelry could inspire, but more often than not he would ask the assistant for her opinion on the business—Do you like this jewelry? How much would you spend on it? How often would you buy?—essentially proving the market before Jain and Yacobovsky even stepped into the office.

“[Investors] getting the information from someone who wasn’t pitching them was really valuable,” Yacobovsky says. “The women we reached this way backed up the theories that our company was built on, and ultimately did much of the selling for us.”

It’s Okay To Not Have All the Answers

It’s easy to panic when you’re faced with questions that you don’t have the answer to in a pitch setting, and the BaubleBar founders are no different. Even venture-backed founders are human. But a lesson that they learned early on was that it is always better to answer “I don’t know.”

“I think it really worked in our favor to be honest and up front about what we knew and didn’t know,” says Jain, and Yacobovsky agrees. “We both have backgrounds in finance and know our market inside and out but there were moments where questions were being thrown at us that seriously had to be a test—we didn’t know the answers to half of them!”

Very quickly Jain says the pair learned to accept their short-comings and admit there was a lot more to be learned. Realizing what they didn’t know—but what potential investors did—was critical in putting together their first round. “It really was a great realization. When you’re putting together your round you’ve got to think of the different perspectives and skill-sets you’re going to have access to. Being honest about not knowing a certain answer can reveal the right investor who knows what you don’t—and more importantly can bring that knowledge to your team.”

Remind Yourself It’s A Date—And Dates Go Both Ways

To steel yourself against the terrifying moment of facing a panel of investors with a shoulder shrug, Jain shares a piece of advice that she and her cofounder were given before embarking on their first fundraising meeting: always remember that a pitch is a two-way interview.

“Obviously you need to raise money but at the end of the day these people are going to be a part of your family for a long time,” she says. “In our case we were really looking for people who understood the two of us, how we worked through problems and collaborated, so it was just as important to find the right fit as it was just accepting a check.”

“ I think when you first start [fundraising] it’s easy to feel intimidated,” Yacobovsky weighs in. “But back up and realize that raising money is just step one is one of five million steps in building a business. Anyone who would go out of their way to be a huge intimidating [jerk] is not someone you want to take money from anyway.”

Find A Consigliore

Jain and Yacobovsky share that half of the fundraising battle lies in confidence—the confidence to go out on a limb, admit shortcomings or to stand up to an intimidating investor—but they are quick to admit the process can be a trying one. Sometimes the thing you need most of all is a friend to talk to in moments of triumph and defeat.

“Find one person you trust who seriously has your back and knows the ins and outs of your business, knows what you’re looking for in the funding round and rely on them for guidance or just as a sounding board,” Yacobovsky says, who adds that she couldn’t have made it through the process without the mentor who guided BaubleBar through both their first and second round of funding efforts. “There were so many things that came up that we didn’t know how to handle,” she says. “There were a lot of 2 am phone calls.”

Jain adds that this person should be close to the company, but just removed enough to serve as a neutral adviser in particularly emotional moments. “Having one person who is not you and not your cofounder but understands the nuances of your relationship and the business—I can’t think of a single thing that’s more valuable.”