VC Minute
VC Minute
259. Delusion and the Series A Extension, feat. Sunny Han, Founder & CEO of Fulcrum
Text your thoughts directly to Rich.
After raising in the bubble of 2021, the next raise proved both challenging and humbling.
About Fulcrum
Fulcrum applies modern technology to manufacturing processes, helping makers focus on their craft and grow their businesses. The innovation of American manufacturers is critical to a better world, and Fulcrum aims to revitalize the industry with automation software.
About AVL Growth Partners
AVL Growth Partners, founded in 2009, is the leading fractional Finance and Accounting firm supporting organizations in pivoting from growth to scale. AVL brings an experienced team of CFOs, Controllers, and Accountants to your organization, delivering transparent, strategic actions for short and long-term success. Transform your financial approach affordably with AVL, supporting companies coast to coast - get to know AVL Growth Partners at avlgrowth.com. (Sponsored)
About SpringTime Ventures
SpringTime Ventures seeds high-growth startups in healthcare, fintech & insurtech, and logistics & supply chain. We look for founders with domain expertise, forging a path with a truly transformative technology. We only invest in software-based businesses in the USA. We bring a people-focused approach, work quickly, and reach conviction independently. Our initial check size is $600k. You can learn more about us and our approach.
If I wanted to say that there was a hard fundraise, it was not the seed round, it was not the Series A, it was the A extension. it was tough because it was a series of decisions that I had made poorly. We'd made progress, we'd focused our niche, we'd reduced our churn by a ton, we'd increased our speed at implementation, our customers were happier, the product was more fully built out, the team was stronger, but the market had changed. I had deployed capital and spent money as if the market wasn't going to change. I don't know how I would have gone back in time to change how I thought about that either. I think maybe people who watch this in the future, maybe they don't know how it felt in 2021. In the middle of 2021, it felt like growth was the only thing that mattered, and you were lame if you thought about efficiency or cost control, and oh my god, you could grow at 4x over a year and a half, why not do that? if you have that, grab the bull by the horns, grab the tiger by the tail, whatever it was. It was everyone, it was investors, it was employees, it was prospects, it was some customers were thinking about venture capital in manufacturing. It's that old tale of, right before big Wall Street crash, there were shoeshine boys that were talking about what stocks to trade. I should've, I layered those two concepts on each other and said, when, you know, small business manufacturers are thinking about venture capital, it might be a bubble. But, in the moment, I didn't. I had some sneaking suspicions, but I didn't have the courage to act on them. And I kept repeating to myself, what I've heard over and over again, you can't predict the future. You can only act on the information that you have. And the information that I had was, interest rates were low, valuations were high. I think the first sign was middle of 2022. This was about a year after we raised our Series A, we'd made some progress, we'd gone through some leadership changes, we'd fixed a bunch of problems, but it was really evident that things were slowing down. Interest rates were starting to go up, things were cooling down. The hype, noise, all the text messages and Discord messages and Slack messages I was getting about rounds getting fired off, and oh my god, it's so easy, and secondary, and blah blah blah, all this gamification of venture. That conversation started to die, and I think that was my first signal. Heading into 2023, I knew we needed to raise again. We were tapping into our venture deadline. We're cleaning things up. We did a very painful riff. We went from 70 some people down to just under 50. We reduced burn. But, you can't really, at that stage, cut your way into breakeven. At least we couldn't at the time. I knew we needed to fundraise. December of 2023, spent an entire two weeks thinking about what story we were going to tell, what was the accurate depiction of where we were, the lessons that we learned. In retrospect, we were probably a bit too honest. We really highlighted, we self flagellated a lot of the mistakes that we made. I don't think very many VCs actually even care that much about that. We should have highlighted some of the important things that we actually achieved and where we're going in the future. But we actually had some really great top tier investors want to invest in us. which was incredible, because very few term sheets were issued for anyone at the time. But, man, did it feel like SVB blew up in the middle of my fundraise, and I was eating three pints of ice cream a day, and I was working really hard, I was putting in 120 hours a week and feeling sorry for myself. Those emotions I felt in the seed round of gratitude and greed and all those things, I felt none of that. I felt exhausted. I felt depressed. I felt sorry for myself. I felt reluctant. It was an incredible round that we put together. It was something that was far more worthy of gratitude than our seed round, not to say that we shouldn't be grateful for the seed round, and yet I didn't feel any of those emotions.
