From rags to riches

By Jason Yeh
December 22, 2020
Listen on Apple Podcasts

Episode Summary

Have you ever heard the advice “dress for the job you want not the one you have”? For Topper Luciani, that was tough advice to follow because it meant wearing an old t-shirt from Goodwill even while asking fancy venture capitalists for millions of dollars. In this episode, we hear how Topper learned the importance of being your authentic self while raising money and how he somehow managed to save his company after one of the most devastating curveballs in fundraising - a pulled term sheet.

Topics Discussed

  • Selling ties and the textile recycling business [3:08]
  • How Topper attempted to raise money for his first (failed) venture [5:35]
  • The origins of Goodfair (Topper’s POV) [7:49]
  • Jason’s overview of Goodfair’s beginnings [12:39]
  • The moment the original Goodfair Seed term sheet was pulled [15:04]
  • Topper brushes off adversity and hits the fundraising trail again [17:31]
  • Topper achieves another term sheet from an “inside” [19:59]
  • Topper leverages the term sheet to fill out the rest of the round [24:22]
  • Topper’s advice to founders based on his experience [25:59]
  • Jason breaks down the episode and discussion concepts with show producer, Olivia Reingold [31:56]

Resources Mentioned

  • Shop some amazing thrifted clothing at
  • Report on the resale market from ThredUp / Global Data

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Topper Luciani
Jason Yeh (host)
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From rags to riches

Have you ever heard the advice “dress for the job you want not the one you have”? For Topper Luciani, that was tough advice to follow because it meant wearing an old t-shirt from Goodwill even while asking fancy venture capitalists for millions of dollars. In this episode, we hear how Topper learned the importance of being your authentic self while raising money and how he somehow managed to save his company after one of the most devastating curveballs in fundraising - a pulled term sheet.

Episode Transcript

Jason: [00:00:00] Now that I have your attention. Two quick things. First, hopefully you know how this works by now. After the interview, we always do a debrief with my producer, Olivia, who does not come from investing or startups. So stay tuned to the end, to hear everything translated into normal people speak. Second quick

call-out on the audio in this episode. Our guests Topper was working hard in his warehouse when we called. So you'll notice that a bit. Thanks for understanding.

Topper: [00:00:30] So then I got the term sheet and they pulled it. Didn't get funded and it was horrible. 

Jason: [00:00:38] Do you remember what was running through your head? 

Topper: [00:00:41] Um, well, I'd rather not share.

Jason: [00:00:48] This is Funded a show where founders who raised a millions in venture capital share the gritty side of what it actually took to get that money in the bank. I'm Jason Yeh your host. Not too long ago. I was trying to get my ideas funded. And once upon a time, I was a VC listening to founders, pitch me for money.

If you've ever been in the situation Topper Luciani described at the top of the show, you know, that horrible was an understatement. Having a term sheet pulled out from you is as close to a kiss of death as you can get in the startup world. But that's what happened to Topper about a year ago when he was raising his Seed round for Goodfair.

His next generation online thrift store.

Now we'll cut to the good news. He ended up successfully raising a few million dollars. His trick. It's something you definitely heard before, not from your business school professor or a fancy advisor, but more likely from your mom before a first date. He says it's as simple as being yourself. Today, we're talking about Topper's journey from thinking he had to fit in with VCs and a collared shirt and Patagonia vest to wearing a shirt that said thermostat police in a meeting with his eventual lead investor.

That meeting by the way, earned him $3 million. But first we're going to rewind to the beginning in 2009, when all Topper knew was that he had to dive into the wild world of thrifted fashion.

Topper: [00:02:17] I remember I had a religious experience in a textile recycler. And that's what set me off on this journey that has, uh, you know, put me through crazy ups and downs because I had a moment that was so powerful that it almost felt like, or not almost, it felt like the voice of God telling me I had to be the person to put this stuff online. I didn't know how to do it. Uh, but I was just decided at that moment that that's what I was going to devote my life to. 

Jason: [00:02:53] When was that, by the way? 

Topper: [00:02:55] That was around 2009 or two, that it was when I was selling ties. Um, you know, so. 

Jason: [00:03:01] What did you call yourself by the way? 

Topper: [00:03:03] The emperor of Thailand.

Jason: [00:03:07] I love that so much. 

Topper: [00:03:08] Yeah. So on eBay, I was the emperor of Thailand and I went to a textile recycler to buy ties and it was like the, uh, the heavens opened up for me and, and I just was such an extreme calling that I wanted to build this like Amazon of thrift type of thing, but it didn't know how to do it.

And it was at that time, um, Guilt Group had just come out, Bonobos was raising money, you know, it was very, very early direct to consumer concepts. And, uh, that's what I thought like, Oh, I can get in on this action. So I, uh, uh this new website, um, called Angel List had just come out. There were like, you know, a thousand people on it.

And I just emailed every single person on it cold. And I got someone to invest in. 

Jason: [00:03:58] That's amazing. I mean, two things that just really jump out at me are. You started this being like, I need to do this. Not like I need to make money. It was more, you had an epiphany, you knew what you wanted to get done. Uh, and, and then you went to go hustle after.

Topper: [00:04:16] My goodness. Yeah, don't do it for the money. Like I thought about like the hours that I've devoted to this, like, if you're not ready to work for a dollar an hour, 75 cents an hour, like. Don't hang up your, you know, hang up, don't hang up your, whatever the expression is, like, don't even start. 

Jason: [00:04:36] And I think like, you know, most entrepreneurs will give that advice and you can read that advice anywhere on the internet.

Um, but what I don't think people really, really internalize is, and I'm reading this on your face, especially as you talk about your epiphany as the emperor of Thailand is like, it's not about like, Bearing the hardships of not making that much money. It's more just like, you really want to do this. Like, you know, whether you get paid 75 cents an hour or you exit your company for a billion dollars, it's just like you enjoy it, you know?

Yeah. And I think that's really important to hear it in the second piece is people think like I should start a company to sell it for a billion dollars. And then two, they think fundraising, you know, Grows on trees and they don't do the work to get it done. And you have just lightly touched on your first foray into asking for money.

Talk a little bit about how much effort, um, you know, you're, you're finding your very first angels in this game. 

Topper: [00:05:37] Okay. So I was living, um, in my grandma's basement in Connecticut. RIP she made a mean meat loaf and, uh, Um, I was asking all my parents' friends for money. That was awkward. Oh, I got, I pitched Jason Calacanis, Gary V all these people were, you know, just the early people on, on the platform and that you could just holler at them, you know, in 2009 or 2010

then when that was like, uh, it was, it was just a completely different ball game. And then I met, uh, through that. I still remember those pitches 

like yesterday, like yesterday. 

Jason: [00:06:28] Well, let's, let's talk about it. Did you prepare for them? Did you know what you wanted to do? 

Topper: [00:06:32] Hell to the, no, I just wanted to tell them about.

Uh, this weird textile recycling industry that is still secretive 10 years later. Um, and that I thought that there was an opportunity in, uh, building an online thrift store. But then I finally met Mark Kingdon. Mark was, uh, an early investor in Twitter, really bright guy, and he helped me build my dream and ultimately got me started.

So shout out Mark love the dude to this day. Uh, but, you know, we failed, I failed and still stings, stings, stings, but, uh. 

Jason: [00:07:11] So that was, uh, just the, the Angel List hustle, the traveling, probably traveling to meet, uh, these, these angel investors. Yeah. 

Topper: [00:07:20] I had no money, none, none living sleeping at the airport, sleeping on the floor at the airport.

Jason: [00:07:27] Right. And this is before you could pitch somebody on Zoom or the expectation, the expectation is you come see me. Yeah. 

Topper: [00:07:35] Exactly. Come see me for coffee. And I was like, yeah. Okay. I'll be there too. Like on Monday or something like that, I'm like, you know, selling use ties on eBay. I'm like, Flipping cars on Craigslist.

Jason: [00:07:49] So I want to fast forward. And that was your very first foray into raising outside capital for a different business, which, uh, RIP we, you mentioned actually did fail. Um, but fast forward to 2019. 

Topper: [00:08:08] I moved to Houston in January of 2019. I had a domain name that, uh, and I had an idea and a methodology for selling thrift online.

I moved into a $500 a month crazy shithole apartment in the Barrio of Houston. And with cockroaches the whole nine, um, uh, and just slogged it out and just kept literally making love to my dream. I just refused to focus on. Um, some of the difficulties of my reality and just really focused on where this could go, but, um, so basically started getting some great traction and.

You know, it was really tough because the way we sell u through mystery bundles of categories. So instead of knowing the exact pair of sweat ants you want, we just send you a bundle of three that are your size. And so people had apprehensions, like no one will ever like order something. They're not seeing exactly what they're getting at the end of the day.

VCs want to invest in products that they. Understand that they buy all this sort of thing. They can't understand a human being, making less than a hundred K a year. They can't understand that they don't exist. That person doesn't exist to them. I know that in theory they do on it in some kind of spreadsheet or something, but the last time that, you know, They met someone that, uh, makes less than a hundred K a year.

You know, they maybe tip them at the valet. 

Jason: [00:09:52] Do you remember any of the toughest pitch meetings from that period of time? Anything that comes to mind? 

Topper: [00:09:59] The pitch meetings are honestly, even the nos are fun. If you could get in front of the people and have them listen to your dream. To me, it's a thrill, uh, and like, The no's, you know, being strung along kind of bites the big one, but, um, and that's more of a reflection of them and not you.

And so, uh, and I empathize with that too, with these investors, Hey, sometimes they might really like the company. Then we had one VC who I really believed him. He really dug what we were building at Goodfair. Uh, and his partner was not having actually there's three that I can think of that like, and maybe they're playing good cop, bad cop, you know what, like, it's not my job to like, figure out the intricacies of their politics or their dynamic or the games that they're playing.

Like, I 

don't give a rat's 

ass. Like if it's meant to be, it's meant to be, um, But boy, I've heard every fricking story on, on why it's a no work, how it's a no work. 

Jason: [00:11:06] Yeah. I mean, I, I love that mindset that even the no's are interesting to you. I actually love when I can get through to a founder. And it's like, when you're, when you're onstage pitching essentially an investor, you should be talking about your favorite thing in the world.

You should be excited enough about it to have joy and the opportunity to talk about your favorite thing, whether it's a yes or no.

Coming up every founder's worst nightmare.

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Topper was being modest when he described how Goodfair sells clothing, what he's managed to do, take away the need to individually organize and photograph each item, is a game-changer with vintage clothes. People like them because they're unique, but that's also what makes them so hard to sell online.

Think about the time and effort it takes to photograph one pair of vintage Levi's. There's dressing the mannequin, measuring the dimensions, giving the item a sku and description. Now imagine doing that hundreds of times a day, some companies have done it, but those costs have usually turned their unit economics upside down.

It's a big hurdle to get over for a startup. And that's where his mystery bundle innovation comes in. He's selling packages of item types, not exact items. For example, you might know that you're getting a large thrifted Hawaiian shirt, but you won't know exactly the design. And he's managed to make that uncertainty a feature, not a bug.

It's exciting to get a mystery bundle from good fair. He turned to what everyone said was a knock against him into a story that raised a $1.7 million pre-seed round, top investors like amplifyLA and Mac Ventures is bought in in fact, six months later, things were going so well that he felt ready to set up a seed round.

And that's when the startup gods said. Wait, maybe this whole thing has been a little too easy.

Topper: [00:14:12] Basically what happened was I went out and we had some great momentum and traction, and I got a term sheet at very favorable terms. 

Amazing. And it was dope. 

Jason: [00:14:24] So you told everyone, got a term sheet? Yeah, right? 

Topper: [00:14:29] Yeah. I got a term sheet. I signed the term sheet. 

You kidding me. 

Jason: [00:14:33] And everyone else that was interested.

Yeah. Sorry guys. We went with somebody else. The whole market. 

It's a no don't want your money. Thank you. It was awesome pitching you. All this stuff. And I pitched a lot of people to get that term sheet in a month, but it's still. Pitched about 40 people and, um, which is, you know, is not insignificant, but the pitch to everyone, you know, everyone, lots of like all the direct to consumer peeps.

So then I got the term sheet and about two weeks later they pulled it. We didn't get funded and it was horrible. 

Do you remember what was running through your head when you heard? 

Topper: [00:15:17] Um, well, I'd rather not share. It's just, uh, it was definitely very, very painful. And, uh, at the end of the day, reflecting here, you know, over, uh, almost a year later, I am all is well, and I made peace with it before

we got another term sheet because like, Hey, what's meant to be, is meant to be. And like, I am damn well know that I'm going to give them my all. Um, but there are things that you, you can't control. 

Jason: [00:15:49] And we don't have to dwell on that. Um, certainly don't have to talk about specifics, but I do want to like pull on this thread a little bit about.

So that people understand what that means for a process. Right? So after the term sheet gets pulled, you know, can you talk me through what you felt like the impacts on your ability to raise, where, like, you know, why is that important for people to know about? 

Topper: [00:16:12] Yeah. So with that small venture community, um, you don't want to scare anyone, but like, um, want to kind of be as candid as possible and as transparent as possible with the whole market.

Here's you're running out of cash. Um, so 

Jason: [00:16:31] I mean, just to, you know, pull this out at a 30,000 foot level it's um, and we've talked about this in other episodes about negative signaling, but, um, you know, also when you're, you're raising, you're not necessarily raising with all the flexibility in the world. So like you're saying.

You're running out of cash. Somebody has pulled a term sheet, other investors you've already told no to you probably had to go back to you and say, Hey, just kidding. Right. Um, and, and, and they were like, well, what happened? I mean, wow. I just, like, as I enumerate all these things and walk through it, I'm getting a little bit of anxiety myself.

But, uh. 

Topper: [00:17:13] This is not for the faint of heart. 

Jason: [00:17:14] Not for the faint of heart. Um, but miraculously, um, and I think this speaks to the strength of you and your story. Uh, you, you actually get back on the fundraising trail and, and are successful. Can you kind of like talk through that process? 

Topper: [00:17:31] Yeah. So, 

what happened was we really started, uh, started from scratch again and it was pre COVID and

basically, we just started hitting up everyone's uh Rolodex. So I would just any investor that was previously in that invested in the pre-seed round, just asking them for interest. So that was really, really valuable and then pushing them for more and more and more intros because ultimately that is the game and yes, they may have given you 20

uh, intros this week, but you gotta push them for 20, more than next week and then 20 more than next week. 

Jason: [00:18:18] And 

Topper: [00:18:18] that was one of the most difficult aspects for me or, or something that, uh, I was perhaps shy about, um, more so than the asking for money. That's like, because you don't want to get them disappointed in you also there's so many emotions to it.

You know, you want them to think everything is great and you want them to focus on what's great. But it's like, if you're getting all these no's, you have to just keep pushing. Um, and, and, uh, it's an absolute marathon and takes a lot. And it's just, uh, that is emotionally taxing it as well, which, uh, you know, for me, it was one of the most difficult aspects of fundraising.

Jason: [00:19:06] Then I'm going to just do a couple of minutes before you talked about this need to be willing to ask for help, which I think is very difficult for a lot of entrepreneurs. Um, and I think there's a, like a lot of lore. There's a lot of startup lore. That's like the founder CEO is this warrior hero that needs to bear the cross to the company and figure everything out by themselves and know people need to be shaken from that sometimes and realize that.

You know, a lot of you being a good person for the 30 plus years before you went out to raise is like cashing in those chips and saying, I'm going to ask you for help. And I'm going to ask for you for help again. So it was good to hear you do that. I'd love to talk a little bit about. Closing up this difficult seven month process.

Do you remember where you were when you finally found out that you would, um, once again, get a term sheet? 

Topper: [00:20:06] Yeah, so 

we had gotten a term sheet from an inside 

Jason: [00:20:10] and just for everyone listening inside round would mean. 

Topper: [00:20:13] So existing investor 

comes through with a term sheet. 

Jason: [00:20:16] Great. 

Topper: [00:20:16] Um, cause we had some incredible traction and it was really showing, but you know, also now we're in COVID now we're in COVID we're around March, April COVID is happening.

And our current investors were just like, you know what? We're we're going to keep supporting you. Uh you're growing still. Yeah, you got a lot to fix, but we'll, we'll double down. So the terms were a little bit funky cold Medina, but, um, they, but you know, when we needed it and I was prepared to do the deal and, um, so we got that going and then we signaled to the market that we got the term sheet, um, And, uh, and, but we were also very, very close with getting a term sheet with some other people.

And then Imaginary came through just everything was falling into place during, um, during that time. And it was just like, okay, Imaginary came through. And I just really liked them. And I had an opportunity to go shop that term sheet around because we were really close to getting, uh, some huge funds to come in, but I vibed with them the most around brand.

I loved what they had built. Uh, around the other brands that they've built. And I just decided, yeah. Um, I'm just going to sign this like, uh, so I could have probably gotten a few, had a bit of a better valuation or something like that. Um, but for me, all of the learnings that we've kind of talked about, um, spelled like being in bed with the right people is far more valuable than, uh, than, you know, some high valuation with the wrong people.

Jason: [00:22:14] After the break Topper crosses his fingers that this term sheet from Imaginary ventures is for good this time.

Sometimes, well, I'm a huge fan of a product. I go crazy person and network my brains out to try to chat with the founder. I did that with Mike Adams, the founder of this amazing Zoom enhancement tool called grain to find out who his other users are. And I was a little surprised at one of the really relevant use cases.

Mike Adams ( [00:22:45] We polled all of our users. 

We had, um, three segments that popped to the top where they were like 80% PMS score, meaning like 80% of the people 

in these buckets were like, I'd be very disappointed if you took Grain away. So 

one of those was researchers. One of those was marketers. And then one of those was founders. Founders were like, I need this because they end that kind of being everything. 

Founders are like, they're the researcher, they're the marketer or the fundraiser. And so in the context of fundraising, I use grain to like improve my performance. It's like game film. 

Jason: [00:23:24] If you ever take notes on calls or wish you could save magical Zoom moments, you've got to try out Grain to get started for free.

Go to that's grain as in whole grain oats. Okay. Back to the show.

So, as you heard earlier, Topper was burned once before. And that made him a little cautious before diving head first into the joy of landing a term sheet.

Topper: [00:24:02] Now, at that point, once we got a term sheet, I was like, Hey, this is, I'm not celebrating until the money's in the bank. 

Jason: [00:24:09] Yeah. You've already had one thing happened here. 

Topper: [00:24:13] Exactly. Believe me. I celebrated that first term sheet. Like. 

Jason: [00:24:18] You were a drunken sailor in that first one. 

Topper: [00:24:22] Um, so then I just started to get to work and you see how I could fill in the round and

once the market heard that Imaginary was in, it was a prank, it was a prank. We got, we had to bump the valuation a tiny amount because so many people wanted and we were, we went out to race, uh, 3 million and we got oversubscribed to like 11. We had offers of like $11 million and it was just like, um, and Imaginary warned us about that.

They were like, you know, once, uh, like people hear about this. You're going to, like a lot of people are going to want in and boy, oh boy, did that happen? So it was like, all right, now I'm the hot girl at the ball. Um, 

it felt good. It felt real good, but so here we are now we're just gonna have to like 

put a win on the score board.

Jason: [00:25:16] Well, I think you have a lot of opportunities to do so. I, I follow you all on Instagram and yeah. The content that you put out, the product innovations that you have is, is really, truly amazing. Uh, I really think your mystery innovation is one of the most incredible innovations in this space and, um, know there's a lot baked into that.

Um, but bef you know, before we sort of check out, I, I wonder if you could talk a little bit about, um, you know, some of the mistakes that you've made and more so the lessons you've learned along the way, um, In terms of what's been most important to you to be successful around fundraising and maybe what you would tell other entrepreneurs or a younger version of Topper.

Topper: [00:25:59] Okay. So number one, it is absolutely a numbers game. Uh, you have to have to have to, uh, understand that you are the nuances of why people tell, you no, especially in a pre-seed, you know, especially when they're just investing in you as a founder, you have to kiss so many frogs before you get to your prince because

the nuances of what makes someone invest in a founder are just unexplainable and, and you can't be that to everyone. So, so that's number one, it's a numbers game, but then number two, you have to be your authentic self. And I noticed a pattern of people with the same pedigree and the same kind of look getting funded for every startup.

So I thought to myself, well, do I have a better chance if I kind of play up that look and play up that kind of persona to get an investor. 

What's, what's an example of that. 

Just like literally, uh, you know, wearing the Allbirds and the, you know, the white Oxford shirt and the Patagonia vest, you know, that persona is rampant, uh, in the Valley.

You gotta, that's how you build comfort with others. Um, By kind of showing that you are part of that tribe. It's just a random theory that I had. 

Oh. And even to the point that I was like, I would watch YouTubes of investors if I would wear, if I should wear like, try to mimic them or model where exactly what they're, because I'm in the clothing business.

I pay attention to this crap. So like maybe I'll build comfort by wearing the same thing as they're wearing. When I pitched, um, Chris Birch, Birch capital back in New York, I wore a suit, which is so stupid, but like, like, you know, I really. I don't know, shooting in the dark or pitch to a thousand people. I tried everything.

And, um, so, Oh, those pitches and all the BS, I have to 1000% be myself and have been made that that to these equal because if it's a yes, then even better. And if it's a no, like, Thank God. Well, something with Imaginary. Um, when we had our first Zoom meeting, I happened to be wearing a shirt that said, thermostat police on it.

I was like, Oh man, here are these like fashion, you know, like Natalie from, uh, Imaginary created a Net-a-Porter. So

this person is not going to invest in the guy with the t-shirt that says thermostat police. Um, but I suppose reflecting upon it, it's like, all right, well, um, they caught me being myself and they still were willing to write the check and that sort of, uh, you know, That mentality is super valuable or it has served me far more than trying to appeal to anyone.

Jason: [00:29:28] I love that. And, um, I don't know if you were trying to loop the two, but I think it's worth saying that the two lessons you talk about are, are incredibly closely linked. Um, you're going to get a ton of nos, but. The thing that I think is so important as people are their authentic self, and they tell their story that, you know, very specific to them realizing that they shouldn't be everything to everyone and they will get a ton of nos, but you're looking for those investors that believe in you and understand your vision and are looking for a Topper that wears a thermostat police shirt, not another Allbirds wearing sweater vests.

You know, number cruncher that, that blends in. Um, so Topper, this, this has been awesome to hear, uh, what an incredible rollercoaster you've been on. Not just the last five years, but 10 plus. And you know, one other thing I wanted to point out is that if you look on Crunchbase, it'll say that you raised $5 million in less than two years, but you said it before.

I mean, this has been the product and result of 10 plus years of iterating and focus on the exact same industry until you knew gathered this level of expertise and confidence in yourself. So kudos to you, man. We're going to we're rooting for you and excited to shop. Um, before we, before we check out, uh, I did want to ask you thrifting is, is such a fascinating thing.

And you, you take in tons, like literally tons. Uh, of pounds of recycled clothing and goods every month, I would say every day. Uh, I wanted to ask one, do you have a, do you have a favorite thrifted item? 

Topper: [00:31:18] Oh, wow. 

Jason: [00:31:19] Or to choose just one? 

Topper: [00:31:21] No, my favorite, I do have a favorite thrift t-shirt I was just thinking about that this morning.

It's just some random a t-shirt from Wawa, gas station, brand New Jersey, and I just loved their logo. I love just thinking about like a seedy New Jersey Wawa like in the middle, the night when I love repping it here in Texas. So that's my favorite. 

Jason: [00:31:45] Well, Topper Luciani founder, CEO of good fair. Thanks so much for spending an hour with us that this has been awesome.

Topper: [00:31:52] Thank you so much, Jason.

Jason: [00:31:56] It turns out there's been some good news for Goodfair. The resell market is on the rise. A research firm called global data, put out a report this year saying that while sales and the overall retail sector are down during the coronavirus pandemic, the resale market is surging. Well, having grown by over 25% this past year.

And you know, who's driving some of that. My awesome producer, Olivia. 

So Olivia what'd you think about that? 

Olivia: [00:32:26] Loved it. I mean, this is a space that really interests me. Um, I buy a lot of things used and so hearing about the business of used clothing was really interesting, especially some of the pushback that he got from VCs and their, I guess, skepticism about like, I don't know, imagining a consumer who makes under $80,000, which was nuts.

Jason: [00:32:52] People wonder why there are so many note-taking apps that have multi-billion dollar valuations. Um, and it's because VCs love funding things that they understand themselves and VCs are a very unique, uh, slice of the general population, you know, highly educated. Um, incredibly wealthy people that have a hard time

a lot of times thinking that there are other consumers out there. So I'm not that surprised that in the early days of trying to find funding funding for Goodfair, uh, Topper run, it ran into walls of VCs, just being like, I don't understand it. 

Olivia: [00:33:30] Wow. So. They themselves, because they themselves don't imagine themselves as possible users to something like that.

They just can't wrap their heads around it? 

Jason: [00:33:40] Yeah. I mean, I think we talked a little bit about this with a different interview, but, um, when investors are making decisions, they are listening to a story and they're trying to dream alongside the founders, um, trying to see. Well, where, where this could go, how big this could be.

And if they have a hard time following along and dreaming alongside the founder, and part of that vision is a sea of consumers that don't look anything like them that they've never seen before. It can be very difficult. Um, and you know, it's one of those challenges that founders face when telling a story that they really need to get people to like, not along with them and believe in their story.


Olivia: [00:34:25] Yeah, that's interesting because that seems in some ways at odds with one of, I think the major takeaways of the interview is which is the power of authenticity and being yourself, which is it's hard, like, when you are, he seems like, in a lot of ways, the consumer for his own brand, just because he's so passionate about thrifting.

So that's hard. Like if they can't, I don't know that balance of speaking to them on their own terms, but also being yourself. 

Jason: [00:34:56] Yeah. I mean, you bring up a blend of a lot of challenges that founders face and especially that Topper must have, must have faced, which was one, um, he's already selling a story that

is difficult for venture capitalists to really inherently understand selling to people that make less than $80,000. Um, and then to, uh, this idea that we've heard over and over again, that you're going to get tons of no's. And so when you start hearing nos, you start questioning. You know, is my story wrong?

Um, is my business wrong? Am I wrong? Um, and you know, I liked that. We, we talked a little bit about, uh, his evolution and thinking about this, but you, you can get really stuck up in this idea that maybe I should listen to all the feedback that I get from these no's. And should I be a different person?

Should I, um, come up with a persona that feels more natural to a VC that they relate to more, um, and that pool can be very strong, but, um, I think it's really important for founders to know that they should really hang on to their authentic self, because what they're trying to find is investors that believe in them and their specific vision.

The moment, people start watering down their vision, watering down their story so that it can be generally interesting to more people is the moment that they become like essentially trying to be everything to everyone. They become nothing to nobody because it's just this watered down copacetic story that is slightly interesting, but not interesting enough to get someone to jump.

Whereas when Topper comes to the table with his authentic self, with which, you know, I wish people could see him, but he is such a character. Um, he uses colorful language. Every piece of clothing that he wears is thrifted him coming to the table like that, and meeting a meeting an investor that sees him and says, I've thought about this space.

And, and I, and I know the consumer looks like Topper is like Topper. And I want to bet on someone that knows this type of consumer, really, really well toppers of the guy to do it. Whereas if he happened to meet the investor that ended up leading his round during his, um, self-questioning days where he wore a suit or a sweater vest, cause he thought VCs would like it.

That same investor might hear the story and be like, interesting story. Not sure this is the guy to do it. I don't know if he actually knows this, this market. So, um, I'm really glad that, um, Topper spent some time on that because it's, it's something that I stress with founders all the time. 

Olivia: [00:37:51] Yeah. One thing I heard from him is just like being okay with a loss.

Like if someone doesn't see the potential, it might not always be worth it too. Convince them and beg them to come on. If, if they're not, um, if they don't see what you see. 

Jason: [00:38:09] You don't want someone that needs to be like really convinced to work alongside you, because you're accepting someone into your business, into your life that is going to be with you for four, five, six, seven years.

You want somebody that was like, Olivia, like that was the person to do it. And the business makes so much sense to me. Like I'm excited to work with her. I'm not someone that like you begged and pleaded and changed your story for and dyed your hair and wore different stuff to make them feel better about you.

Um, that's just not who you want as a partner. 

Olivia: [00:38:42] Yeah. Um, can we talk about the term sheet? Um, first, like I kind of can figure out what that is, but can you just tell me what it is just in case. 

Jason: [00:38:53] Yeah. Sure. So, you know, as you're going through the fundraising process, um, you're looking for what is called a lead investor and generally speaking, a lead investor, um, Will be the biggest investor in your round.

So let's say you're raising $3 million, you know, they will have more than 50% of that round. Um, and they will also be the ones that negotiate with you around quote-unquote terms. A lot of things go into terms, um, a term sheet outlines the high level description of those terms, but generally speaking, the biggest one people talk about is the valuation.

Um, essentially how much they believe your company is worth. 

Olivia: [00:39:36] Yeah. So he had this moment, which from the likes of, it sounded really bad where someone, I guess, pulled, um, a term sheet, first of all, like how often does that happen and how big of a deal is that? 

Jason: [00:39:49] I'm glad you asked that question because I just don't think we spent that much time on it, or as, as much time as I would expect for such a huge event.

Um, and I, you know, he might've been trying to protect people's names and everything, but, um, how often does it happen? Very, very rarely. Um, And there, there isn't anything legally binding really that says someone can, or it cannot do what happened essentially saying, Hey, we're going to invest and then not invest.

But the venture capital game is fully driven by reputation. Um, and so. Uh, he didn't name any names because he's a great guy, but certainly when people start asking in the future, like, would you work with fund fund X? You know, he's not going to say like, I, you know, I would work with them because of how they behave.

So one, never happens because venture capitalists hold their reputations very close to the chest and like protect it. Um, and then more interesting you ask, like, It sounded bad. How bad was it? I mean devastating because you and I have had conversations, um, around other interviews about this concept of signaling and negative signaling.

Um, um, this is what happened with Topper. I will replay it. He went out and talked to a bunch of funds. Um, did a great job getting a, it sounded like got, got a number of funds interested in investing in him and, um, leaning in and one fund went out and said, here's your term sheet here? A great terms. And then he went and told everyone else that was interested, uh, don't need to talk to you.

Already got term's going to do this investment. And so, so fast forward that that, uh, venture capital firm pulls the term sheet essentially says we're not gonna invest anymore. So then he has to go back out to market. Essentially everyone that he talked to you before, and then more people who will find out about what happened and everyone is going to think, what did that from find out that made them not want to invest.

Olivia: [00:42:03] And is that a fair? Is that a fair? Um, has the station on the part of VCs? 

Jason: [00:42:09] Yeah, it it's, it's definitely fair up to a certain point. Um, and you hope that they would listen to explanations like. Whatever, Topper his explanation for why this firm pulled out. But at the end of the day, like we've said multiple, multiple times, people are not investing alongside a ton of numbers or years and years of historical data to give them comfort that this is going to be a great investment.

It's a feel about how great the founder is, how the business story is. And if there's any doubt in your mind, if there's like. They must've seen something. There is something that's not great about it. It can poison the well for every other investor. So, um, yeah, I can't understate how impressive it was that he got back on the horse was able to go talk to investors you talked to before and find new investors to hear the story and really tell a convincing enough story that allow like overcame essentially.

A huge hurdle, a huge challenge in actually closing out his round. So I'm, I'm like incredibly impressed with him. 

Olivia: [00:43:14] Okay. Um, so I know that during some of, um, his fundraise, he was living in Houston, I think. So I've heard a lot about Texas recently. Like, uh, I think my sister is thinking about moving to Austin.

I'm just wondering if you can talk about like, is, is Texas a new hub of startup? Of startups and VC. 

Jason: [00:43:36] Um, well, it's a great question because of how the world is changing. Um, but I will tell you this, even as recent as like call it five, five years ago, certainly eight years ago. Um, when I got into venture capital, um, you know, the best companies came out of San Francisco and maybe after that, New York and LA, anywhere else besides that was like a barren wasteland, mostly because like, Most venture capital firms were based in those big cities and a lot of venture capital firms.

Weren't excited to like travel to different cities, to like meet founders and evaluate investments. And then even if they got interested in the founders themselves, um, there was hesitation around whether or not. The best talent could be recruited in the middle of America. Can you actually, yeah. Can you actually build a massive business in Minnesota?

Because maybe at the beginning you have a couple of great engineers, but the moment you're big, can you recruit a team of 50 elite engineers in Minnesota? Maybe not. Um, and so, you know, in 2019, even I think things were turning and it would still, I mean, it's still a little bit. Left of center to look at a company based in Houston, which good fare was and still is.

Um, but it's a good question now because we're in the middle of a pandemic. Um, and at least right now, venture capitalists are taking a hundred percent of their meetings for zoom and it really doesn't matter where you are. And this push around remote work is allowing. Company's headquarters to be, um, inconsequential the ability to re recruit the best talent from all over the world, no matter where they live, or, uh, no matter where your quote unquote headquarters is is, is going to change the game.

You're going to start seeing a lot of founders and a lot of companies based in cities that you would never see on a tech crunch headline five years ago. It's a great question. And I think like just a bigger encouragement for. Startup founders all over the United States in the world and know that, um, you know, the landscape has changed and access to talent and capital now, um, we'll go.

Olivia: [00:45:58] That's so cool. Lots of good advice. And as always, um, I mean, I'm not in the VC or startup space, but I feel like I can apply that. To my life too. 

Jason: [00:46:09] Yeah. And you know, to wrap up the conversation, I'll say that he found his way being his authentic self pitching investors, but go on all the socials, Instagram and TikTok, and look him up good fare.

And you'll see that. Yeah. Um, his personality shines through the brand as well. He's a prominent figure. Um, and he does not act, you know, what you see is what you get. So check it out. It'll be fun. And when you match up what you see on Instagram with this conversation, I think it'll bring a smile to your face,

by the way. What's the craziest thing you've ever found in your pocket that you can't beat this 

Topper: [00:46:52] Well. Found lots of cash in pockets and the weirdest things are a bag of Coke. And a used tampon

Jason: [00:47:05] Thanks a ton for listening. If you have any questions related to today's show, or maybe you're raising money yourself and want to bounce something off me, if so, shoot me an email at I'd love to hear from you.

Find us on social, where we showcase other founders who are in the trenches. The show is @fundedpod and I'm @jayyeh. That's J A Y Y E H. This week, we're asking two questions first. Who's an entrepreneur who's fundraising story you'd love to hear? And second, what's your dream find at a thrift store? I posted mine on our Twitter account.

This episode was produced by Olivia Reingold. Hello. Thanks also to Jordan Pascasio from Adamant Ventures for the real hard work. And shout out to the one and only Topper Luciani. The only person who could look like a million bucks in a thermostat police shirt, 3 million actually. Plus one last thanks to our awesome sponsor.

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