How OneEleven’s Dani Pascarella (StartEd '17) Knew It Was Time to Raise Capital
In August 2021, StartEd CEO and Co-founder Ash Kaluarachchi spoke with Dani Pascarella, Founder and CEO of OneEleven ― a financial wellness platform that empowers people to live happier lives. She’s also a StartEd ‘17 Alumna.
While managing money for the wealthy on Wall Street, Dani noticed that a lot of her friends were stressed when it came to money and finances. They made poor decisions due to a lack of time and financial knowledge. Eventually, she left Wall Street to start OneEleven.
When Dani came to StartEd in 2017, her company was just a year old and called Invibed. Based on the guidance she received at StartEd, she pivoted from a B2C business model to a scalable B2B model. After bootstrapping for a few more years, she raised a seed round in 2021 from investors that included U.S. News and World Report ― an investor within the StartEd Network. In this post, she shares how she thinks about raising funds.
From bootstrapping to raising funds
My early financing was my 401(k) from Wall Street, which I liquidated. It’s the opposite of typical personal finance advice, but I thought, “I'm going to bet on myself. Let's do this.” I wound up bootstrapping ― supporting the company using my own personal savings and an SBA loan.
Here's the thing about capital: there's a right time and a wrong time to raise it. We were a bootstrapped company for many years, and we just raised for the first time in 2021. Capital is going to accelerate whatever direction you're going in. If you don't have the vision ready yet or you're not on the right track, you're going to very quickly rise or fall the second you raise capital. What happened to a lot of companies that don't exist anymore is they raised capital and it accelerated them to failure, whereas if they had more time to figure it out, they might be in a very different situation.
So I'd say that once you know what you need to do and who your buyer is, it's time to flip on the capital switch and really start growing. This is my personal opinion. There are some founders who will say, “Raise as soon as you can!” But I do think that having the time to figure it out without a lot of external pressure is extremely valuable. I will say that we as a company are very, very smart because we've been in the space longer and we’ve had more time to get to know our buyers and our users. We have insights and have connected dots that you can't unless you've been in this space long enough.
To me, the point when you raise capital is when you’ve figured it out and you're ready to grow. There is definitely a benefit to spending the time to really iron out what you're doing, why you're doing it, and how you're going to do it.
Knowing when to raise capital
We got to the point when I knew it was time for us to raise money. We had contracts and pilots, and customers were saying, “We love you, but we need to see you do X, Y, and Z to expand.” For example, some of our B2B clients wanted a mobile app or more coaches. They basically wanted to see infrastructure in the form of VC money before expanding their contracts with us.
Secondly, we were also starting to hit some snags in our sales process. We started to go up-market in terms of partnering with bigger organizations, and we were getting a lot of the same questions about size and scale. The ability to handle scale was the friction in our sales process for both existing buyers and new buyers. So we were losing deals or not getting expansions because we didn’t have the capital to do certain things. It wasn't capital that we would be able to generate organically, so we needed to be able to fund that. One of our mentors at StartEd actually told me that if you take capital, you should be able to generate at least 3x the revenue that you would have generated if you didn’t raise capital.
I felt like I was stretched very thin. Up until we raised, I was running tech and doing a lot of the coaching ― both coaching customers and running the coaching team. I was also doing business development and customer success, and I got to the point where I needed to help with sales and marketing. I needed more people to do the things we were already doing. The more customers we were getting, the less time I would spend on sales, and I would spend more time servicing them and working on launches. It was this catch 22 of “I got the deal and it's great and we're excited, but now I'm the implementation manager.” I was becoming the bottleneck, which if you're a sole founder, that's probably something that you're going to run into a lot until you hit the point where you can scale.
We wound up getting a few big deals. I hired somebody to help with the coaching side who's fantastic. He's actually our director of coaching now, and a chunk of my time was freed up. This was a game-changer. I suddenly had so much more time for sales, fundraising, and other growth fueling activities. At that point, I knew I needed to hire more great people so that we could grow faster.
When you're losing money because you don't have money ― that's when it's probably time to raise money.
Finding investors
We met one investor through StartEd. When I saw him on the list, I said, “This guy's a legend. I need to have a conversation. I would kick myself in the head if I didn't talk to this guy.” I didn’t even want to talk to him about investing. But he wound up investing. If we look at the investors we have, they're people who we met before we were fundraising, and it was not in the context of fundraising, which I think is very interesting. It was more along the lines of, “Can I get your feedback? I want to hear what you think.” It was for a specific reason. Our lead investor backed a very similar, non-competitive company. So I said to myself, “I need to hear what this guy thinks about how we're selling this because he’s done this before and has been extremely successful.” That was the reason. That's the first bar: they're a genius at this one thing that I need to be better at. Something drew me to them besides a check.
The second bar is, “Do I think they're fundamentally good people? Are they somebody that I like and feel comfortable with?” This is how we hire too. We have a strict “no mean people” policy. I will get rid of a brilliant genius because there's just no room in how we operate as a company for people who aren’t kind and compassionate. So that was the other test for our investors. I want to feel like I'm doing business with other people who I also admire and respect and think are phenomenal, outstanding individuals. Part of why we waited to fundraise was that I had a lot of conversations. There were a lot of times where potential investors were interested in what the next steps were, but I didn’t feel great about it, so I passed or said we'll keep in touch.
I think for our next round, it’ll be the same thing. We're probably going to be fundraising again soon. I'm taking meetings not to fundraise but because I want to see how they behave. In the same way they're looking at you to see your progress as a company. I want to see lines, not dots, with the people that I'm putting on my cap table. A cap table lasts longer than most marriages. I want to make sure that we have that relationship and that we feel good about it before we sign the documents.
Before fundraising, it's very much, “Am I going to make it? Am I going to keep growing?” After the raise, you also now have a lot of other people's expectations. You have to grow, and you have more help. So instead of me the founder trying to do a million things and just produce, produce, produce, now the problem is how do I get the right people on our team and how do I get them to be their best selves? You're now in this situation where you've got to get 10x more stuff done, but you have the team to do it, so your job is more about empowering other people.