Inside Phia's $8 Million Seed Round

0:00Allie:This episode is brought to you by Accenture. When your advertising operations fall out of sync, everything else follows. Spotify and Accenture are working together to reinvent the rhythm of ad sales, using automation, analytics, and smarter workflows to simplify campaign delivery and access better data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. Learn more at Accenture.com slash Spotify. This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks.

0:45Allie:Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required, compatibility and availability varies 18+. Your team is everything. The people that you build with, who you're at the office until 1 a.m. with. Hello, hello. Welcome to Term Sheet. I'm Allie Garfinkel, senior writer here at Fortune. And every week on the Term Sheet podcast, we dive into the latest news and insights in venture capital, private equity, and startups. Here's where you can get a peek behind the curtain of the VC and finance world and catch up with some of the most exciting figures in the private markets.

1:23Allie:Here's what's on my mind this week. First, Anthropic released a report on Monday that suggested that overwhelmingly a number of enterprise customers are using Claude to automate work. Now, this is coming at a time where it is very, very difficult for entry level jobs. If you look at Bureau of Labor statistics, for example, it's also sort of in line with what we've heard from Anthropic before. Leadership at the company has definitely previously said that they do believe AI could raise the unemployment rates. It's important to say this also does paint a little bit of a rosier picture than I would expect about enterprise AI adoption.

1:55Allie:It is more difficult out there than maybe this suggests. On the ground, when you talk to people about adopting AI, it's actually very hard to automate away an entire person's job. Often what I will hear is that people will find parts of jobs can be automated away. And if you look at that MIT study from a few weeks ago that 95 % of generative AI pilots are failing, it actually suggests that this maybe isn't as simple as automating work. That being said, especially given some of the numbers we're seeing around unemployment, especially with all of the concern and pressure under entry level jobs, it's important to take this really seriously.

2:29Allie:Elsewhere in the private markets, the U.S. and China reached the framework of an agreement to divest TikTok from its Chinese owner, ByteDance. Now, this is the deal has yet to be approved by all heads of state. And it's important to say the framework of an agreement makes at least me a little bit suspicious. It reminds me of when Trump in the debates would say I have concepts of a plan. So we'll see what happens. But what I will say is it would be a massive deal in the literal and metaphorical senses if one of the largest private companies in the world, last valued at over$300 billion, is finally outside of a standoff with the United States government.

3:06Allie:On to this week's interview. I am so excited about this one. We have Sophia Chiani and Phoebe Gates, co-founders of FIA. It's an AI shopping companion that's just raised a new round of funding from Kleiner Perkins. And in a term sheet first, we have their investor, Annie Case, a partner at Kleiner, joining us to talk about the future of shopping. Now, why do I care about the future of shopping? Part of it is that I have a sneaker addiction. Part of it is that I have a dress buying addiction. But also, I think it is a massively underestimated market that actually hasn't seen as much innovation as you would expect.

3:39Allie:If there's anything we learned from Barbie Summer, and especially the Taylor Swift's Eros Tour, there is a lot of power in the female consumer. And I actually am a target audience in a lot of ways for what Fia does. I was really excited to talk about this because I think that we need to spend more time talking about it, not just because it's a market for women, but because it actually says a lot about how we spend our time, what we value, what we spend our money on. Here's Fia. Sophia, Annie, Phoebe, thank you so much for being here. This is the most people we have ever had on the Term Street Podcast at one time.

4:13Allie:So if I'm going to ask everyone to talk about how they know each other, Sophia, I would like you to start. How did you meet Phoebe? How did you meet Annie? Phoebe and I were roommates at Stanford, random roommates actually, and we were connected to Annie through one of our advisors. Now, Phoebe, tell me about the first time you met Sophia. Yeah, well, I think both of us were super nervous coming into Stanford. And you have to remember, Sophia was the youngest youth ambassador for the UN. And so my first impression of her was that she was incredibly smart. And then upon living with each other and spending a ton of time together, I realized that she was also incredibly funny.

4:49Allie:Did you ever imagine, Sophia, that you would start a company with Phoebe? From the moment that me and Phoebe met each other, we became instant friends and realized how much intellectual compatibility we had. So it was pretty quick, the evolution from friendship to becoming co-founders. It was just such a natural evolution that I think it just happened perfectly. Now, I want to bring you in, Annie. When did you come into this story? How did you meet Sophia and Phoebe? As Sophia said, we first met through an advisor. And I got on a Zoom call with them, not knowing what to expect, and was immediately really blown away by both of them.

5:23I think really young, but just so, so accomplished, even while in undergrad at Stanford, had just done so much and built companies before and been vocal on causes that they cared about. And as they talked about FIA and their vision for the company, I just got really excited about the opportunity to work with them and help build it.

5:42Allie:Annie, in that first conversation, did you know you wanted to lead their Series A? I had a sense that I did, yeah. I think as an investor, the longer you do this, the more you kind of have that gut feel on day one or meeting one. The diligence process is the process of either confirming or reversing that initial hypothesis. But definitely in that first call, I just felt the energy. I felt the excitement. And I definitely came away saying, I can't wait to spend more time with them and learn more about what they're trying to build. Now, since I have everybody here, actually, Phoebe, Sophia, how did you know you wanted Annie to be part of the Phea journey?

6:19Funnily enough, honestly, I would say the exact same feeling where we were taking initial calls with investors and we were really blown away by the amount of care that Annie showed during the process. She asked great questions. She was from Kleiner Perkins, of course, a really respected firm. And she was, quite frankly, a woman who understood the pain points that we were experiencing in shopping and really resonated with the solution that we were building. so we came away from the meeting just incredibly excited and thinking that she could 100 % be someone we would want to partner with on our seed round.

6:52Allie:Phoebe you totally smiled when Annie said she knew that she wanted to lead your series A. Why? I think because for us we were really excited about Annie when we first met her as well and I remember shortly after that first call she connected us with Tracy who's actually been a pivotal mentor for both me and Sophia who founded the company Tradesy that Kleiner Perkins also invested in and so yeah it was it was an incredible synergy the first time we met. And I think the partnership really has only grown from there. Now, tell me about why this funding round, why now, what growth looks like from here for FIA.

7:23Allie:And I want to hear it from each of you. Phoebe, I'm going to ask you to start. Yeah. FIA really hit the market as essentially a tool that helps consumers in that point of consideration as they're shopping know whether or not they should buy this, which is a question not only we ask, but millions of women around the world ask. And I think the really exciting thing about retail is it fundamentally hasn't evolved in the last 10 years. Retail is incredibly fragmented. You don't know where to go to discover the item. You don't know if you're getting the best price. And so the idea that we can enter in by solving this pain point at that point of consideration and then expand holistically to be the AI shopping assistant is really, really exciting for me.

7:59And I'll let Sophia take it away on the growth we've seen thus far. Yeah, we launched FIA just a few months ago, and we just crossed over 430 ,000 downloads. So it's been incredibly exciting seeing that we have tens of thousands of daily active users who are using the platform, transacting, driving revenue, and we are now in a phase of wanting to catalyze on that growth. So we're starting to double down and build out our team. We are currently a small but mighty team of 10 based out of Union Square in New York City. And I think it's just the right time for us to completely revolutionize the way that people are shopping.

8:38And we're doing it with this initial wedge of a mobile browser extension that helps people save time and money.

8:43Allie:And Annie, for you, why this? Why now? What do you think in terms of the size of the market for FIA? Yeah, I think there's tremendous opportunity beyond this initial wedge. I think when we first started talking about what they wanted to build, from conversation one, the vision has been much, much grander. And the conversations we've had have been around what product do you launch with? How do you test whether there's excitement about this? And how do you build trust and loyalty and appreciation with consumers? And then what does that earn the right to then go build from there? And so I think the consumer retail market is massive, one of the biggest industries in the world.

9:23And so there's just so many directions that you could take this. I think they were super smart to start with a very real pain point and build trust and credibility. And then, you know, a lot of the conversations we've had around what could be next and areas I get excited about around, you know, the AI personal shopper and what's possible with new technology. You know, I think a lot of that's on the come, but we've gotten a really great start in the initial wedge product that we've launched.

9:47Allie:Now, before we get into more about the future, I kind of want to go back in time. So Phoebe, Sophia, you both are roommates at Stanford. Sophia, I read that what happened was you guys locked yourselves in your dorm room, basically. Can you start telling that story? And Phoebe, can you finish telling that story? Phoebe and I were taking this AI entrepreneurship class together at Stanford, and we had to come up with some problems to work on. And our very initial idea was, which we've spoken about, was a smart tampon. And we very, it was a smart tampon, like, like an aura ring, giving you insights into your hormones every month.

10:28Very funnily enough, I don't know if we've said this, but there is a team at Stanford of people in Stanford Medical School who are actually building this exact same thing. We actually got on a zoom call with them as we were doing some market landscaping and they're doing amazing work. And we very quickly realized we are not the right people to build this. We don't have the right background. And this is not a company we could see ourselves building for the next five or 10 years. And with FIA, we wanted to understand, okay, what are common pain points both me and Fidi experience? Where opportunities for us to leverage AI to really push forward innovation?

11:03And we landed on the concept for FIA. I'll pass off to Fidi to give more color. Yeah, I think it really became a sprint in our minds of what could we do and what could we come up with? Never in our lives had we been, you know, tasked with this idea. And both me and Sophia are very, you know, innately competitive people. We love to play, you know, games. We love to solve puzzles. And it was a competition. We were the only undergrads in this MBA class. And we really loved our professor. She's actually who gave us our original 250K in seed funding. And so it was very important for the two of us to impress her and come up with a good idea out the gate.

11:36And so I remember it was about two and a half weeks we spent in our dorm room, quite literally not seeing anyone else, you know, not seeing our families, not talking with other people. We had a giant whiteboard that replaced our entire living room. And we come up with different ideas and we take Zoom calls with experts. We read studies, we do market landscaping. And it became almost this like Olympiad of what ideas should we build and what would be really interesting. And I think what both of us didn't understand was that it wasn't just for this class and it became so, so much more than that very quickly.

12:06Allie:Interesting. So it sounds like part of what happened is it was you wanted to sort of do right by this professor who you loved. And then you sort of said, actually, wait, we really want to do this. It almost felt like as we continued to pull at the thread of what shopping could be in the future, as you think of an agentic landscape, we just kept unraveling more and more pain points in the consumer landscape. And of course, the first thing to solve is that question of should I buy this? But there was so, so much more there. And now we've probably talked to, I mean, upwards of 5 ,000 women about their shopping habits.

12:38I have records of, you know, thousands of interviews and we'd literally be sitting in our dorm room, you know, talking to different people about their shopping habits and realizing all the different pain points that we could solve over time. And so it almost was like this ball of yarn that unraveled itself. And we were like, wow, we could spend the next, you know, 20 years building this and really thinking about how the landscape could adapt over time.

12:59Allie:Well, it's also so personal, right? Like we, like we were even talking about this when we met, I started using Fia because I've been on a jewelry buying kick and it is actually helpful to know if I can get something for a better price elsewhere because I am a very devoted shopper, but I am a lazy online shopper. If it is there, I will do it. Sophia, you're nodding. Why are you nodding? Have you heard this one before? I mean, I feel the exact same way. This is basically how the conversation went with me and Phoebe where we were just talking about pain points we experienced and we were basically talking about online shopping and we were saying, man, why is it so difficult and so annoying?

13:37You can find an item you like, and then you want to find it secondhand. Then you need to go on Poshmark, Depop, The RealReal, Best Year Collective. There are so many secondhand websites and you need to go through manually and check every single one to understand whether or not you're getting the best price, which absolutely as a college student was what I was doing. and we both really realized we were very passionate about secondhand shopping specifically and that very few people I think we had asked our class of 30 people how many of them had secondhand shopped before and only two said that they had we realized that there was the market tailwind where secondhand was expanding at a rate 10 times higher than retail and we also saw it as the perfect entry point and wedge of ultimately consumers care about really two things when they're shopping number one being saving money, the most important of all, and then also saving time.

14:27And we thought, well, if we just aggregate secondhand options for a retail item that someone is looking at, it's such a win-win because they can save upwards of like 75 % on the item. And we do all that work for them in just a few seconds. Let's try it. And it was really exciting to see when we did build our initial prototype in our class, people were a lot more open to like wanting to look at secondhand options and thought that it was really clever.

14:51Allie:Well, and sort of to this end, part of it is that it's something people want to use again. And I want to bring you in here, Annie, because you have so much experience with consumer apps. What does it take to get a consumer app like this right? First, as you guys were talking about the dorm room experience, I was laughing because I remember doing references on Phoebe and Sophia when I was considering leading their round and talking to people who'd worked with them or knew them from before. And one of their peers from Stanford, you talked about, Ali, this like three-week period where they locked themselves in the room.

15:20I called this peer of theirs from Stanford, who's also a founder, and was like, you know, what were, what are they like? What were they like? You know, should I work with them? And he was like, they're hardcore. Like, they're, they're hardcore. I think he'd been around and, you know, seen when they disappeared for a few weeks and went on, went, went after this problem and went to learn about it. And it was just like, hats off to them. Like, they're, they're really going after it. So, you know, that was another positive indication and made me lean in and want to leave around. And I was just laughing about thinking of them locked in their dorm rooms toiling away on this and, you know, building credibility with the founder community.

15:50It's the kind of founder behavior you want to see. Yeah, totally. I was like, I like hardcore. That sounds great. And while in college, you know, you're like, you have other classes going on, you have other stuff to be doing. And you're like, no, we're going to build this company and get it off the ground and do things right. So I was just blown away by that. But anyway, to your question about what does it take to get things right in consumer? Yeah, I mean, And I think consumer is beautiful and terrifying in that there's no one way. I think it is a, you've seen a lot of the consumer successes over the years actually be second acts or pivots from the first business or start with a very wedge product and then build capabilities over time.

16:29I think there's no one right way to build a company or build a consumer company. And I think part of what you have to do, particularly when you're investing as early as we are with this one at the seed round, is just believing deeply, deeply in the founding team, which we do here in Phoebe and Sophia. And then also believing in the market and the tailwinds around the market, which for me, you know, this is a market that has been around and massive for a long time. I think the tailwind or like what's changing, why now, was around AI and new capabilities with technology. and I think matching amazing team with a massive market and tech tailwinds is kind of the recipe for success that we were looking for and what got me really excited about this one.

17:11Allie:Well, and sort of to this end, and this is something you said earlier, I think, Phoebe, consumer, particularly retail, the experience hasn't changed as much as you would think over the last decade. As you guys sort of describe the inflection point that consumer is at right now, why would you say that this is the right time for change? I imagine AI is part of it, but also I imagine is also about kind of people's inclination to interface with new technology right about now. Yeah, I'd say you're exactly right. I think it's interesting because when you think about it, you know, two thirds of US GDP is consumer spending.

17:43And yet the way that consumers are shopping really hasn't changed. And there's constant complaints from shoppers about, you know, the amount of ads that they're being flooded with. There's articles about online shopping no longer being fun. And it's a function of the fact that, you know, a business like FIA is possible today that can deal with over 200 million pieces of data and quickly fetch you the best result for you, can deal with things like personalization, can deal with things like insights of what size you should wear or what the retained value of an item is going to be. That kind of processing and being able to do that super quickly was not possible previously.

18:17I also have to ask, when you told your dad you were going to go start a company, what did he say? I think he was really... I think that my dad was super excited for me. I mean, it was important for both my parents and for Sophia's parents that we both, you know, finish school. And, you know, neither my parents are experts in the retail or e-commerce landscape, but I think they were both, you know, excited for us. And they were nervous about the journey that we were about to go on, but excited. And I think it was the first time they'd seen me so passionate and lit up by an idea. Did they give you any advice?

18:51I think the biggest piece of advice that I got, not only from my dad, but from both of my parents, that has really resonated and just been incredibly true as we continue to build out the FIA team, is that your team is everything. The people that you build with, who you're at the office until 1 a.m. with, even it comes down to the summer intern you have, the people that you choose to build with every single day, whether that's your incredible co-founder like I have Sophia, that's what's actually going to define whether the product succeeds. And I think that that's been really important for me and Sophia because, you know, not only are we focusing on a product that has, you know, product market fit, but we're also thinking about founder market fit.

19:28We are the women who use this product day in and day out. And that's why we wanted to bring into our cap table people who really understood this problem of how shopping could adapt and where it needed to go like Annie or, you know, Sarah Blakely, Sheryl Sandberg, Haley Bieber, which will be announced when this comes out. And so that's why it was really foundational for us, not only to have women on our cap table, but particularly people who understood this problem.

19:52Allie:Well, and I'd be curious to bring you in on this, Sophia, too. How has that sort of translated into how you think about hiring? You guys bring up your mentors a lot. It seems like you spend a lot of time, both of you, thinking about who the right people in this equation are. A hundred percent. Like Phoebe was saying, we realized really early on the team you build is the company you build. Even for myself, with my experience in college, I built my nonprofit Climate Cardinals from what was just a childhood idea to now a full-time nonprofit that has three full-time people, many of whom were people I met when I was in college who now have joined the organization full-time.

20:31And I really believe the only reason I was able to have this nonprofit succeed me and go on beyond me was that my number one goal was how do I find people who are incredibly mission aligned, intelligent, and excited about this specific problem that I was working on, which was climate education. And that very same thing has been applied when it comes to FIA, where this company is really a sum of both FIA and myself, but also both our advisors and the incredible people that we work with every single day on the engineering end, on the product end. And that has been one of the biggest things we've focused on as really first-time tech founders.

21:05And like we were talking about earlier, the introduction that Annie made to Tracy, who was the founder of TradeZ, which was a really successful secondhand marketplace, was instrumental because she had dealt with a lot of the problems and a lot of the nuances of the secondhand space. And she had a lot of industry expertise and knowledge to share with us. And our number one goal also has been ultimately learning as much as we can as quickly as possible. And that has never really been possible before now because with AI, you can now take people who are extremely hungry and scrappy and equip them with exactly what they need to be able to run and work and move extremely fast.

21:43And that's really the philosophy that we've employed is that we want to absorb and be sponges and be cognizant of all these incredible industry experts that we have been able to bring on as both angel investors and also as advisors and use them to really transmit as much of that knowledge as possible to our team so that we can run attacking this problem space as diligently as possible.