Rich Chetwynd is the founder and CEO of ThisData, a cyber-security startup selling software that detects whether a user signing into an account is the real-user, or an attacker signing in with a stolen password. And ThisData isn’t Chetwynd’s first rodeo; his first business, Litmus, sold to a public-listed company in the US. We caught with Chetwynd on the Kiwi founder series, diving deep on a lot of things, particularly investment. We’ve summarised his top bits of investment advice below, but for the rest of the webinar, check out the replay here.
Before the actual raising of money can take place, the founder/s need to make the decision whether to raise or bootstrap. Chetwynd has done both; to both extremes. With his first business he bootstrapped for two years until they had significant capital, and was acquired after five years; never raising money. With his second business, he raised right at the beginning on just an early prototype. The happy medium he’s landed on is to raise money as late as possible. “Don’t raise any money until you’ve got that strong product-market fit, and bootstrap for as long as possible.”
So if and when the time comes to raising money, Chetwynd shared the advice for the first time he went about it. There is an old saying that ‘if you ask for money you’ll get advice, and if you ask for advice you’ll get money’. Although there was nothing deliberate to it, this is how things ended up playing out for Chetwynd. “I found the single person I knew who had a lot of experience raising money, and I went and asked that person if they’d be interested helping me put it together. Ultimately they ended up putting in money as well, but that wasn’t the aim. That person was really key; I didn’t need their money but I really needed their help. They helped me work out what the initial valuation might be, how much we should raise, who we should raise from, as well as opening a few doors and making a few connections.” Finding people who have been there and done that is the fastest way to learn.
When approaching investors, it’s incredibly important to consider what you’re getting from them. It shouldn’t just be money; ‘dumb money’. There has to be some cherry on the top, something extra they’ll bring that will really help your business grow. For Chetwynd his early investors brought an understanding of the investment landscape, and helped him raise subsequent rounds of capital. Furthermore, he has brought on some investors more recently who, despite holding the smallest shares of the company, have had the most significant impact on their progress in the US. The networks and connections that they’ve provided Chetwynd in the US have been invaluable in their growth there. Really make sure that you’re clear what it is you need from your investors, and search for those who can bring that.
Another part of raising money that plagues New Zealand companies is our trend of low valuations and high dilutions; something that really limits a founder’s options for subsequent rounds. As a way of dealing with this Chetwynd advises speaking to investors. Explain how it is not just about this round. With their investment, provided you hit your targets, you’ll likely be looking at subsequent rounds later down the track. And those rounds are likely to come from overseas. With that in mind, would overseas investors like to see a heavily diluted founding team? Acknowledge that whilst you understand their desire for a bigger piece of the pie, they may be shooting themselves in the foot in terms of the long term value of the company.
Finally, whilst all this investment talk is going on, you still have a business to run and a team to manage. And they’re going to be wondering what is going on. Chetwynd is a massive fan of being open and honest with the team. He always makes sure they know how much runway the company has, and where their next paycheck is coming from. However, whilst your employees will be great at their jobs, some might not be cut out for the emotional rollercoaster of being a founder. So Chetwynd does advise that “you don’t want to necessarily tell them everything that’s bad and everything that’s good because you want them to be steady. To focus on getting the job done, rather than worrying about things that they don’t need to be worrying about.” In short, be open and transparent about the financial position of the business, but don’t share things that your employees are going to struggle to handle.
In this installment of our Kiwi Founder Stories, we sat down with Kirsti Grant, CEO & Founder of Populate; a SaaS company helping organisations plan hiring, and manage employees. During the hour, we discussed a lot about hiring. We’ve summarised a few key points on building great hiring processes, fostering a strong culture, and founders making their first hires.
Building Great Hiring Processes
Working at Vend and running Populate has given Grant plenty of experience building hiring processes. A key piece is “making sure every applicant is acknowledged. Those people will be your brand advocates and can give you referrals. Give them a good experience right off the bat by acknowledging their application. Then even if you have to decline their application their first exchange with you is not a negative one.”
Another key part of your hiring process is your compensation plan. Grant discussed this in length, stressing the importance of clearly understanding your compensation strategy. She also discussed ESOP schemes, advising that, “if you’re choosing an ESOP or options component to a package, it’s really important people understand what it means. If you have no intention of there being a liquidity event for a really long time, you might need to tell people that.” Grant goes on to explain that “in the US, a couple of companies actually show [in their job offer form] what potential exit scenarios might look like, and what the employee’s share ownership could mean for them, which is quite cool.”
Building Strong Culture
Culture is critical to the success of any organisation. The keys to good culture are ensuring everyone understands the story, the vision for what the company is trying to achieve, and it’s values.
It’s also fundamentally important that you scale the culture over time. “Your approach to culture just has to evolve. Everyone has to be very open to change. The things you do to foster culture at 10 employees vs 100 employees are fundamentally different.” It’s important you recognise that and make sure you’re constantly evolving. Part of this evolution is to adapt to ways of fostering culture that are all inclusive. Otherwise you run the risk of isolating employees, and squashing diversity. “Just like technical debt, there is diversity debt. The longer you leave it, the harder it’s going to get to fix it."
Founders First Hires
Making the first few hires as a founder can be hugely daunting. You’ve build and managed everything to date. Letting go of control can be difficult, let alone finding the right person. Grant, as former VP Talent for Vend and now as a founder & CEO is uniquely positioned to share really valuable insights for founders making their first hires.
“People that hint towards needing a lot of structure or a lot of process is always a little bit of a worry. The reality is that they're going to need to be building those processes and structure themselves,” Grant says. “If I have an inkling of a potential problem I might throw a couple of curly things in - a last minute change or a surprise in the interview - just to see how they react. Do they take it all in their stride, or is it a big problem?” Grant believes curiosity, resilience, and a drive to learn are the most important qualities to look for in your first hires.
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