Managing a Down Round (Podcast): George Arison of Shift

Nathan Beckord -

This "How I Raised It" podcast episode is with George Arison of Shift Cars (Shift.com), an online car shopping platform that brings the car to your door for test drives.

Shift's Recent Venture Round

Shift most recently raised $181 million of Series D venture funding in a deal led by Lithia Motors. BMW i Ventures, Alliance Ventures, G2VP, Highland Capital Partners, Goldman Sachs Investment Partners, DCM Ventures, Threshold Ventures, 122 West ventures, MicroVentures and other investors also participated.

Episode Details

In this episode, George talks about how fundraising is a process of "VC thesis matching," how he raised the seed round by going back to previous bosses and co-workers, how startup valuations really work, tips for surviving a downturn, why the next few years will be great for founders, and more.

What Nobody Likes To Talk About: "Down Rounds"

We also go deep into what happens during a "down round" and how to best deal with it -- for example, getting existing investors to commit to a price, dealing with anti-dilution clauses, changing the liquidation stack, increasing the option pool to keep employees happy, and more.

Listen on SoundCloud: How I Raised It podcast by Foundersuite.com · Ep. 152 How I Raised It with George Arison of Shift.com or on Spotify:

How He Raised It

💰 Who: George Arison
💰 Company: Shift
💰 Where to find him: LinkedIn | Twitter
💰 Money quote: “There's a lot of benefits of getting to know really great investors, even if they don't invest in you.”
💰 Noteworthy: George is extra careful to listen to feedback from investors who have turned him down. Why? They can help him spot issues with the company that he might not be able to see.

Capital Gains - Key Podcast Moments

[8:21] Origin story 👉 He’s built two car-based companies, but George isn’t really into cars. He’s into building new systems to get people where they need to be.

[15:39] Round and round and round again 👉 Shift raised $225 million in equity and $75 million in debt. But this  fundraising journey bore little resemblance to George’s previous experience with his first company.

[19:22] Term sheets are everything 👉 Taxi Magic had a great contract for an assured half a million in revenue that they used to leverage a great Series B… until the business offering the cash folded

[25:12] Zero to 60 (angels) 👉 George didn’t know much about fundraising before his first seed round, but he and his cofounder managed to attract 60 to 80 angels with a good story and a lot of grit.

[33:22] The dreaded down round 👉 For the first time on this podcast, an entrepreneur is willing to talk about their down round! Here’s why this conversation shouldn’t be stigmatized.

[41:58] Down but not out 👉 It’s possible to protect yourself and your employees during a down round, but it is a balancing act.

[44:47] The good news? 👉 Valuations are mostly artificial anyways. You can talk about your rounds relative to each other without getting into it, and you can always lay out specific growth strategies.

[47:08] “Cut everything you can” 👉 George’s advice for surviving the current economic moment is to contract as much as possible, so that you can hopefully bounce back stronger than ever in a few months.

Top quotes from the episode

“There's a lot of benefits of getting to know really great investors, even if they don't invest in you. They might tell you things that you might not pay attention to, but then over time, it becomes really, really critical.”

“Stock prices and public markets go up or down. The prices aren't always the same. Why is that wrong for private companies?”

“I honestly believe that the next two years — they’re gonna be an amazing time to be a new founder... Because recessions are when the great founders come out of the woodwork and build great stuff, so I think we're going to see some really great companies born in this time period.”

“Don't overvalue your business. Being overvalued is a bad thing.”