In this purpose-driven era, executives love to wax poetic about their values and principles. Why not? It’s happy talk. It makes everybody feel good.
Before the pandemic, Chad Bronstein, founder, and CEO of Fyllo, which provides compliance-first SaaS and data solutions for highly regulated industries like cannabis, was one of those CEOs. The company he built focused on attracting the right human capital and obtaining the right venture capital. Studies have shown that VCs tend to value strong teams even more than technology, which was 100% true for Fyllo.
Chad said, “We didn’t just want someone to write a check. We wanted the right individuals, in it for the right reasons, and we wanted to do right by them, too.”
However, it wasn’t until Fyllo, as an early-stage company, was impacted by the pandemic that Chad’s principles were really tested.
Chad said, “From the second the pandemic hit, the drumbeat of advice started. People I know and trust counseled me to cut salaries and reduce headcount. However, I wouldn’t pull the plug on our principles and knew our people were the ones that would ensure that Fyllo would succeed when the dust settled.”
Chad continued, “I felt the same way about our investors. If we wouldn’t be transparent in a crisis, when would we? They were (and are) part of the team.”
Then, in March 2020, cannabis was deemed an essential service. First in California. Then in Illinois. Then just about everywhere. Suddenly business was back and stronger than ever.
Studies have shown that VCs tend to value strong teams even more than technology
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While others were scrambling to put their team back together, Fyllo’s team was ready. However, it would need more capital to scale to meet market demands. At the same time, Chad co-founded a second company, Wesana Health, that would also require capital.
Here is how Chad approached the pandemic and how he successfully raised $30M for Fyllo and $14M for Wesana during lockdown.
1: Investors are people, too. Find investors who want to be part of the mission and the team, not just the cap table
Some investors are entirely transactional: give me X dollars and I’ll give you 10X back. Don’t settle for that kind of relationship. Instead, insist on finding investors who can become part of the team. When you take better care of investors as people, you can take better care of the team. When we take care of our team, we can take better care of investors. It’s a virtuous cycle. Investors are people, and people don’t like to be blindsided. If they’re part of the team, treat them that way. Don’t wait until board meetings to communicate with your investor-base.
2: New and dynamic categories mean a wider investor pool
Even innovative companies tend to overthink inside the box: “I run a widget company, so I should go to only investors that invest in widgets.” Think bigger. Consider investors that share your values, curiosity, and fundamentals over those who only care about a particular industry sector. For some of Fyllo’s investors, the Company is their very first cannabis investment, and it took time to educate them on the market. Putting in the time was a wise investment because having the right investors is better than simply having an investor that only knows your industry.
3: Investors invest in your team. You should, too
One of the most challenging parts of building a company is getting the team right. It’s about the right skills, the right passions, and the right chemistry. Savvy investors look at the whole team when investing. They want to know that successful people are betting on your company just as much as they will. This is one of the many reasons why Fyllo didn’t need to lay people off during the pandemic. Their team is a critical capital raising component, as well as a crucial piece of company execution.
4: Remember investors care about principles but are judged on returns
Investors can’t invest just because they love the business. In the end, they’re responsible for generating returns. So they’re betting on your ability to keep your focus on what’s best for your customers, your people, and your business — no matter what — so that you can do what’s best for your investors.
More than a year since the pandemic began, Fyllo is set to have its strongest year yet. Yet, when the going got tough, Chad stuck to his principles. He continued to invest in his team and made decisions that drove the business forward. This is what, in the end, enabled him to attract smart and strategic capital.
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