How to Craft Your Pitch to Attract Big Investors

0:00It's so important for me as an investor to understand the motivation of why a person has gone out and put their life on the line to be building a business. Hello and welcome to Shopify Masters, your companion for starting and building a business. I'm your host, Shuang Esther Shan. You probably spend a good amount of time thinking about your finances. Fundraising and understanding the world of venture capitalists can be intimidating. But our guest, Ellie Truesdell, is here to demystify it all. Ellie spent nearly 10 years at Whole Foods sourcing new brands before she co-founded Made by Nacho, a premium cat food company created with chef Bobby Flay, to bring his cat's favorite dishes to life.

0:50Their brand, along with others like Midday Squares and Omsum, fall under Ellie's own venture fund, New Fair Partners, dedicated towards serving the modern eater. Today, we'll get her perspective as a founder and venture capitalist who knows what it takes to dominate retail shelves and online. Ellie, welcome to the show. Thank you for having me. Very, very excited to chat because you have this really incredible, well-rounded perspective on finance. You've raised and you've also invested. So you have this dual lens for new founders and people who are trying to figure out the best funding route for them.

1:33What should they actually think about when they're fundraising? A lot of it is realizing or recognizing your stage, where you are in your processes. If this is a first-time raise, you're a young company and a startup. I think especially in this environment, which I think we all know is brutal and really challenging, it's having realistic expectations, going out and trying to pitch people that have some motivation or some connection to your business, your brand, you personally. And that doesn't have to just mean friends and family, but something I learned and something I thought a lot about in the early days of raising my first fund for Newfair is that people aren't going to solely invest in Newfair based on wanting the highest return.

2:22Of course, that should be part of it. They want and are seeking a return. But if you're doing that, you're looking exclusively at tech funds, you're probably managing your risk a little bit differently. What I needed to do was find investors who were particularly motivated by or cared about food. We're food specialists. We exclusively invest in food. And so there needed to be that emotional connection. There needed to be a personal tie to either the food world or to my personal story or to something about me. So I think that that's just one sort of qualifier for how you could think about going out and fundraising is finding people who have a connection that's beyond just wanting to see an investment return.

3:02And then beyond that, it's really doing some research, knowing if you're going out and pitching a fund that has never invested in a SaaS company before ever in your SaaS business, that's probably not the right people to be in touch with. If you know that they're solely a growth fund and you're pre-revenue, pre-launch and raising a seed, not worth your time or theirs. So just doing that research and really trying to set yourself up for success. And then more than anything, I mean, just be ready to be resilient. Don't take rejection as any sort of personal affront to you. There are so many reasons people don't come in, don't invest, and honestly could come back to it.

3:39If someone tells you, listen, it's too early or it's not the right time, take that for what it is and don't get discouraged and say, listen, I'd love to build the relationship and come back to you when you are ready. Sounds like we should definitely research the different funds and highlight our personal story beyond just what the ROI would be. But how do you take all of that information and storytelling and distill it into a good cold email? I'm trying to think about great email pitches because there are some. It's hard to break through, but I think length is important. Not writing too long of a first email is really important to, especially if you're pitching an investor who probably is seeing hundreds or thousands of these a year.

4:21So keeping it tight to the point, having a personal anecdote. I mean, it's so important for me as an investor to understand the motivation of why a person has gone out and put hopefully their life on the line to be building a business. There needs to be a real founder story, not just them chasing an opportunity. So if there is that quick distilled story that you can lead with, that initially is going to get me excited, interested beyond just, again, with every single one of these investment opportunities, there should be a built-in expectation. There's room to make money here. That should be the understanding with anytime you're pitching anyone, any business.

5:00So you really do need to think about what is going to tie that angel, that fund, that high net worth person to your business with a story, with something that feels tangible and a little bit more personal to you. In person, I think stories, as far as I'm concerned, having been reasonably successful fundraiser, both for my fund and having raised four rounds of capital at Made by Nacho, the pet food company that I co-founded, I think that stories are everything. I mean, you really have to try to tie what you are pitching and the value proposition back to execution and to operations and how you're going to make it happen.

5:41And I think people fall in love with or get endeared to a company through stories. So really trying to have a couple stories that you think are going to make people fall in love with your business is important. So storytelling is so important, especially during the pitching process, because it is not just one meeting or just one fund. You might be talking to multiple venture capitalists. How does one stay focused throughout that whole process? One thing we've always recommended to our brands, even in my early days of going out and pitching Made by Nacho when it was our first raise and we were still kind of coming together as a team, we had a couple sample pitches or opportunities to get on Zoom calls with funds or people that we knew either wouldn't invest or were not people that we really wanted to invest just to practice.

6:33So I think there's real benefit to sometimes if you just have like a family member come on or a friend to do a trial pitch, you're not really going to nail it the way that you would. You're going to feel self-conscious or it's not going to be as realistic without wasting anybody's time. But if you can engage someone who maybe you do know is a growth stage investor, they're not interested in coming in on this round, but you say, hey, would you ever be willing to just let us practice pitch on you, get some feedback and go from there? And I think having done that a few times is really important, particularly if you have other people that you're raising with and there needs to be a little bit of a choreography.

7:08It's so important for me when I'm receiving pitches to watch that two founders or a team really knows who's picking up the conversation when or who's answering what question when because everyone has ownership over their own parts of the business. And so I think having the chance to do that practice is really important. that's on the actual in the pitch. Then when it comes to sort of organizing yourself around how many different funds you might be having conversations with, a little bit personal, I'm sure some people use CRM tools at Made by Nacho when we've been raising rounds. We just have more of an internal, you know, Google Sheet sharing where we try to keep very up-to-date notes with each conversation to track how each one's going, what's the follow-up, where are we, And even before we've done that to what I mentioned before of specking out your investors, we've made a list of these are the funds, connected website, here are the key players, here is their typical check size, here's their stage, and here's their portfolio already.

8:09so that you're really walking into the conversation as a student of the fund. And I think that just shows research, it shows preparation to the investor, but it also puts you in a better position to pitch yourselves in a way that's suited to them. So after speaking to different venture funds, maybe there's a few offers on the table. How do founders actually pick the right investor for them? Yeah, it's a really important part of the conversation that I think sometimes founders overlook that you have the decision-making power or the agency to say, no, I was on a call this morning with a founder who is raising a seed round, had it filled by one investor and walked away from the deal because they just started feeling uncomfortable with the terms and the asks.

8:54And so I think being prepared for that, that you should never be overly wed to the money and the capital where you're sacrificing things that are really important to you. And so really trying to get a sense, both from your conversations with the investor, if they're aligned and you have a shared vision for building this company, as much as you can back channel and find out from the rest of their portfolio, how it's been working with them. I have done that so many times and fellow founders are going to be very willing to tell you, yeah, these people are great during hard times. These people have not been supportive during tough times.

9:30And I think getting that feedback is important, but more than anything, really trying to address the terms up front. And one thing for us at Nacho that was always problematic is if you discuss terms, really felt like you laid everything out in person or in a conversation, and then a term sheet came back that did not reflect that, that just sort of immediately broke our trust and probably felt like a partner that wasn't going to be the right fit. Whereas if what we'd outlined in detail was all in there, we felt like, okay, great, that we've built this rapport already. The investor respects us and is putting on paper what we've already agreed to.

10:08But I think it's just really important to be prepared as a founder and a business owner to walk away if you need to. Once a founder secures funding, the relationship with the investor actually lasts years, if not decades. How do you ensure you nurture and grow with the investor over the years? It's really important to remind yourself, especially if it's your first time raising money or you're early in your journey of raising and building a business, that you might be in a relationship with this investor for 8, 10, 12 years. So it's a little cliche that this is a marriage. It's a very long relationship.

10:47So much can happen over those years that it's really worth doing the diligence. And so I think preparing yourself for the term sheet is important. Building the relationship over the years is so important and it will change. We find at Newfair we're intending to be really hands-on and supportive and helpful in the earliest stages because that's where we're expert. That's where we've supported and built the most companies. That's where we hope we can help you see around corners and be the most valuable. As you continue to mature, our relationship might become one that's slightly less hands-on and a little bit more strategic and advisory and guidance and feedback.

11:30And so I think recognizing that, too, in how you're stacking your cap table or how you're thinking about bringing on investors in your different stages of the journey of, OK, we've had really pivotal sort of like seed and Series A investors who know how to advise us during this period. And as you move forward and maybe are getting closer to an M &A deal or a sale, or you're looking to take growth equity and just really need to prepare yourself, have different investors that you're building that relationship with. But more than anything, I think it's proactively communicating with your investor base.

12:06I'm so thrilled when our founders have at least a quarterly update, but it's great if they love to do a period or monthly update. Just with the quick highlights, right? We want to know how the business is going, the wins, the struggles and challenges, where we can be helpful. A lot of our founders will send asks in every one of their monthly updates of their investor base, which what I love about that is it's efficient. It doesn't mean that they have to call all 10, 20 people on their cap table and say, here's what's going on and here's where we can use their help. It's a monthly or a quarterly update where we're all getting the same information and can come back to you.

12:42And then if you're doing that regularly beyond the email correspondence and those newsletter updates, just knowing enough about each of your investors to say, we're having an issue in and with our 3PL and logistics. I need to call my investor who I know has done supply chain before. Or I need to call someone who's on my cap table who's a founder and might know another person that I should be calling about this. So I think really being prepared to utilize your investor base, knowing that they might not be actively reaching out to you, and then maintaining the communication outwardly and consistently is just so important.

13:24It helps everyone. Yeah, it sounds like any good advice for relationships, staying communicative and transparent and asking for help when you need it. I think a lot of founders might feel like they need some help in this realm right now just because there is a bit of downturn with direct-to-consumer and tech in general. And they do sense that within the VC firm, investments are not as lucrative as before and it's not as easy to make those connections. What do you think founders can do to ensure that their runway is built on their own terms and it lasts long while they're trying to figure out fundraising in the background?

14:08Yeah, I think right now it's really critical to preserve cash and be realistic and maybe even pessimistic on how long it might take to raise capital. And the only reason I say that is to ensure that you can get through this. Raises right now are taking so much longer than you think they will. Terms are changing. It feels like you think you have a deal done and then something comes in and changes the scenario that you have to be ready to either agree to or say, you know what, we're not doing this deal, so now we have to go back out. So I think throughout all of that, to me, showing consistency and showing that you're continuously sending those updates that I just mentioned every month, despite real headwinds in the fundraising space, showing how you're adjusting, saying, listen, we recognize that this raise might actually take twice as long as we thought it would.

15:01So we've decided not to roll out with X retailer and we've cut back paid ad spend by X percentage. I think just showing that discipline and being really mindful this year and last year. Last year we saw this help preserve companies or sink them, is the ones that saw the writing on the wall, made the tough decisions and changes that they needed to in time to preserve cash, and then took that much longer to raise their rounds, have made it. Unfortunately, a number of companies that we know, for a variety of reasons, just didn't make the switch. It's been such a huge cultural shift in terms of investor expectation and high growth company performance.

15:48And as you mentioned, headwinds in D2C, there's headwinds based on interest rates, inflation, all of it. It's just so much harder. So I think more than anything, strategies to preserve cash and elongate your burn or runway, but more than that is showing consistency and resiliency throughout it all, especially with that communication with investors. When I get kept up to date from a brand that either we've said no to, but they want to see that like, hey, we're still here. We're pushing through this. We've done everything we can to get through this tough time. We've gone through a riff, reduction in force.

16:25We've made these tough decisions to get closer to profitability. All of those decisions should really show up and benefit you just when the tide turns or when an investor says, all right, great. I've seen the way this founder works for long enough. I'm so impressed. I'm actually going to take a chance on this. It's so fascinating to hear from your venture capitalist perspective, and we're going to dig into other chapters of your career. But first, I would like to take a moment and thank you for tuning into today's episode. Wherever you're listening, make sure you are following Shopify Masters and leave us a review with some feedback for today's episode.

17:09Our team loves reading them. Thank you so much. So hearing from the VC perspective is such a treat for me. And I know that our listeners are dying to just learn from you. But what is so fascinating is the fact that you've had so many career chapters that are dream roles. So you started your career in Whole Foods where you're actually looking at new brands and kind of sourcing and deciding who gets to be on the shelves. From the retailer's perspective, what's your advice on pitching and getting in touch with someone like a Whole Foods? Yeah, it's so interesting. It's very similar to probably the advice I would give when you're pitching an investor because similarly as a buyer back in the day, this is, you know, 10, 15 years ago when I was a merchandiser or a buyer at Whole Foods, we were seeing thousands of brands every year.

18:09And so I think you also have to be presenting something that has a real value proposition. The story piece is absolutely the same. I need to feel endeared to why this product is differentiated, why it's exceptional. I think also know your audience, know if you're pitching a natural foods retailer, if you're pitching a conventional, if you're pitching a Costco or Sam's Club, you should make sure you're presenting them with something that is suited to their stores and to their customers. So I think it's really interesting when we would get a lot of quote unquote better for you brands, which now are a little bit more table stakes.

18:48So a ton of conventional grocers are recognizing that that's where all of the growth is and are excited about better for you brands, maybe even more so than the natural channel, because the natural channel, their bar at this point is a little bit higher. They feel like, listen, we've launched in my 10 years at Whole Foods, we sort of went through that renaissance. We brought in every alternative and every quote unquote disruptive player to the legacy brands, you know, Hugh Chocolate, who was disrupting Hershey's Chocolate and Sir Kensington's who was disrupting Kraft Heinz, Ketchup, et cetera.

19:19So I think if you know where you're positioned in the market, recognize where the retailer is, and make sure that you're offering something very different to their set in that category. Also, if you can somehow get in front of them with a little bit more of a personal touch, whether it's an introduction through another brand, it's meeting them at a trade show, makes all the difference just because it's hard to overstate how much product comes to buyers and how much a single buyer can manage. Some grocery buyers at Whole Foods oversee tens of thousands of SKUs. So it's really hard for them to even have the chance to get excited by a new product.

19:58So you've got to sort of work a number of different angles. I think what's really fascinating about your different career chapters is the fact that you built up those relationships over the years that made those pivotal decisions really easy and those opportunities actually opened up to you. So what's your advice for being able to nurture those relationships and be the person that Bobby Flay wanted to turn to when he decided to start a brand? One of my favorite expressions is time either promotes or exposes you. And I think that it's just something that I really love because for me, over time, I have, as you mentioned, invested a lot in building relationships and maintaining them.

20:46And for me, that has been through business and professionally to make myself open and accessible to people, be really direct and honest in my feedback. It's not always going to be positive feedback, but I try to give it. Generally be a champion of and a believer in people. Having done that first in my career for 10 years with Whole Foods and having built a real reputation among entrepreneurs in the food and beverage community, that it built a lot of influence. It's given me license to do things in my career that maybe I wasn't even planning on. I really wasn't ever expecting to go into venture capital.

21:22I'm sort of an accidental venture capitalist in that way. But because I'd been immersed in founders and startups for 10 years and all I did was look for the next big thing in CPG, I sort of was naturally groomed for it. And I think that dedicating time to relationships and over that period of time, they're not being sort of the blow up or hopefully those relationships becoming important, some of them really resulting in big things in and across the industry and some nice press, et cetera. That I do think led me to then be able to work with someone like Bobby Flay, who's, you know, he's 30 years on the Food Network.

22:02He's the longest standing personality they've had. It's so important for him when he's partnering with people that he trusts them, he trusts their reputation, and that, you know, I'm not bringing him down. That's critical. He's a public figure. So it's really flattering that he did want to partner with me on this. I had known his agent for years and because I'd worked with enough chefs in the industry to help launch their CPG lines and through many people that he knew, I think he caught wind of my reputation and sort of my past work performance. And so you have to be patient. You have to recognize that it takes time to build influence in your own particular niche or industry.

22:42For me, it's been really helpful and powerful to stay in one industry and be really passionate and just want to spend all of my time in natural foods and make an impact. And so over those years, then it's just built on itself. Yeah, I think beyond just building the relationships, hopefully having built a great reputation, that opened some doors for me that maybe wouldn't have been open otherwise. But I also really took some leaps. I'm just sort of the type of person who, if I see an opportunity that I'm excited about and I know that I can bring something unique and specialized to the table, but I haven't learned at all, I'll still go for it.

23:19So certainly when I left Whole Foods, I ended up joining and running a manufacturing facility, a co-packing business in Pennsylvania. That was something I'd never done before, but I had enough insight to the industry itself. I knew I was going to be able to bring a lot of strategic and qualitative elements from my years in retail and from working with so many brands. And then learned as much as I could and really relied on and trusted the people who were working for me in the facility to sort of be my own instructors. And that was the same thing when Bobby Flay tapped me for Made by Nacho. He said, you know, if I do anything in CPG, you're going to be my first phone call.

23:58And a couple months later had this idea or had been stewing on an idea with his cat Nacho Flay around launching a premium cat food line. And when he called me about it, I thought to myself, okay, I've never had the chance to really be, number one, never built a brand from the ground up. That's exciting. I, at that point, really hadn't worked as closely on a D2C business. I recognized that everything was moving omni-channel. I had a real expertise in brick and mortar and retail, but I wanted to learn more. in digital. So I think I always think about things from the perspective of, okay, I know enough about this that I can do it and I can bring some real specialty in that I knew I could build a great team.

24:41I knew we would have a excellent retail launch and just engage the right people. But it also was going to be a challenge in learning the pet industry. I had only been in human food to that point. And I was going to learn omni-channel and learn what it meant to build a profitable brand across different channels, not just brick and mortar. And so that's been an incredible journey. And I think it's, you know, just some advice for listeners is like never, never look at an opportunity and think about all the things that you don't know yet, but rather, okay, what am I bringing to the table here that's going to be really unique and differentiated and that I've built my particular strength and influence in, I can come in and nail that part and then learn as much as I can from the people around me, hire the talent and recruit the right people around me to fill in where I know I'm going to have some gaps and then learn as much as you can from those people.

25:36So it might have been a big challenge to change your mindset because you used to be the person that brands pitch to and turn to for advice. And now you are the entrepreneur that has to figure out supply chain, production, manufacturing. So how did you adjust to that change? That was a huge shift. It was really different going from being the person who is in a position of authority at Whole Foods for so many years, green lighting products or telling you that you weren't on shelf. I was the one being pitched all the time. And to then move into a founder's seat where you're just getting so rejected so often in the early days.

26:15It's been actually pretty great. We're about five years into building Made by Nacho and officially three years since launch commercially. And reflecting on and looking back at some notes from when early, early days I was calling people, either sort of pitching them, asking them for their advice, trying to hire them. So much rejection. I mean, people just really couldn't believe in the idea. They couldn't see it yet. We didn't have anything to show. And so most people can't envision that you can build something out of nothing. And I will say it's been very gratifying. I was down in Orlando for Global Pet Expo, which is a big pet food trade show a few weeks ago.

26:53And I ran into at least three people who were sort of in that cohort of industry insiders or investors that I'd reached out to early days, sharing the idea for Made by Nacho, who were pretty dismissive. And totally fairly so, of sort of like, you're, you know, good luck. You've never done pet before. Cat's hard, et cetera, et cetera. And all of those people were sort of like, you know, clamoring to talk with us, very excited about Made by Nacho. When can we next meet? It just really like had such amazing things to say about the brand. And so I think that just had to get through that time. Be resilient.

27:28Recognize that if you're resolute on something that it is you're doing, it can and will and should work. Yeah. And I think also we have to know what was it like working with Bobby Flay? because a lot of people think celebrity co-founder equals more attention. But I think from the perspective of a co-founder is more attention, also more pressure to deliver a great product. So yeah, how did you incorporate his ideas and turn them into a product? I feel incredibly lucky and I couldn't have predicted this. I'd worked with Bobby enough, but not to the extent that over the course of five years now that we have, and I couldn't have ever prepared myself for how professional and just what I can't use any other word than pro he is at all things he does.