Ep 43 – Pro Tips on Acing the Raise



Lisa Frusztajer is an active early-stage investor focusing on companies led by under-represented founders. Lisa got her start in early-stage investing as a Pipeline Fellow, an LP with Converge Venture Partners and as a Lead Partner with the Portfolia Enterprise Fund. She also invests independently.
Lisa is currently Investor in Residence at The Capital Network (TCN), a Boston-based non-profit that provides entrepreneur and investor education. At TCN she built a mentorship program, works on organizational and fundraising strategy and speaks frequently on the founder journey. Lisa is a certified coach who helps founders overcome obstacles to growing their businesses and becoming effective leaders.
Lisa spent most of her career in technology, working in marketing, finance, engineering and project management. She has served on non-profit boards, mainly for educational institutions, and currently chairs the board for a Cape Cod library. Lisa studied Russian Literature, Soviet and Russian Politics, and Finance, and holds degrees from the University of Chicago, London School of Economics and Columbia Business School.



What are investors looking for during fundraising due diligence?

What one critical fact do most founders miss when thinking about what drives their investors’ funding decision?

What is the single biggest mental pivot you need to make as a founder to successfully fundraise?

In this episode, Lisa Frusztajer, Investor in Residence at the Capital Network, talks about what founders should prepare for pre-investment, what factors external to your startup could play an outsize role in the funding decision, the one fundraising skill non-financial founders MUST master, and much more.

Episode Highlights

  1. How investors vet startups doing fundraising
  2. How investor-side issues can impact your startup’s funding chances
  3. What investors look for in your financial model and how to nail the process
  4. How institutional investors differ from angel investors and why that matters to founders
  5. How to make your startup instantly more attractive to investors, with one simple change
  6. How to get up the financial learning curve quickly as a non-financial founder
  7. Common mistakes founders make during fundraising and how to avoid them
  8. Two ways your financial model can go wrong and how you can tackle them, even in the face of uncertainty
  9. How to level the power balance with your investors
  10. The sure-fire way to increase your self-confidence on the hard things
  11. How to design the right capital stack for your startup
  12. How to balance gives and takes when negotiating a funding deal
  13. How one funder achieved a response rate over 90% with a fundraising cold email
  14. How to build strong investor relationships for the long term

Links and Resources:

The Capital Network: Boston area nonprofit focused on founder funding education

Interview Transcript

Shubha Chakravarthy: Hey Lisa, welcome to Invisible Ink. We are so excited to have you here!

Lisa Frusztajer: Thank you. I’m thrilled to be here.

Shubha Chakravarthy: You have had a pretty interesting. What got you involved in the startup world to begin with and how did you end up where you are today?

Lisa Frusztajer: I was always really interested in technology and when I started I equated startups with technology. I spent most of my career working in technology and I love innovation and learning new things. I just find it really intellectually interesting.

So, I jumped right in and got to work with a lot of small companies that are doing cutting edge things with a lot of creativity. The most exciting thing is getting to work with founders who get up every day to create something new.

Shubha Chakravarthy: I was looking at your profile and there were so many touchpoints where you have interactions with founders. Clearly The Capital Network is one.

We had a fantastic conversation with Marie the other day. What are the biggest interfaces that you have with founders today, and which are the ones that you find most insightful?

Lisa Frusztajer: The way that I work with founders has really been as an investor and I’ve done a ton of due diligence. I have a finance background. I’ve done a lot of analysis. As I said, I’m really interested in the technology I have done a lot of due diligence on companies as a lead investor on a fund, and then as an investor on my own.

What I’m looking for is what drives the business, what are the key levers for the business, the extent to which the founder understands that, and then the extent to which the founder has really experimented with what is working and what is not working, because you know that in a startup, it is not always going to be a smooth path.

It is not always going to go right. So, to have the outlook that you are going to be aware of and the results you are producing and be willing to learn from those and absorb the data and then adapt is one of the things that I’d look for in due diligence.

By the way, I love to take a very open approach when I’m doing due diligence with founders. I want to communicate exactly what I’m looking at and why. I’m also really committed to not burdening the founder with creating a lot of new stuff for due diligence. So, it is the start of the investor and company journey, and I believe it should be a two-way street.

The other thing that I do is a lot more to do has a lot to do with the founder journey, and by that I mean the personal journey, because when you are starting a company, you are really going through a personal transformation as you are creating the company. When we go through personal transformations, it is not always easy.

An analogy is going to the gym if you are building muscle. It is not going to be easy every day. In fact, you are not going to do a good job building muscle unless you lift more than you think you can, unless you leave kind of sore a lot of the time.

So, I work with founders as a mentor. I designed a mentoring program for a great organization in Boston called The Capital Network. Then I’m also a certified coach. So, I work as a coach with founders who are finding themselves reaching points where they are struggling with the journey where they just need some extra support to keep going.

So, it is as much about the analysis as it is about the personal journey and giving personal support to founders.

Shubha Chakravarthy: I love the juxtaposition of coming at it from almost the two opposite ends. One is completely private, and one is completely public or scrutinized, if you will. What triggered your decision to become an investor in the first place?

Lisa Frusztajer: It was really fascination with what was going on in innovation and people who are starting new things. It is just a very exciting journey. You have to look at things with a fresh set of eyes, so you are learning something new every single day, and I just find that to be a lot of fun.

Shubha Chakravarthy: I want to dive in on one thing that you said a little earlier in terms of the due diligence process. I really appreciated your concern for keeping it light on the founder and not being unduly onerous.

Can you give a high-level walkthrough of what it typically looks like when you are a lead on the due diligence? What does that journey look like if I’m a woman founder going in looking for investment. What should I expect in the initial pitch?

You mentioned the four or five things which you look for during your due diligence process, can you just give a quick walkthrough of what that looks like from the moment you hear the first pitch till the moment you decide?

Lisa Frusztajer: There are a few different categories that I look for, and you can find a due diligence checklist online. Now, there are typical areas – you evaluate the team, you evaluate the market and its potential, you evaluate the extent to which the company has traction, the technology, and then you evaluate the strength of a given deal as an investment.

So, in other words, what is the valuation? What is the stage? How does it fit into the portfolio that the investor is constructing? What are the terms? So, those are kind of the basic categories.

When you look at those checklists though, it is basically a document list and my approach has been to be very transparent about the different areas I’m going to look at and then really emphasize to the founder, “Don’t create anything new. We do a first round based on what you have in hand and start discussing it.”

It is things like looking at the financial model, I’d say that that’s sort of under the category of the company itself and its traction, and then figuring out what the potential of the company to perform is.

But I think it is really important for the founder not to overlook the fact that an investor is putting together a portfolio. So, the investor is going to be looking at the extent to which this company fits into or doesn’t fit into the portfolio.

Shubha Chakravarthy: Coming on the other side, you are the founder. You don’t necessarily have transparency or visibility into how the rest of the portfolio is made up and therefore how well you are or are not going to fit in.

So, what are the things that at a high level, a founder can do to maximize her chances or at least be realistic about her chances going in?

Lisa Frusztajer: That is such a great question Shubha, and I really wish that we spent more time really talking about that because at the end of the day, you come to an investor, you start a company, you love your product, you are doing something really cool and innovative, but if you are looking for outside capital, the numbers have to work for the investor.

So, what does that mean? It means that I’m putting together a portfolio. Let’s say, as an investor will have various expectations for return. It makes a difference whether I’m investing for myself, where if I love the founder and what they are doing is something that I feel personally is really important, I might have a given return expectation.

If I’m investing on behalf of a fund, then I’m accountable to the people who have put up their money to create the fund. So, I’ve made a commitment that I’m going to screen investments to provide a return for the limited partners who have invested in the funds.

My hurdle for feeling comfortable allocating somebody else’s capital is going to be very different. Likely it’s going to be higher than if I’m investing for myself.

So, for your question on how do people find that out? There is not a lot of transparency. You just have to ask. I think that when you are going out to start a company, the emphasis very often is on building the company. But in order to get outside capital, in order to be successful doing it, you really need to learn the language of the investor.

The best way to do that is to talk to investors. If you’re getting rejections, find out why. I think we have this idea, like when you look at a typical pitch, a lot of the emphasis is on the product and the company. It certainly has to be on the problem to be solved and the market size and all that kind of thing. But at the end of the day, is this going to be a good investment?

I’ll tell you a couple of interesting things that I’ve seen recently, which is that I know two women who are out there raising capital. The companies are great companies with great products and both first time founders but both of them came from private equity backgrounds.

So, the things that they emphasized in their pitches were not so much the product. They went immediately to how do the numbers work. What is the math here? What is the equation here? What did that mean? That means talking about what is the path to cashflow break-even – look at my revenue and the growth rate, it’s on an upswing.

These people both had a very deep understanding of the economics of the company, because one thing I see is actually, I’m going to just make a side comment here, I’ve talked to many women who say, “I’m uncomfortable with the financials.”

You have to know your numbers cold, and I don’t think it’s any accident that these women from financial services have this very deep understanding of their company economics, the levers that were going to drive the business. They knew how to do a sensitivity analysis, and they were very fluent in translating the questions that they were getting in their pitches to how it affected the company results, and I mean, financial results.

Then the other thing is that they were really able to send signals that touched on investor hot buttons. So, in other words, I’m generating a lot of momentum for the round. It’s oversubscribed, but I’ll let you in.

I’ve generated a lot of early revenue without a lot of marketing. My margins are X percent today and I project that by the end of the year they’re going to be 2X. So, it is really talking in the numbers because that is important to know when you are talking to investors.

Shubha Chakravarthy: That is so fantastic, and I’m so glad that you are diving deep into this because this is what I think – women don’t get a chance to hear as much, and I’m just thrilled that you are doing this. I have a couple of questions on that.

First off, not everybody is fortunate to be in financial services and you may not have had the luxury of living in that world and learning the lingo, so to speak.

What are some methods that you have seen work or that you would recommend to somebody to get a crash course or get really familiar really fast because it is something that needlessly instils fear. What do you recommend they do to get up to speed quickly on these terms and these lenses through which they should learn to look at their startup like an investor would?

Lisa Frusztajer: Yes. Part of it is talking to investors. A big part of it is talking to other founders who have been successful in raising money and understanding what the end game was for the people who succeeded. That will help you learn the language. You still need to figure out what the journey is for you.

A part of it, like with anything you have never done before, is to just dig in. Do your financial model yourself. Too often I’ve had people send me to the fractional CFO during due diligence because they don’t want to talk about the financial model. When you look at it, it is basic arithmetic. So, we are not talking about high level math here. What we are talking about is how to translate the numbers into a story.

So, pressure test your model. Just get in there and work with a model. Guess what? It is really important to do it because your investor’s going to do that. A couple of times I asked for the financial model. I mean, part of it is, I love doing the financial analysis. I think it is fun to do this kind of thing, but you also want to see where the potential is for the company.

A couple of times I’ve gotten financial models where they actually don’t work. So, things are double counted, and it takes a long time to put together a really good, robust financial model.

There are a lot of resources for getting good ones. There is actually an excellent one that is put together by the Boston University Accelerator, and if anybody wants a link to that, please email me because it is very good and it generates really good management statistics. So, the only way to learn how to do something you don’t know how to do is to do it.

There is one other thing I’ll say though, which is to listen to the feedback that you are getting because in your original question to this, how do you learn to speak investor talk is by really listening to the feedback that you are getting and making sure that you understand it.

I’ll give you an example on that. About a month ago, somebody approached me, someone who is a great entrepreneur and has made great progress. She is doing a diagnostic test kit. So, she asked about looking for investors. She doesn’t have a prototype. She has got a good 6-12 months of research before she has a prototype.

So, I asked her, “Well, have you considered non-dilutive funding?” The response back was, “Yes, but it takes six months to get the money.” I just thought that was an interesting response.

So, she is not investment ready, and I was far from the first person suggesting she get non-dilutive funding, but she continues to ask for investor money.

She needs to understand why she keeps getting that same answer. Go after non-dilutive funding, it is because she is not in a position to really paint a picture where she can portray the way she is going to generate a return for the investor.

Shubha Chakravarthy: I’m going to ask you two follow up questions on that amazing explanation you gave me.

The first is, you said you looked at the model and you would encourage all founders to kind of dig in and see if it doesn’t work. Then you said, this model didn’t work. Now, there are two levels at which a model won’t work, right? One is, as you mentioned, the “math doesn’t add up” one.

There is also a second level where the results that you are expecting or projecting to come from the inputs, that relationship doesn’t stack up.

I’ll give you an example of that, “I’m expecting sales to grow at 40%, but I’m not seeing the marketing investments. I’m not seeing the hiring of the salespeople.” Can you talk a little bit about what types of such errors are there? How much of each do you see and what suggestions would you offer to founders to make sure that they make neither of those types of errors?

Lisa Frusztajer: I’m going to give you my personal perspective on it. I like the differentiation between the two types of errors well, let’s call them “Math errors” and “Projection errors.”

So, projection error, meaning you anticipate something that is going to happen, but your assumptions are kind of off. The math errors are just carelessness. You have got to really go through and test your model, have other people look at it and know it.

So, I suppose that is sort of an easy one to look at. You just need to make sure that your model is clean and working right on the second kind of error, projection error, when you are working with a really early-stage company.

Let’s face it, you don’t know what is going to happen. So, what I look for there is transparency of assumptions and being able to trace the assumptions that the founder has made on salaries or expenses for instance. So, you know what is strong and what is not strong. It really is so situational. It is very hard to generalize.

For example, if you look at a company, even if they are investing a lot and they don’t become profitable quickly, that investment may as well be worthwhile because it poises them for future growth. So, there is not any one standard that you would apply to it.

It is just such a joy to work with founders who document their assumptions and are ready to discuss those assumptions. So, here we are again to the certain duality. There are the numbers, and then there is this sort of human side of it.

If you are a founder and you have got an appetite for somebody poking at and pushing at your assumptions, and you respond with really an eagerness to get into the discussion and to take in another point of view, then that is a really strong way to present yourself and to present your company.

It shows that you’ve thought about it. It shows that you are ready to take in information. Some people call that coachability, and it also shows that you have an understanding what is driving the business.

Shubha Chakravarthy: My second question back to that is that you had mentioned earlier that it is important for the founder to be able to listen to the feedback that they are getting from any potential funder.

Now, one thing I’ve heard, and I can see why a funder or potential funder doesn’t have any incentive to give you the real feedback, right? They have nothing to gain and everything to lose if they give honest feedback.

So, my question is, how do you know what feedback is real and what is just a polite “no”? Secondly, what can you do to increase your odds to get real feedback?

Lisa Frusztajer: Let me just ask you what you think is the reason that there is little incentive to give real feedback?

Shubha Chakravarthy: Well, one is founder driven and one is funder driven. The founder driven is, I have no basis to know how you are going to react and I think, to be very candid, the dynamics get convoluted if there is a gender and race difference, because who knows? If I’m a white male, you think I’m going to take a risk. If I were a white male, I certainly wouldn’t, right? That is the founder side.

Then on the funder’s side, let’s say that I’d tell you that your business model isn’t going to go anywhere and then tomorrow you turn out to be the next Uber. I’m not going to lose out on a chance to participate because what are the chances you would come back to me if I said, “No, I’m never going to be able to participate in future upside.”

So, I think those are the two drivers, but I could be wrong. I’d love to hear what do you have to say on that?

Lisa Frusztajer: I think those are really interesting comments. One thing I would say is that part of the culture of the investment world is that everybody wants to keep a conversation going, and sometimes that is to the detriment of the founder.

You are right, there is a power dynamic that is inherent in the investor-founder relationship. So, the investor has the money and can decide whether they want to put it into the company or not. The founder is the one who is out there making the ask. So, I think there are a couple things.

One, I think it is really important and this takes a lot of internal work to turn that dynamic into something where the power imbalance is lessened. That is where to a large degree coaching comes in, which is to have that belief that you actually are doing something that is valuable and that you have the ability to design your investor.

There is no shortage of capital out there, but we have this idea that you make a pitch, and somebody gives you a check. Is that the way it needs to work necessarily for everybody?

Why not just have a series of conversations, build relationships as a founder, and then be able to decide what is the best path for you? That is one thing I would say.

The other thing is when you have that relationship, then you really can’t have a much more candid conversation about what is really going on, because let’s face it, the investor doesn’t succeed unless the company succeeds.

So, if you are the founder asking questions about what the investor’s goals are, I think it is really important. You also have to remember though, that investors are likely getting dozens of these inquiries all the time, and they may be just polite or doing a favor by talking to you.

However, I think this is really the fundamental point here, which is within this industry where there is the potential power and balance, I really think that it is the founder’s job to define what the conversation is about.

For example, if you are a founder, you can go out and have all these conversations, but you don’t know necessarily unless you define the conversation, whether the end game is making an ask or potentially getting money or is this just a “Get to know you” kind of mentoring conversation and you can really burn a lot of your time.

This is part of what we have really instilled in founders through the mentoring program that we did at TCM. It is a leadership opportunity for the founder to be the one to make the ask and to define what the conversation is all about.

Shubha Chakravarthy:  Kind of wearing your shoes of an investor for a moment, are there things that signal to you that the founder is potentially coachable or at least open to receiving feedback that might make you more predisposed to giving them your actual thoughts about the problems with their business model or are their pitch, or is that something that you just stay clear of? I’m just curious.

Lisa Frusztajer: Yes, unfortunately it is subjective because everybody’s idea of coachability is a little bit different. It is getting to know people and it is getting comfortable with them. It is just having the conversation and digging into things.

Shubha Chakravarthy:  You had mentioned that this mental transformation that you need to make is really important in building that muscle.

Have you seen any pivotal moments or tips or things through your personal coaching work that have helped founders make that flip in their mind to say, “I am now more comfortable doing that” or is it just a matter of doing it over and over again until it becomes embedded in your muscle memory?

Lisa Frusztajer: You mean where the founder really is the one who is ready to take the reins?

Shubha Chakravarthy: Yes. It is that whole – you have to make that mental transformation. You have to be willing to ask.

Lisa Frusztajer: Yes. I think the answer to the question really hinges on how do you come into your own? How do you get to the point where you feel confident?

It is really about getting to the point where you have a sense of self-confidence. The only way to do that is to keep doing the hard things and test yourself and also acknowledge that it is okay if it doesn’t feel easy.

If you are doing something new, it is going to be difficult, and you have to just bring that anxiety or that fear or that discomfort along with you.

I don’t think there is such an easy answer. Now, I will say that if you have never raised money before, when you get your lead, when you are successful raising your first round, that can make a tremendous difference because suddenly you feel like you have got other people on your team.

Shubha Chakravarthy: I love the example you gave earlier about how you had counseled this first-time founder that she needed to look for non-dilutive sources of money. Which brings us a question of, there is a variety of early-stage funding options.

What are these, pragmatically speaking for women and especially diverse women founders, and how should a first-time founder be thinking about these options? In other words, how should she build her capital stack?

Lisa Frusztajer: So, I’d say it is really a combination of looking at what is in your interest, what the options are, and how your company is going to play. So, understanding return expectations is really important.

A few things that are in your interest – you have to understand with each source of funding, what you get and what you give up. When I’m talking about each source of funding, I mean it could be loans, it could be crowdfunding, it could be revenue-based financing, it could be non-dilutive funding, or it could be investor money, which also takes many forms from equity to debt, et cetera.

There are companies that have used four different forms of financing over the course of their first couple of rounds, so there is no right or wrong.

To answer your question on what people should seek, I see that primary founder interest is falling into a few categories. One is the amount of equity that you want to hold. So, you know if you do revenue-based financing, then you are going to hold more equity.

If you do debt, you are going to hold more equity and women give up way more equity than the other two historically. So, that is a real gotcha and women of color give up way more equity, so even more equity on average than white women do.

Shubha Chakravarthy: That is unfortunate, but unsurprising. I think some of the dynamics from a founder perspective, at least to me, are more understandable because you go to the table a little more scared, a little more apprehensive and expecting a little less.

Are there dynamics on the other side of the table that are also driving this trend or this phenomenon?

Lisa Frusztajer: Oh, you mean investors who are going to drive a harder bargain or ask for more? Well, I think we wouldn’t see the macro statistics we do if it weren’t happening from the investor side of the table.

My own personal experience though, has actually been very different, and that is part of why, as you were asking about my investor journey, I said I started out really looking at tech, but when I realized how egregiously inequitable the funding environment is, I really switched.

So, my portfolio now has a much broader range of companies, not just tech, and most of the people who I invest with are female. But you are asking about the dynamic from the investor side of the table.

I have seen investors really encourage and support founders to negotiate harder, to not give up so much equity or investor attorneys who really understand the nuances of the agreement and will point those out and then ask founders to renegotiate. So, my own personal experience has actually been really positive.

But if you look at the amount of technical knowledge that that requires because the terminology, I have to refresh my memory on this terminology all the time, I find it really confusing. It is hard to remember.

Guess what? It is always changing. So, you do need an advocate. I’ve been really fortunate in seeing advocates more often than people who are oppositional, but back to kind of what are the founder interests, the things that you have to have in mind you don’t really learn these until you are out there raising capital.

But I’d say that the primary one is equity. You want to maintain control over your company. You want to maintain ownership. You are doing the work. You are generating the value. As the founder or the founding team, you should hold on to equity.

The other thing is that you want to have supportive investor relationships. So, when you are doing a deal, you need to think about what is going to be demanded of you and making the investment, going through due diligence, and then dealing with the investors after the fact.

You want to have a reasonable cost of funds on balance. Then you also want the investment to really meet the capital needs of your company. The other thing is, when you are looking for investments, another big founder interest is what is going to take to get your company to the next level? You get to decide what next level is.

Maybe you want to have a nice and steady growth rate that you run in perpetuity, or maybe you want to have 60% revenue growth every year. Those are very different definitions of success and the investment that you take has to match those.

So, what are the founder interests? It’s equity and control. It’s having a manageable approval process and supportive investor relations along with optimal capital flow to match the needs of your business, and then skills and context to grow the company. Each of the sources of capital that we talked about has those in different fashion.

Shubha Chakravarthy: So, it almost feels like you want the founder to be creating a matrix, to say, “Here are all the things I want and here are the different sources of financing, and then let me do an objective evaluation or assessment that says – where do I stack or where do each of these stack up so that I can make the right call to say, okay, I’ll go after this. But this is incompatible with what I see as success for my startup.

Lisa Frusztajer: Yes. Then there is another important thing that we haven’t really touched on, which is, what are the expectations?

So, I’m the one who’s giving the capital. What are my expectations in return? Am I the kind of company that can or wants to meet those expectations?

Shubha Chakravarthy: So, there is clearly a return expectation, which is embodied in the form of the milestones that you are committing to such as revenue or whatever the case might be.

So, there are financial expectations. What are the other expectations that founders should be aware of that investors would have, and how would they fit them out during this fundraising process?

Lisa Frusztajer: The financial expectations or the return expectations are really big and even within different asset classes or forms of funding, there is going to be great variability. I mean, a giant institutional venture capital fund is going to have one kind of return expectation, but a small single digit millions fund or certainly angel investors might have very different return expectations.

So, that’s something that’s very important to remember.

But one of the big ones is, “What is going to be the ongoing relationship with the investor? What are the reporting requirements? What are the board seat requirements and board of advisors’ requirements? What am I going to have to do to remain accountable? What is the investor expectation of me?”

So, if you get a grant, then yes, you have reporting requirements, which are no small task, but you are unlikely to have somebody calling you up every X number of weeks to find out how things are going and managing that is really important.

Shubha Chakravarthy: Then all of this brings us to the question of, what the founder is facing as she is setting out into fundraising of whatever form in the early stages.

What are you seeing as the current trends or what can she expect going into the fundraising scene as an early-stage diverse woman entrepreneur today?

Lisa Frusztajer: We like to look at the depressing statistics on percentage of venture capital dollars going to women. I am sure you’ve seen this, but the earliest or the latest data from 2022 says that things got even worse in terms of percentage of dollar venture capital dollars going to women.

That is a reality, but you know, whether it’s 1.9% or 2.3%, it is pretty bad. However, what I’m seeing just over the last few years, I don’t know if you’ve seen this shoot, but, but it’s kind of incredible.

There has been a much higher-level awareness of how inequitable the system is. So, I’m seeing a broadening of the types of ways that companies are getting funded and it’s not easy to get capital.

It is very network driven industry. So, the hard reality is you do have to do the work and find people and go out and make the asks and build the relationships and build the network. But I’m also seeing, more investors jumping in. I think it’s broadening the options.

So, I’m actually very encouraged. I think there’s capital out there. It may not be in the forum of what you see on TV when you watch Shark Tank. But, seeing a lot of women in particular who are successful getting money.

The other thing is that the industry, and by the industry, I mean the industry of investors and of founders continues to expand. So, there are more opportunities for people to participate in accelerators and fellowships.

Corporate venture is also growing. There are more ways to do it than just the one size fits all – “Yeah, I’m going to guarantee a 10X return and hold just a tiny percentage of equity of my company.”

Shubha Chakravarthy: So, that leads me to a question that you briefly alluded to earlier in one of your comments, you said that time is limited, right? It is going to always be a multiple of the time and effort for you as a diverse woman, entrepreneur, or founder, to get to the same level of access or resourcing as a comparable white male.

How do I as a founder, maximize my ROI knowing that I have to do this so that I shorten the duration or in some measure, I improve that outlook of ROI to get any resources, whether it is funding or mentorship, or frankly even good employees. What have you seen work?

Lisa Frusztajer: There is a founder who is based on the Boston area, and she was a speaker actually at a TCN event and she sent out cold emails asking people to talk to her about funding her company. She got a 90% response rate on those cold emails, which is amazing. I mean that is really a great example of shortening the timeline of getting a response.

Now, did all of those responses lead to funding? Of course not. But it is just a perfect example.

So, if you deconstruct, what did this person do? She went straight to her traction, her revenue growth, where she was headed financially. So, it is again, back to this – speak the language of the audience. She was very crisp on what her product was, but she really went right to the results that she was going to produce for her audience, the audience being investors.

Now, I think that is a beautiful modifiable example. Now, do you know that that investor is going to write a check? No, but the fact is it does take time.

Actually, you were recommending that book the Uri Levine book and he calls fundraising, “The dance of 100 NOs.” I mean, that is just the reality. You are going to go up, you talk to a hundred people you might get one “Yes.”

You were asking how to shorten the timeline? I suppose you can shorten the timeline by doing the same thing you would do if you were selling your product. You understand what your audience values and you really address those interests.

But I don’t think there is a way to make this really easy. It just takes time.

Shubha Chakravarthy:  What I’m hearing loud and clear, Lisa, from everything you are saying is you take that same skillset that you have applied in bringing your product to market, you flip it to a different audience, and you sell your startup as an investment proposition.

Of course, it is a complete change in orientation. You need to learn a whole new set of skills, but you want the money, you have got to do the work. That is what I’m hearing. Is that a fair characterization?

Lisa Frusztajer: I think that is beautifully said. Your product, when you are talking to investors, when you are looking for capital investors, or even non-dilutive funding, is your company.

So, in other words, your company as a viable investment that is going to generate a return. What the potential funder is going to be looking at is a little bit different.

This is why it is not easy because when you start your company, you are solving a customer problem, but you have to learn a whole new set of skills. You are really changing your identity, and this is why it doesn’t happen overnight, and this is why it’s very hard to do this.

Shubha Chakravarthy:  One other quick question on that, and we’ll move on to a few other things. You mentioned this issue that you have to go out and meet people. What I’ve read about the whole investment industry, at least parts of the VC or the risk capital industry, is that it is a game of pattern matching. Right?

It is very easy to be dropped due to the lowest common denominator, which is how you look, how you speak, where you went to school.

Now, there are a lot of things I cannot change about myself. I can’t change how I look. I cannot change the color of my skin or my accent for that matter. How prevalent is this? What can you, as a diverse woman founder, do to minimize its negative impact on your prospects?

Lisa Frusztajer: That is a great question. So, this is one of the big things that I coach on, and I refer to it as executive presence because executive presence really translates into what the snap judgment people are making about me is. People use the term executive presence because it seems a lot less threatening.

It is like a nice, “I don’t know, plain vanilla term.” It really is exactly how do you come across, do you do you command the room? How do you look? How do you hold yourself? It is based on judgments. All those things, including your age and your background, your skin color, et cetera.

There is no law that says that the way you raise capital has to be by standing in front of a room, making your seven-minute rushed pitch, and then be pelted by aggressive questions.

We have this archetype that that’s how fundraising works, but there is no law that it says that it has to work that way. As an investor, when you watch these pitches, they are so well rehearsed that sometimes it is actually hard to understand what somebody is saying.

Then there is the timer. So, my answer to your question, how do you overcome snap judgments or bias? It is by working to build a relationship with people and making the process less performative and more interactive.

Shubha Chakravarthy: Which is telling me that it is more of a thoughtful, strategic one-on-one, done over time kind of relationship building versus going with a bang at a demo day or pitch competition and which I’m guessing isn’t going to be such a high ROI proposition anyway, going in for people like us.

Lisa Frusztajer: Yes, it is not that it is bad practice. It is probably good practice. Why not go into it and say, “All right, this is going to be challenging but I’m going to learn a new set of skills and I’m going to make it fun.” I’ll tell you, there is another piece of it and that is allowing yourself to discuss the things that didn’t go quite right.

This is tied very closely to developing confidence. So, I had recently invested in a company and the founder had gone through a bunch of ups and downs. Not everything had worked out great, but she was so clearly persistent and resilient and thoughtful and taking in the data.

I think that there is a piece here where we feel like we have to have these polished and perfect presentations. That is, everything is going great, but everything doesn’t always go great.

So, when you can develop a relationship with somebody and really discuss the things that maybe were a little bit challenging and how you dealt with others, I think that is really important.

That engenders a tremendous amount of trust, but it also requires confidence on the part of the founder because it feels vulnerable if you are talking about things that go wrong, and I don’t think that that kind of conversation is really all that easy to have when you are in front of an audience, giving a seven-minute pitch.

Shubha Chakravarthy: Which brings us to this question of the whole investment side or the supply side of capital. What are the things you were seeing earlier? I was just so happy to hear that you were noticing all of these encouraging trends and tailwinds that are working towards funding more women.

What are the other trends you are seeing that still give you pause and that cause you concern that may prove to be headwinds that women need to be aware of?

Lisa Frusztajer: I’d say one thing, which is that the macro statistics are still very real. I would love to see more capital flowing to women, but I would also really love to see an acknowledgement that there are a lot of definitions of success.

I feel like we still don’t quite have the language to work through some of the problems of bias, some of the problems of pattern matching. That is a two-sided conversation. I’m convinced everybody wants to do the right thing. I mean, I’m an optimist, I think people want to see more equitable distribution of capital.

But these are touchy topics, and it is human nature to avoid the touchy topics. But I think we have a lot of room for improvement on addressing these head on and, for example, when we designed a mentorship program at TCN, we really focused on DEI training for anybody who wanted to become a new mentor.

There were a couple of interactions that were less than optimal, and we addressed those immediately. But I think we could get a lot better at that.

Shubha Chakravarthy: Basically, what I’m hearing is that there is a long way to go, but all you can do right now is you keep taking each step forward so that over time the impacts add up.

Lisa Frusztajer: Yes, I think so. So, why do we have a long way to go? I think one of the reasons we have a long way to go is because we still have people who are underrepresented as founders, as investors, as decision makers and institutional investments.

It is still a small percentage, so maybe it is no surprise that we haven’t gotten good enough at having those conversations where the imbalances are and what some of the remedies are.

Shubha Chakravarthy: That brings me to another question. I think it is very obvious based on the numbers, that the majority of decision makers in the world of capital are still men and probably white men as well.

So, what role can men play? I’ll tie into this the question of allyship that we hear a lot about. To what extent are allies critical in this, and more importantly, how do you as a woman figure out who a true ally is versus someone who is just saying it because it is the right thing to say, and it is a buzzword?

Lisa Frusztajer: I think that is a really good question. I think we have to all be willing to have some awkward conversations. I mean, the other thing is that actions speak louder than words. I do know several white male investors who are really committed to backing women and are really there for them and mentoring them.

But I had somebody send me a pitch and I gave feedback, and the person didn’t respond to any of my feedback and said, “Well, I just wanted the women’s point of view.” I was really taken aback by that. It was actually a healthcare company and what does that even mean? What is the women’s point of view? So, I talked to the person, I’m not sure it really changed anything.

I get a lot of people saying, “Oh, I really want to find female engineers” because we all know that the pipeline into STEM professions, it starts with a lot of women wanting to go into STEM, but then there is a big gap and if you are in an all-male company, bringing one woman in is not really going to be an optimal work environment.

It is also not likely to provide optimal results. So, if you assemble your team and it is all male, you don’t just bring one woman in to solve that problem. I think you have to look at the symptoms.

So, this is part of a bigger conversation. What do we do? It is a lot of things. But, I think we just have to be willing to have the awkward conversations because I think they are really going to continue. I think we also have to be really open about these strange interactions that happen. There is still a reluctance to call people out just because we tend to want to be polite.

Shubha Chakravarthy: The stakes are too high for women, right? If you called someone out, you probably risk not getting capital from a lot of other people whom you didn’t call out as well.

Lisa Frusztajer: It is the gender double bind. The gender double bind is, if you stick up for yourself, then you are seen as non-feminine. If you don’t stick up for yourself, then you kind of crumble.

Let me tell you one other story. Somebody asked me, “How do you coach women to be really forceful without being perceived as a very aggressive person – the B word.” There is still that gender double bind and I just think it is awareness on both sides that we need for that.

Shubha Chakravarthy: Which brings me to a great question I’ve been wanting to ask because you do a lot of coaching, particularly to women founders, and I think that aspect of that fine line that you have to walk between assertiveness and over aggressiveness, for lack of a better word – what are you seeing and what do you see as transformational practices?

Lisa Frusztajer: One thing that is really interesting is that a lot of women, probably most women I talk to get to the point where they really believe in their gut that the price of pursuing the entrepreneurial journey is lower than the price of not doing it.

So, in other words, you are facing the fork in the road. Do you want to do the easy thing, which is to continue what you are doing right now? Or do you want to embark on this harder thing where it is going to be challenging. You are going to face bias. You are going to face imbalance. You are going to be the lightning rod, or you are going to be under scrutiny all the time.

Virtually every woman who I talk to feels like the price of not trying is higher than the price of trying. What does that take? It takes a real commitment to doing it because you believe that this is what you were meant to do and that you are really committed to walking this path. This is really important.

You are willing to accept a lot of discomfort and just work through it, but at times it is going to be so uncomfortable and anxiety provoking that it is going to be hard to be productive. It is going to be hard to get things done, but you are willing to tolerate that in the service of trying it out.

Shubha Chakravarthy: I think the number one trait that you just laid out is this willingness to stick with discomfort and pursuit of a greater goal.

You have seen a lot of women founders. You have looked at a lot of pitches. You have done a lot of due diligence. So, if you had to paint a composite picture of a successful woman, what would those traits be in addition to what you just said?

Lisa Frusztajer: It’s so funny because I’m not used to generalizing and I’d say certainly resilience but also a lack of fear of being vulnerable. So, in other words, really digging into what you are doing and being passionate about it and energized by having the conversation about your business.

If you can engage people on that level, then you are really building relationships. You are inspiring your team and you are testing yourself, but you are doing it because it is something that you really want to do and that you love.

Shubha Chakravarthy: Fantastic. So, to wrap up, what are the top pieces of advice you’d give to early-stage women, and especially diverse women entrepreneurs that they can do Monday morning to improve the chances of having your point well taken for a successful venture, whatever that means for them?

Lisa Frusztajer: That is really interesting. As I think about it, I think we have kind of touched on all of them. The first one is – know what is right for you, and that will take some homework and it will take some experience and it might take some mistakes.

So, know what is right for you and chart your own path. Create your own journey as a founder. Create your own journey as somebody who is taking in capital. That is number one.

Two – think like an investor and know what investors are looking for. Learn that language. It is a new language. If you have never done it before, then you are going to have to learn a lot. I mean, particularly if you come from a non-financial background.

Then three, to get to the point where you understand that what you have to offer is valuable to the other person. But also, the journey that you are traveling is valuable for yourself, is really important, and that takes self-confidence and self-knowledge.

So, it is sort of back to what we were talking about earlier where there is an analytical piece of it, but it is really an internal transformation and a very personal journey.

Shubha Chakravarthy: Got it. Thank you. This has been supremely inspiring, informative, and educational. Is there any question that I should have asked you, but I didn’t?

Lisa Frusztajer: You asked great questions, Shubha. You were so great at picking up on one thing and expanding on it. I really appreciate it. I can see why you have so many amazing podcast guests.

Shubha Chakravarthy: Thank you, and you are one of them! So, I’m really appreciative of your taking the time. Lisa, this has been a truly amazing conversation. I loved all the pieces that you talked about. So, I want to thank you for your time and your generosity in sharing your insights.

Lisa Frusztajer: Thank you for everything that you do!