July 25, 2020

Series C raising and spinning out of Coca-Cola's incubator - Jeremy Burton on the fundraising for Wonolo.

Series C raising and spinning out of Coca-Cola's incubator - Jeremy Burton on the fundraising for Wonolo.

In this episode, Jeremy Burton the Co-Founder and CTO at Wonolo explained how they managed to raise over $52 million dollars, how Wonolo pivoted after it was created in Coca Cola's incubator and how it is operating now. We also go back in time and see what mistakes would Jeremy fix in terms of fundraising.

Wonolo: https://www.wonolo.com/

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Transcript

This is fund raising redo and today's a guest speaker. We have Jeremy Burton Co, founder and CEO of that close. It's Series C round in two thousand eighteen and raised over fifty two million dollars up to date. 

And Lisa will talk about this. The difference between raising your early round. So, preceed and seed rounds and raising your series C rounds. And we'll also go back in time. 

And see what Jeremy thinks was window's biggest mistake in their fundraising. So, Jeremy, Alaska caught by you giving us some background on yourself. And on vanilla. 

Very happy to be here. Thank you for having me on your podcast. 

So, 

on Jeremy button, 

I'm the CEO and Co founder at when always a marketplace for on demand labor people often describe us as the Google or list of temp staffing, 

which is true in that. 

We allow people to find jobs from a app on the smart phone. I think a better analogy in some ways, though, is to think of us is like, the tender of temp staffing. 

Because, ultimately, we're in the business of making a match between someone who wants to do a job and someone who wants to job done and our technology is there to maximize the chances that both sides end up happy with that match. 

And just like contender. Some of those matches will be very transients, some more, perhaps going work at a warehouse for one shift and decide that job is not for them. Sometimes a worker will go and work three days a week. Sometimes a work, their full time. 

And ultimately, sometimes people will be hired from one to work full time at our customer, which is kinda like getting married. So we accommodate all of those different kinds of relationships. And we've been in business since twenty fourteen. 

We're about two fifty people. We have offices in San Francisco, Toronto, Nashville as well as a lot of overseas opera as well. 

Nice that seems like you've grouped quite a bit. So congrats on that and hope to see it one day or get acquired successfully. But first question, as, you know, it's a marketplace. So it has two sides. 

The people who are hiring, and the people who are trying to find a job, so it's like twice as complicated as other products. 

I was wondering, how did you manage to get this, you know, me amount of people on your platform? Do you do this before you raised, or to you manage to do this only after your race? So answer the question in two parts. 

So, what you're referring to there is, I think the classic chicken and egg problem with any two sided or marketplace business. And we had a very simple solution in the early days of winter. 

When we were just starting out, which is we, as in the family is and the employees actually did most of the jobs. 

And my first one of our job was carrying a very, very heavy cabinet up, a very steep and narrow flat upstairs for another startup here. 
In San Francisco, and what's been interesting is that has really given us a great action to will know laws and the challenges that they face and we still have a policy. 

At that,
every post works at one, 

although each queue has to do one one Alo job every quarter and it really helps us understand the product from the perspective of the one more also keeps us very much in touch with the kind of issues that when I was face, 

you know,
many of whom living paycheck to paycheck. 

So that's how we solved. The chicken and egg is we actually provided the supply with our labor. The history of flow is is an unusual story and in telling it. 

I realize it maybe doesn't provide much that you can learn from for others. But I'll tell it anyway. So we'll no, I'm like a lot of startups was actually incubated inside a much bigger company. 

When I started this side,
the coca cola company,
and at the time in twenty thirteen,
like many large public companies,
Coca Cola had an internal incubator accelerator program with Coca Cola executives. 

They will provide them with some seed funding to start a business inside Coca Cola. And one of the rules was that the business had to solve a problem that Coca Cola themselves faced in their business. 

So, my Co founder, a J, he had worked a Coca Cola for seven and a half years he was accepted to participate and actually run this program. And when was one of the ideas that he came out with. 

And it was originally designed to solve a problem that Coca Cola has with merchandising. So merchandising means going out and stopping Coca Cola products on shelves in coolers around the country around the world. 

And it's actually quite a complicated problem to solve. Because it's very hard to predict the needs for labor in different locations. It's very weather dependent. 

For example, if it's a hot day, people drink a lot more Coca Cola products, the cooler needs stocking more quickly. And if it runs out, then people start buying Pepsi products. And no, one color is very happy about that. 

So, the problem that the original version of what was built to solve that problem, it became clear that this problem existed in different industries and many different companies. 

It's the reason that long lines when you're checking in for a hotel in Las Vegas, for example, is the reason that it's very hard to find sufficient nurses in healthcare. This problem of unpredictable needs for labor. 
So, cover color effectively provided the seed funding for the business. And in twenty fourteen, we spun it out of coca cola and it became a separate business one, although it's in its own. Right? 

And since then we've mostly funded the business with more traditional venture capital. So, unlike many of the start ups I've been involved in it does have this very unusual beginning. Nice. That's actually a really interesting begin and your completely right? That's pretty unusual. 

I don't think I ever heads. 

I think I had one story like, that's but it's not exactly the same. So, it's still very new. And my next question was actually, where did you start your fundraising process but you already answered that you were given seed money basically, by Coca Cola. 

But then I would rephrase my question where do you start your fundraising when you left Coca Cola and spun off? Yeah. 

So, at that point, we had some essentially seed funding from Coca Cola, and we needed to continue to raise money to build the business. 

So, we're essentially looking at an a round, and we certainly had some very difficult times raising that around for a variety of reasons. 

One of the reasons we had a tough time was the, the area that we focus. It is very much. Not. Sorry my son just walked in. I'm just going to restart that. No worries. 

Okay. He's just getting something. It will restart. No worries. No worries. That's exactly what I was referring to, you know, where things have happened no worries. 

Alright, I saw that one again. Can you re, restate the question? Sounds good. 

Oh, we'll cut the whole part out and pretend like you asked a question and then the question sounded like so he already got seen funding from Coca Cola. 

Where do you start your fundraising process when you spun off from Coca Cola? 

Yeah, so we had essentially seed funding from Coca Cola, but we needed to raise and a round in order to keep growing the business. And we actually have quite quite a hard time with that. Around in a, a couple of false starts. And I think we're a number of reasons for that. 

I think first of all the okay that we serve for temp staffing, and particularly for light industrial staffing, 

where we're thinking about the people who deliver your pizza or pack your box at a warehousing facility. 

It's just a market is not familiar to Sand Hill road and traditional venture investors. So they just didn't have a lot of familiarity with the space. 

There were many of the, where hot SAS companies or other alternatives that they have the opportunity to invest in. 

And the other side to it, I think, is, we didn't have a track record with, at the kind of investors that we're interested in marketplace businesses, and these two sided networks. 

And I think they are much more complicated businesses as you were alluding to. There are more capital intensive in the early days, and we just didn't have the necessary network that so we actually 
really struggled. 
Ultimately, we ended up finding a guy called Tim corners. Tim used to be a partner at a quarter, and then various other funds. And now has his own fund called pivot North. 

And he has been a great supporter of the business and I think the great thing you get from a micro VC, like Tim is, because he's not working for a big fund or it doesn't have a huge portfolio. 

You get a lot of very personal attention and support, and he's been almost like a record store or a movie producer that helps the company grow and help connect us with investors for future rounds. 

And I think what Tim was able to do, and he's had a track record of doing this in his career is choose, or select companies that are perhaps a typical or different. And I think it was one of those. 

So it was great to get Tim on board, and he's invested in all of our rounds that we've had subsequently and it's still on our board. Nice says I agree. 

And my next question here would be how do you find him? So, I know that find this kind of person and making him, or her, showing your team, like, so closely working with them. It was just great. It's basically the best investor you can get, especially in the early days. 

But how exactly. Do you find him? Do you actually, like, go through some website looking for all the investors and sorting them out based on some metrics and then making a deeper research or was it some sort of referral? So, how how do you make this first concept. 

So, we found team through normal networking. I think we were introduced by another investor. The irony was I had actually met him on a panel with. 

I had to develop a conference in back in nineteen, ninety nine when we were both, I think, still in our twenties. And we didn't remember having met each other so it was funny reconnect after all that time. And I still have his business card. 

I support your business, the first dot com, boom. Nice. That's actually really cool. Congressional, by the way. But my next question was about reaching out to the first investors. 

So let's, let's dig a little bit deeper here. So do you actually try so the investor who introduce you to team, how did you get in touch with that investor? Was he introduced to you as well? 

Yes, I think there was, there were a number of investors that we had in our personal networks, I should say that one although, for me is startup number nine and I'm forty six years old. So I've been doing this awhile. 

So, I do have a pretty good set of connections in the investor community and my Co founders had some as well. So we had a good group of people that we could talk to as the first round of connections. 

And it wasn't hard to broaden that network. 

Quite wide with their referrals, 

so for us, 

that the getting the things getting the connections was not the issue it was once they saw the business, 
they didn't really understand it, 
because it was focusing on the space that was not familiar to them that was more our problem the last stage, 

and you actually try to explicitly solve that problem or do you actually just say, 

you know, 

what the numbers matter and if we have hundred means, 

we will find that one person who actually understands the problem or did you actually try to find someone specifically in this field specifically someone who might understand it. 

Yeah, I'd love to say that there was some very. 

Careful and clever strategy, but I can honestly, it became a numbers game and happened to rub up against my time and he happens to tell you something that was a bit unusual. 

So, yeah, I mean, the numbers games work pretty frequently, so I cannot blame you on that, but let's talk about your earlier round. So outside of our call, you only raised Series A, and series. B and C. 

so, how do you think what's your major takeaway from those three rounds? 

I think, you know, each of those rounds is is quite different in terms of the stage we were at as a business. 

But I think the other thing that you always have to bear in mind is where you are in the economic cycle, where you are in the VC cycle, which can be a little bit disconnected from the macro economy as a whole. 

So we were definitely lucky in terms of timing during the process of raising money, we, the market was getting hotter and hotter and hotter. 

And when we closed our round in twenty eighteen, I think, looking back, you can kind of argue that that was the absolute, a peak of our of our recent cycle. So, we got lucky with the timing. 

I think what happens is if I compare the end and so obviously the seed stage is very much all about promise about vision about ideas about the founders, 

and, 

you know, 

their belief in the mission and their character is. 

And if you can trust that to Series C, 

series is very much a growth round, 

and investors are simply trying to understand the, 

you know, 

if they put more money and will they get more money out and it's really based on a very deep diligence on unit economics, 
an understanding of the unit of scale of the business. 
So they can understand the return is very level vision. Very little future roadmap is really about repeatability. 

Of the business model and a, and B rounds or somewhere between the two so around just so, you expected to have some degree of product market fit. 

You have some decent traction, but you are still selling on the vision of what you can be and be around. 

And I think a lot of people say this brand is, in some ways, a hard hardest, because that's kind of your transition from that early stage vision, promise to real repeatable serious, scalable revenue. 

So I'd say the brand is the hardest, and we're very lucky to have sakoya the B round lead, which obviously, the brand name is sakoya opens up a lot of doors for future rounds as well. Oh, yes, it does. 

It really does. So, let's talk about the thing that I mentioned in the very beginning, which is going back in time. And now we're looking at your previous mistakes that you've done during this fundraising. 

What would you do differently if you could go back in time and to the time where you didn't raise a setting for the company yet I think the. 

The simple answer will be to say that we would try and use more of the sniper rifle unless the shotgun. 

I think ultimately, 

we succeeded due to the number, 

and it was obviously a very draining tiring process with, 

you know, 

over a hundred meetings in order to ultimately get one term sheet and get the business funded. 

And it, you know, it's really disruptive to the business, especially in the early days, whether a few people in the business. 

I think we, with a time machine, with the benefit of hindsight, we would have changed how we pitch the business and spend a lot more time. 

Explaining and educating investors on the market and why this is very old fashioned temp staffing market. You know, it was ripe for disruption. 

Why looked very like, 

the taxi and limo industry did before Lyft came along to get bring them along on the journey of understanding the opportunity and the tan, 

rather than going straight. 

We are great. And why we are different. I think it was not a familiar enough space so he missed one one lesson that we've learned. I think, with that we would then. 

You know, with the benefit of hindsight, being more targeted on the investors willing to listen to that narrative and think about something different. 
And I think you glean that from looking at best is history and their portfolio, and the kind of 
businesses they've taken back on. And it's no, I'm not using this in anyways criticism. But there are major funds where they have a very strong thesis on the market. 

They have a very strong view on the kind of businesses they want to invest in and I think it's it's as a founder in the early stages, it's often a waste of time to try and pitch those funds. 

Because if you're outside of their selection criteria, they take them using a tool they're using it really just to learn having any serious intent testing. And the business thing is no point wasting time on those. 

Unless you want to just use them as rehearsal and practice of your pitch, it's much better to say who the investors really actually would invest in this business. 

Right but, you know, practice is always great. I've heard main advice. I mean, many founders seem like, you know, even in our early days, we tried to speak to PCs and try to get means just because there is a slight chance that they will give you an introduction. 

And also this is a rehearsal for real interviews. So, I think so good. I think there are better and more or less time, consuming ways to do that. So, like, PCH events just Google speech events and that's it. 

So probably try that way before talking to vc's, but still great. Great advice. So let's talk about your other fundraising experiences so when NALA is not the only company here raise money for right? That's correct. 

And what can you see about your other fundraising experiences? Well, I, I started my first company in nineteen ninety nine. 

It was twenty four years old, and I was in the UK, so a very different time a very different place. There's been a lot of changes structurally,
in the way venture operates,
and a lot of changes in what a seed round or an, 

a round, 

or B round means in terms of evaluation and percentage of the company are selling and the, 

the expectations of the maturity of the products and the business, 

so it's hard to directly compare points in time. 

Think the one lesson that. 

I have learned over the years in doing this is, despite the fact that we're in this incredibly high tech industry, using and machine learning and building all of these amazing products. 

The the venture an investor business is still very much a people business, 

and it's very much based on relationships and it's very much based on a personal connection between investors and founders and I think you ignore that at your peril. 

I think it's, it's very important to really invest in your net. I think there are cases where, and I gave the example of Tim candidates who I've met twenty years ago. 
You know, there there are cases where you meet someone and then many, many years later. You come back to them and they end up introducing to investor or funding your business or in some other way helping you. 

So, I think building your network it's very important and really understanding that ultimately taking an investor especially in stages kinda like getting married. You have to deal with years and years and years they'll be on your board. 

So if I, the side of that relationship, feel like it, it's not gonna work. Then walk away. It is ultimately, you know, a relationship has to work over a long period of time. 

Absolutely, and speaking of relationships, I want to ask you a question about your worse memory about fundraising. So just a little bit of entertainment here. What do you think? What comes into your memory? 

We want to ask you a question of what was your worst memory about the fundraising? Yeah, I actually have one very clear worst case. 

The combines a number of I'm using and frustrating elements, so I won't name the,
the fund all the investor,
but during our around funding, 

we, 

as I said, 

the many many meetings, 

and we had a meeting scheduled with an investor at a CO working space in the summer in San Francisco, 

the meeting was scheduled for nine. 

Am we arrived early as we try and do at eight thirty we walked into the lobby and there was a morning raise, going on with. 

Lasers and balloons that was being a famous venture capitalist not someone we were going to meet, wouldn't name him, but he had a reputation for doing these events at the time. 

So it was a very bizarre scene to arrive at this investor meeting to go through. 

We went upstairs and we discovered that the meeting room that had been booked apparently have not been booked toward being canceled. So, there was no room for the meeting. 

So we sat launched on to, in the center of this very noisy, a CO working space, the partner from the fund that we were meeting, ended up being forty minutes late. 

So he arrived forty two minutes after we got there. He got a phone call from the parking garage where he left his car and forgot to leave his car keys. Again. Disappeared for ten minutes came back. 

So, at that point, we have ten minutes remaining of the scheduled time and he sat there with his team member. And they clearly had no understanding or interest in our business and ultimately, one of my Co founders got so frustrated. 
He just stood up and we'll tell part the way through a very burned into my memory is a very poor experience. And fortunately that's on. You stuck that stuck in my memory that that was definitely an interesting day. 

Right people or at least, you know, at least punctual. I hope so but that's actually pretty, pretty decent story. I must say. 

So now that we've talked about the worst memory do you have any fun stories about fundraising that you that you remember? 

Yeah,
I think what's been interesting just to introduce the story is, 

I think there was for many years in venture a sense of the power dynamic always being the investor is dominant and you as the end subservient and they are, 

you know, 

they're the ones to that. 

You have to kind of sell when it's a solely relationship that works in in that direction. 

I'm not saying that's universal, 

but that was definitely my experience in the, 

in the nineties and two thousand and I think a new generation of investors has come in who really see the relationship is much more or of equals or even one where the investor is a service provider 

to entrepreneurs,
and they have to when you're business and that's actually, 

I think being a much that's been a very good change a very healthy change and the experience ahead with that is actually for B round. 

We, you know, our business was doing very well so we were lucky that we didn't really have to go out and fundraise actually. 

Many investors found out about came to us and sakoya came to us and really wanted to invest in our business. And in order to try and close us. 

Jess Lee, who is the partner acquire who ultimately did the investment and sits in our board? 

Jesse came to our office and bought us a bunch of very nice sort of thoughtful gifts nicely wrapped and I really kind of felt like that was a very different change. 

Very unexpected and different in terms of the, sort of the, the tone that it sets and the sort of power dynamics. I think it, I think times are changing and it's it's nice to see that kind of approach being used as opposed to what used to happen. Nice. 

That's actually a really positive story. I can imagine how nice it feels to get a personalized gift from a partner from sakoya. So bid Joe. Here's who, let's move to the next topic, which is gonna be your advice to founders right now. 
So,
early stage founders are really struggling during these times,
because most of the capital really flows into more mature companies where it's more stable, 

where you kinda know where the company's going and early stage founders what's what would you recommend to them right now to those of them who need to raise money right now I think if you were an early stage. 

Invest sort of early stage entrepreneur. You really should just keep going. I think the data's a little bit mixed. 

I, I have data I've seen and anecdotes I have from friends of mine who are venture investors and actually, I think the hardest is the is the middle. 

I think we've seen some pretty big drops in be around actually see around that happening around happening. 

What's problematic and investors have told me this is they're finding it hard to get deal flow and they're finding a hard to do meeting successfully diligence, successfully over zoom. So, I think they've slowed down little bit, but they still want to invest in. 

There's still plenty of money in these funds to invest. They're just having to adapt but I think vc's are pretty adaptable. Obviously, Silicon Valley prep prides itself on reinventing itself and being adaptable. 

So, deals are happening, but there's still money to invest and recessions are often good times to create startups because the incumbents, the big companies in any sector, or. 

Distracted they're having to lay off people they're having to downsize trim businesses that are non core focused on what's working and that really means eyes off the board. So it's actually a great opportunity. Many great companies. We've been started in that kind of environment. 

I think if you're a late stage founder, I think the advice is very different. I think if you have a startup, that's still not profitable. 

And if you're not in one sort of top one percent of so called unicorns, I think the right thing to do at this point is to try and extend your runway as far as you can, until we can be more confident in predicting the future. 

There's just so much that's uncertain and I think for those companies, if you look back historic often, the winner of a particular category is just simply the company that out lost in the others, the difficult times. 

So, I think it's just about survival. If you're if you've already raised money and you're already running, just push that runway as far as you can. 

Absolutely, that's actually great advice. And that's something that you can hear pretty frequently and that's something that you have to take. Seriously. So, you know, try I would recommend you just making a big list of things that you spend money on. 

It doesn't matter if it's like, a five bucks subscription on some simple service, or if it's like a thousand dollar contract, you still have to put it on the list and then you can see where you can trim some fat. 

So, we're moving onto the last question of today's episode, which is a call to action. What's the one big thing that you would want the listener to do? Right now? As soon as the episode is over. 
Keep going, you know, this is a long game. 
I am talking to a partner at a fund who is one of the early investors in build dot com and, you know, it's it's been a ten year journey to where they are today. 

So it may seem like the world is falling apart and times are crazy and everything's unpredictable, but in the grand scheme of things, if you look back at history, this will be a short period. 

And it's a great time as I said, to start businesses. It's a great time to really think about what is core. 

What do you need to win and focus on the things that are absolutely core about your business and your differentiation and be ready for when the economy comes back? Which again, if you look at history? It always does. 

So, I think keep going Dolby, disheartened by short term blips. That seems very intense. 

Absolutely, that's great. Advice. And Super positive episode. I think we got really, really great and positive ID right here. So thanks. A lot of Jeremy for. That's my call to action would be. 

Michael Jackson would be checkout,
our prime content channels,
so we've created our pay channel for fundraising where your premium it has,
you know,
those episodes,
then recording here in a very short and simple format with nice links and all that stuff. 

So, it's worth five bucks per month and helps our team to be running. So we'll wrap it up here. Thanks a lot Jeremy for coming up. And for sharing your knowledge. I think that was a great Pre positive and also very unique experience. 

I mean, with when NALA and it's being spun out from Coca Cola, so thanks a lot for that and have a great day. Thank you. Is absolute pleasure.