Xtreme Solutions founder Phyllis Newhouse and Starry founder Chet Kanojia shared how they built their first ventures, and the most important things to remember when raising capital.
When serial entrepreneur Phyllis Newhouse was approached about an arcane option for funding one of her businesses, she asked a question familiar to many founders and other observers of the financial markets: “What the heck is a SPAC?”
Newhouse soon learned, and years later she’s the co-founder and CEO of her own special purpose acquisition company, Athena Technology Acquisition Corp., an all-female-led SPAC that had a $250 million IPO in March. On Tuesday at the 2021 Inc. 5000 Vision Conference, she joined Starry CEO Chet Kanojia, who recently announced he will take the broadband service public through a SPAC deal valued at $1.66 billion, to share their insights on how to secure funding for your business.
Newhouse started her first company, cybersecurity firm Xtreme Solutions, with both public and private funds. In 2002, having just left the U.S. Army with very little savings, she leveraged her knowledge of the federal government to attract a $10 million contract, getting cash and resources from a strategic partner up front.
“That’s how we expanded and were able to grow and scale quickly, because we used strategic partners,” Newhouse says. The business relationships, one of which lasted seven years, continually helped Xtreme Solutions to take on large contracts and build up a talented staff. Now a larger business, she adds, “we often … work with a smaller business on funding. It’s a win-win for both organizations.”
Kanojia’s first attempt to get a business funded took a year and a half, following the dot-com crash in 2000. Investors would often send him home empty-handed except for an invitation to come back in a few months. “That doesn’t help me–I need the money now,” Kanojia recalls he would lament. “What I didn’t realize was that was a relationship project. They want to see if you were true to your word.”
Kanojia also points out that VCs are susceptible to fads and industry trends, which sometimes leads them to miss new opportunities. The important thing is to not get discouraged. “There was a time you couldn’t get SaaS companies funded because it was going to look terrible on margins,” he says, jokingly adding, “Now if you have crypto on anything, you could sell dogs–t.”
The most important thing when seeking funding, according to Newhouse, is not to lose sight of your real goals. “What is it that you’re chasing?” she asks. “If it’s the money, it’s not going to be a long chase. If you’re chasing impact, if you’re chasing change, those things are sustainable.
“The world’s going to change and keep on changing. And if you’re left behind, it’s because you’re chasing the wrong thing.”
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Original source: Inc.