In 2021, tuft + paw was in trouble. We had 6 months of cash left before we’d need to make some hard cuts. Here’s the story of how we were days from running out of money, and how the founder of Reddit (and husband to Serena Williams) Alexis Ohanian came to the rescue to save a small cat biz from the brink of destruction.
First, why were we losing money? We make our products from scratch. We’re not tweaking existing products, we’re literally starting with drawings. This requires lots of time and a team - designers, engineers, developers.
I firmly believe that investing in product is the most important thing you can do as a business to protect yourself in the long run, even if it’s painful in the early stages.
But I remember looking around at others who were growing without investing in product, and constantly wondered if I was taking the wrong approach.
In 2021, we were in a tough spot. Our sales doubled, which required us to buy more inventory. But supply chain crisis meant we had to pay for products months before we actually got them. Ironically, the faster we grew, the worse our cash position was.
But we also didn’t want sales to slow. We had already raised money, and the ability to raise again depended on sales growth. Somehow, we needed to keep sales growing, without running out of $.
First thing I did was reach out to our existing investors. “We’re growing super fast, but supply chain is putting stress on cash”. But investors were hesitant. I had recently raised money, and so alarm bells were going off about why we needed money again so soon.
Fundraising timing is an art. Getting the first investor committed is SO important. No one wants to be the first, and everyone asks who else is committed before joining, and it’s a bad sign if no one else has committed.
And the longer you wait to close, the worse of a signal it becomes. I was having trouble getting any of our existing investors to be the first to commit. Then I remembered - Alexis had invested a small amount in a previous round…
But Alexis is a busy guy, and tuft + paw isn’t his priority. I’d sent him emails in the past, but usually wouldn’t expect to get a response. But I was desperate, so I sent him a short, direct email.
“Hey Alexis - we’re raising money, can I count on you for 50k? It would be a strong signal to other investors.” Within literally 2 minutes, he responded with his lawyer CC’d.
“Ok. But it's gonna come from my daughter's so you'll be happy to know she loves kitties”. Done. I couldn’t believe it. Having Alexis on board was a very positive signal, and we eventually got the rest of investors on board and received funding in the nick of time.
The takeaway from this… Always be conservative when planning for how much cash you need. We were close to being in a very bad position. And I will forever respect Alexis for his willingness to act independently. And thankful his daughter likes cats :)
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