Entrepreneur alert: How to raise $3.2m in funding during Covid-19

Swoop co-founder Ruben Schultz breaks down the techniques behind raising a multimillion seed round from Silicon Valley investors during Covid-19 – and how his start-up is adapting to the coronavirus era.

By Esade Entrepreneurship Institute

Entrepreneur Ruben Schultz quit his corporate job at Facebook to launch Swoop, a Los Angeles based start-up providing tech solutions for transportation businesses. The start-up has built management software for group vehicle operators who were historically taking orders with pen and paper. Swoop is in the spotlight: in the midst of the pandemic, the start-up has raised $3.2 million in funding from Silicon Valley investors. Ruben says his experience at Esade helped him embark on his entrepreneurial journey.

Ruben Schultz
Do Better: How did you manage to raise a multimillion seed round from Silicon Valley investors?

Ruben Schultz: We were growing pretty quickly, and we realised that if we wanted to make the leap to the next stage, we needed external funding. So we went out and started pitching to venture capitalists, especially in the Silicon Valley area. It was an extremely interesting journey.

How so?

You start by building your pitch deck and then you go out and pitch to investors. At the beginning you get rejected by everyone — sometimes because you don’t know how to tell the story yet, or maybe you're just not pitching to the right investors. Early on it can get pretty deflating and frustrating because you don’t get a lot of successes, but once you get the first investor to show interest, it's almost like a snowball effect. When the first investor says yes, everyone else gets on board.

How did you deal with rejections so as not give up during the process?
 
Before you start pitching investors, you need to write down somewhere – or really put it into your head – that you're probably going to get between 40 to 50 "noes". It's part of the process.

The more you go out and raise money, the more you need to accept that people are going to reject you

If you feel insecure about your idea you may give up after a few rejections...

The more you go out and raise money, the more you need to accept that people are going to reject you. After a rejection you can say to yourself: "I was expecting this anyway," and then it becomes less personal. You also need to learn from your rejections. If you walk around and keep getting rejected, you need to adjust and think why they didn't like the story and what you could do better, so that when you pitch to the 50th investor your pitching is way better than the first time. With that in mind, you want to start by pitching to the investors that you're least interested in.
 
Why?

Because it's like a practice round. You need to prepare for the big one. That's how it works with venture capitalists. The nice thing about fundraising is that there is a lot of information out there on how to build your deck, how to schedule meetings, how to get introductions, and how to get in touch with VCs. Anyone who wants to go out and raise money should spend a day or two reading what's already out there – because that saves at least 50% of the learning that you'll have to do in the process.

A venture capitalist is more likely to invest in your company if you are introduced to him

If you could give very practical advice to entrepreneurs who are trying to get funding from investors, what would you recommend besides being patient?

Ask founders in your network for introductions. A venture capitalist is more likely to invest in your company if you are introduced to him. In other words, if I want to invest 100,000 dollars and someone introduces someone to me, I'm more likely to give that individual the money. So try to get introduced to these venture capitalists through your friends and acquaintances. In our case, we had a list of people that had started companies and we asked all of them for introductions. Most founders are open to providing introductions.

What other advice would you give entrepreneurs to attract VCs?

Make sure you feel comfortable with your pitch and your story because you only have 5 to 10 minutes to tell your story. Another aspect that is also important is that you want to either keep fundraising – or you don't. You don't want to be in-between. The best email you can write is something along the lines: "I've been very busy raising funds for my company for the past four months. Since the month of September I have been looking to raise two million dollars and I'm only raising funds during the next four weeks."

funding entrepreneurs
Related content: The quest for funding: key financing sources for entrepreneurs

Why the time frame?

If the investor says yes and wants to meet, just let them know that you're busy this week building your business and suggest meeting next week. Try to schedule all the meetings in a two to four-week window, rather than always be raising money. Because trying to raise funds takes a lot out of you and it distracts you from building your business. You want to keep it concise. If you don't manage to raise all the funds in four weeks, go back to building the business for another four to six months, and then go out again in a focused way.

So that's the secret to raising 3.2 million dollars.

Exactly [he winks].

Onto another subject, how did your journey as an entrepreneur start and how did you get where you are?

I always knew that I wanted to start my own company, but I never really knew when the time would come. It wasn't a very planned journey. I think it's important for aspiring entrepreneurs to remember that there is no playbook for starting your own business.

Swoop van

You quit your job at Facebook to start Swoop.

I didn't quit Facebook right away; it took me a few months to make that decision. My friends had already been working on Swoop and had quit their jobs — they were a bit more risk-taking that I was.

Is it advisable for entrepreneurs to quit their jobs right away to start their own business?

The decision to quit your job is specific to each individual, but it's important that you don't feel that you have to make the jump immediately. Patience is important when you start a company. You have to think about it as a ten to twenty-year journey, not a four-month journey.

You're never going to be 100% sure, but when you feel that you're onto something – and gain some traction – it's usually a good moment to make the jump. Becoming an entrepreneur doesn't have to be a once in a lifetime decision. You can always go back to a regular job. Remembering this often gives you more comfort when making these decisions.

It's important for aspiring entrepreneurs to remember that there is no playbook for starting your own business

It takes some pressure off...

The first thing I noticed when I quit Facebook was a significant pay cut. But it's such a refreshing jump to make from being employed to starting your own business. The responsibility is so rewarding and intrinsically motivating because you work for something you have created. You no longer work to figure out something for somebody else.

Did you start your business in a garage?

It sounds cliche, but the first year we started literally working out of a garage. We wanted to solve group transportation, especially in the US where most services such as Uber, Lyft, Bird or Lime focus on individual travel. We realised the large vehicle industry is completely decentralised and very opaque. If you were to book a bus right now you would get different prices, different people, different vehicles, and different experiences. With Swoop we're building software to help vehicle operators better run their businesses. The platform allows you to place orders, track your drivers, and even manage payroll.

How is Swoop adapting to the Covid-19 crisis?

As a company we are affected because it's transportation and people are not moving around so much. The money that we have raised helps us make it through, but it's going to be a tough time for us. During these months of Covid-19, we have adapted and we're using the vehicles for moving goods instead of people. We're handling many package shipments such as fresh food and produce — all these things that people are having delivered to their homes due to Covid-19. It's actually working nicely because there's a huge increase in demand for shipments. We're also focusing on building our software for vehicle operators and trying not to be too distracted by all the other things that are happening around us.

Team during Covid-19
The Swoop team in a business meeting during Covid-19 (Photo: Swoop)

You quickly adapted your business to this new reality.

It sounds like it was easy, but it was incredibly stressful because half of the time you have no idea what you're doing. We could chat for an hour about all of the struggles I've had in the past two weeks. Everyone is affected by Covid-19. It's so easy to get lost in the mess during this pandemic. In the beginning, I was struggling with balance as I was consumed by everything that was going on. There were weeks when I felt I wasn't doing anything for the company. It's important to remain focused and try to remember what you're building.

How do you manage to stay focused during the pandemic?

There are two things that can help you remain focused. One is tactical, like turning off your notifications, limiting your exposure to news and social media, and trying to be present. Another thing that really helps is being grateful and appreciative of all the things that you have. For me, it's often just thinking about being part of a larger system – the earth, stars, and universe – and that somewhere within all of this craziness I get to live my life. I know this is a privileged thing to say because I'm not sick and I have a roof over my head, and just reminding yourself of that is incredibly helpful during this pandemic.

And lastly, if you are unfocused or having difficulties, be open about it, share it with your friends, and your co-workers; let them know that you're having a hard time. Sometimes a lot of people think that they have to act like everything is fine. But it is fine to be vulnerable and just admit that it's difficult. Because it is difficult out there right now.

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