The Right Questions To Ask VCs with Milana Lewis of Stem.is
Episode Summary
What’s the starting point for raising capital? According to Milana Lewis, it’s not your initial pitch. Co-founder and CEO of Stem, a platform that helps independent musicians manage the financial side of their business, Milana believes the fundraising process should start long before the ask.
From 2010 to 2015, Milana worked as a Digital Talent Agent at United Talent Agency (UTA), one of Hollywood’s biggest talent management firms. She was tasked with helping UTA’s clients find the right tools and technology to self-distribute their work.
During this time, UTA started its own investment fund, and Milana got the opportunity to witness the investor experience first-hand as the fund evaluated companies. She also got to meet all-stars like Gary Vaynerchuk, Scooter Braun and Mark Cuban.
Over time, Milana made sure to build and nurture the relationships with investors she met. She shared that she wanted to become an entrepreneur one day, and when she came up with Stem, she told them about her idea.
It paid off. Literally. When it came time to raise money, Gary was the first person to say yes. Mark invested, too.
In this episode of How I Raised It, Milana shares how she secured $22 million — over three rounds — from some very high-profile people.
How She Raised It
💰 Who: Milana Lewis
💰 Company: Stem
💰 Where to find her: Twitter | LinkedIn
💰 Money quote: “The first couple of investors are making a blind bet. You have nothing to prove in most cases, unless you’ve bootstrapped the business to revenue.”
💰 Noteworthy: Milana’s pitch to Gary Vaynerchuk was only 15 minutes long — by the time she pitched him, he’d already been hearing about the business for about a year. He didn’t need to hear the full pitch because he already was very familiar with the company and Milana.
Capital Gains
[9:30] Origin story 👉 Milana came up with the idea for Stem when she was still working at UTA and realized there was nothing out there to help entertainment professionals with the financial side of their work.
[12:08] Early access to investors 👉 UTA started an investment fund, and Milana got to sit in and help evaluate companies. This also led to her meeting big-time investors like Mark Cuban.
[12:40] Share your career goals with potential stakeholders 👉 Investors get excited about making early stage investments — they want to identify superstar founders before anyone else does.
[14:05] Build credibility before asking for money 👉 In her role at UTA, Milana was able to gather intelligence about new companies, which ones were raising, and what was and wasn’t a good deal. She then presented these opportunities to the investors she knew.
[15:30] Make a lead list 👉 Fundraising is like sales, and you have to have a really tight process to yield the best results. For a year before she started raising, Milana kept a spreadsheet of every person she met socially or through business. Her goal? To come up with a list of at least 100 potential investors.
[17:01] Sort the list from biggest to smallest chance 👉 She prioritized the list, putting those who knew her, those she’d built a relationship with, at the top because they’d have to take the shortest leap of faith.
[17:49] Adhere to a tight timeline 👉 Milana gave herself four weeks for the first phase of fundraising conversations. During that time, she spent three days each in New York, San Francisco, and Los Angeles, and scheduled back-to-back meetings.
[20:55] Be deliberate about the investors you speak to 👉 Early on, don’t waste your time pitching to people who typically invest in seed or Series A. You won’t have enough proof points to gauge their interest. Focus on early-stage seed investors instead.
[31:29] Less is more 👉 Don’t take on a ton of small, individual investors at the beginning. Managing investor relations and communications can eat up way too much of your time.
[31:52] Evaluate investor commitment 👉 Only take investments from funds that will be around for a while. A lot of early-stage funds aren’t committed to being funds long-term. It’s not their core competency, and sometimes it’s just an experiment. If they shut down their fund, it becomes a huge mess for you to clean up.
Top quotes from the episode:
“For anyone who’s sitting in a big company and has an idea, has the itch to be an entrepreneur, notice the people around you who can support you in the future, and be really honest and vulnerable about the fact that you’re thinking of being an entrepreneur.”
“You start raising a year before you start raising. Because you start building relationships and you start building data points.”
“Know how to move the pieces of the people around you to get to the final outcome.”
“You’re not just pitching your company. You have to also vet and evaluate potential investors. Because there’s so many headaches later on. If the partner of the person leading the deal leaves the fund, no one at the fund may care about you. Then you have dead weight on your cap table.”