20VC Why Every Founder Should Bootstrap Their Startup, How To Solve Information Asymmetry Between Founders and VCs & Living In A Cupboard For Two Years To Fund StyleSeat with Melody McCloskey, Founder & CEO @ StyleSeat

In this episode of "20 Minutes VC," host Harry Stebbings interviews Melody McCloskey, the founder and CEO of StyleSeat, a leading beauty and wellness marketplace that has raised over $40 million from notable investors such as Sequoia and Lightspeed. McCloskey discusses her journey from bootstrapping and living frugally to leading a successful company, emphasizing the importance of spending wisely and achieving product-market fit. She shares insights on transitioning from a hands-on founder to empowering a team, the value of operational experience on a board, and the challenges of asymmetry in information between founders and VCs. McCloskey also highlights the significance of resilience, adaptability, and receiving constructive criticism in her role. Moreover, she touches on the future goals for StyleSeat, including profitability and learning to market the business effectively.

• Style Seat is the largest and fastest growing marketplace in the beauty and wellness industry with a valuation of $78 billion.
• Melody McCloskey is the founder and CEO of Style Seat.
• Style Seat has raised over $40 million despite challenging funding conditions.
• Investors include Alfred Lynn at Sequoia, Chris Sacca, Jeff Clavier, and Eileen Lee Lightspeed among others.
• Melody McCloskey is also a mentor for the Teal Fellowship, aiding the next generation of entrepreneurs.
• The introduction to Melody was facilitated by Jenny Lefcourt at Freestyle.

"And today I'm thrilled to welcome a very special founder. So joining us today, we have Melody McCloskey, founder and CEO at Style Seat, the largest and fastest growing marketplace in the 78 billion beauty and wellness industry. They've raised over 40 million in challenging."

"Running Starseat, she's also the mentor for the Teal Fellowship, working with some of the brightest and best next generation entrepreneurs."

The quotes highlight Melody's role as a successful founder and CEO in a lucrative market and her involvement in mentoring future entrepreneurs.

• Foundersuite is a CRM for raising startup capital, with over $130 million raised by customers since March 2016.
• It offers a database of 50,000 investors and tools like investor update tools and a portfolio tracking dashboard.
• Greenhouse Software provides tools for hiring and is recognized as the 2017 best place to work by Glassdoor.
• They work with innovative companies like Airbnb, Slack, Snap Inc., and Lyft.
• Greenhouse offers an applicant tracking system to help companies hire qualified candidates.

"Foundersuite makes the leading CRM for raising startup capital."

"Greenhouse software designs tools that helps companies hire great people and ultimately build better businesses."

These quotes promote services that assist startups in fundraising and hiring, emphasizing the importance of these tools for growing businesses.

• Melody McCloskey had "startup fever" and wanted to start a company that helped others, focusing on small businesses and the female sector.
• She did extensive research and chose the beauty industry for her business.
• The first engineer for Style Seat was found through a Craigslist ad and was a former Google engineer.
• Melody's friend designed the first version of the site, leading to the creation of a prototype.
• This allowed Melody to find her technical co-founder, Dan, and they bootstrapped the product from there.

"I started style seed. We launched back in 2011. I knew I wanted to start a startup... The beauty industry seemed very exciting."

"I found my first engineer by posting an ad on Craigslist... and believe it or not, that actually resulted in a fantastic engineer from Google."

The quotes detail the early stages of Style Seat's creation and the unconventional methods Melody used to build her team, showcasing her resourcefulness and determination.

• Initially, as a founder, Melody had to learn everything from scratch, including finding an accountant, a lawyer, and understanding customer personas.
• The first couple of years involved solving problems quickly and moving on.
• The transition from a doer to a manager involves empowering the team to solve problems instead of doing it all yourself.
• The shift to management occurs when you can hire people who can perform tasks better than you can.
• Melody admits to initially struggling with this transition but recognizes it as a crucial learning experience.

"As a first time founder, you have no idea what you're doing... for the first year or two of starting a company, it's really about, okay, now I need to find an accountant. Now I need to find a lawyer."

"You turn from a doer to someone who needs to empower the rest of your team to do. And that was a huge shift for me."

The quotes reflect on the challenges and growth experiences Melody faced as she transitioned from the role of a founder to that of a CEO, emphasizing the importance of delegation and team empowerment.## Upgrading One's Operating System

• Recognizing the need to evolve personally to match the growth and evolution of the company.
• The transition is psychologically challenging and differs from academic understanding to practical application.
• Learning to adapt and improve is a continuous process that requires resilience and flexibility.

"I had to figure out constantly, how do I upgrade my own operating system so that I can make this shift."

This quote underscores the ongoing effort required to develop oneself in order to keep pace with the changing demands of leading a growing company.

• Utilizing a combination of advisors, operational research, and peer insights to navigate challenges.
• Emphasizing the importance of being open to feedback and learning from others' experiences.
• The value of asking for help and gathering diverse perspectives to inform one's own approach.

"Honestly, I think it's a bit of everything. It's a bit of your team saying, you're micromanaging me. Back off... I did a ton of research on HBR best practices for a manager... asking them, hey, here's a huge challenge that I'm having."

Melody McCloskey highlights the multifaceted approach to learning and improving as a leader, including direct feedback from the team, research, and discussions with peers.

• Resiliency is critical for enduring the intense and challenging nature of leading a company.
• Leaders must be able to reassess their skills and delegate tasks to drive the most value for the company.
• Success involves embracing constant evolution and maintaining transparency and openness to criticism within the executive team.

"The first thing is resiliency... And then the second thing is, for me, really about constantly asking myself how can I drive the most value?"

Melody McCloskey emphasizes that resiliency and a focus on value creation are key to her long tenure and success as a leader.

• There is a belief that certain executives are better suited to specific stages of a company's development.
• It is uncommon to find individuals who can effectively transition from early-stage chaos to the predictability of a scaled, public company.

"I think it's very rare to see that flexibility... You either are thrilled by this is very consistent and very predictable business model... Or you love the chaotic shits being flung across the wall."

Melody McCloskey discusses the rarity of finding executives who are adaptable to both early-stage and later-stage company environments.

• The balance between maintaining transparency and protecting the company's negotiation power or privacy.
• Transparency can be challenging during critical times, such as fundraising, where too much openness may weaken the company's position.
• The approach to transparency varies and is influenced by the team's ability to contextualize shared information.

"It can be challenging when, I mean, the, the biggest challenge is when you are, let's say you're in the a stage of raising money and you don't have a lot of Runway."

Melody McCloskey points out the potential risks of being overly transparent during sensitive times, such as fundraising, where it may impact the company's leverage.## Bootstrapping and Its Impact

• Bootstrapping teaches fiscal discipline and efficient capital use.
• The speaker had to live frugally and work hard to fund their startup.
• Bootstrapping instills the value of each dollar and the urgency to reach product-market fit.
• The speaker emphasizes that founders who don't bootstrap may think differently about spending.

"I think everyone should bootstrap because especially in boom times, I mean, a couple of years ago, we had pretty significant boom times. There's still a lot of money right now in the valley."

The quote suggests that bootstrapping is important even during times of financial abundance, as it teaches valuable lessons about money management and discipline.

"It means that every single dollar, you never know if you're ever going to see it again."

This quote highlights the uncertainty of financial stability during the early stages of a startup and the importance of treating every dollar as precious.

• The speaker had influential angel investors who believed in her potential.
• Series A and B rounds were focused on the company's growth and data.
• Choosing investors involved assessing their commitment and understanding of the business.
• Personal rapport with investors and their operational experience were crucial factors.

"Our first seed round, my first two advisors and angel investors were Garrett Camp and Travis Kalanet."

This quote reveals the speaker's initial support from well-connected individuals, which played a role in the company's early funding.

"Our series a and series b were much more of... here's the opportunity, here's the math, and here's how we've grown, and here's scale."

This quote indicates that later funding rounds were data-driven, focusing on the company's growth and potential for scaling.

"The partners at Foson, which is the firm that led it, Kinsen is the name of the VC firm... They were constantly asking me really in-depth questions about the company, and we had a great working relationship and a great working style."

The speaker emphasizes the importance of a strong working relationship and mutual understanding with investors, which can impact the success of the partnership.

• Different stages of the business require different board expertise.
• Operational experience on the board is invaluable for practical advice and support.
• Building a board with members who have firsthand operational experience can lead to more effective guidance.

"What I've found is that you need different expertise at different stages of the business."

This quote acknowledges the evolving needs of a company and the importance of having board members with relevant expertise for each stage.

"I think it's good to have as much operating experience as you possibly can at companies. That's been my experience."

The speaker advocates for the value of board members with operational experience, highlighting their ability to provide practical insights and connections.## Executive Coaching and CEO Growth

• Melody McCloskey emphasizes the importance of having specific goals and skill sets for personal growth as a CEO.
• She seeks case studies and advice from experienced individuals to learn about board dynamics and accountability.
• Melody highlights the necessity of being eager to learn and the value of an executive coach in her development.

"I want when I speak to an executive coach is specific skill sets. I have specific goals of how I want to grow and learn as a CEO."

This quote highlights Melody's targeted approach to executive coaching, focusing on specific skill sets and goals to enhance her effectiveness as a CEO.

"So we'll talk about things like board dynamics and what's the appropriate ways to work with a board so that they have the information that they need, but that you're also holding them accountable for the decisions that they need to make and sort of their obligation to the business."

Melody discusses her interest in learning about board dynamics, indicating the importance of balancing information sharing with board accountability.

• Melody McCloskey reads extensively, including business books and literature.
• She recommends "The Hard Thing About Hard Things" for its concentrated insights.

"I really like the hard thing about hard things. I thought it was a lot of information, a lot of learnings in a short book."

Melody praises "The Hard Thing About Hard Things" for its dense content and valuable lessons, making it a recommended read.

• Melody identifies driving return for the business and adapting to constant change as significant challenges.
• She has learned to accept and thrive on criticism as a means of growth.

"Making sure that I'm driving the most return for the business constantly because it's the type of thing that I have to change and evolve every week."

This quote reflects Melody's focus on driving business returns and the need for continuous adaptation in her role as CEO.

• Melody's mentors have evolved with the changing needs of her business.
• She has been influenced by various individuals including Garrett, Travis, Jenny Lefcourt, Padmesree Warrior, Debbie Landa, and Linda Kozlowski.

"My mentors have changed over the course of the business."

Melody acknowledges the changing nature of mentorship and its alignment with the business's evolving requirements.

• Melody McCloskey desires more transparency and less information asymmetry in the VC and startup ecosystem.
• She identifies the power imbalance between founders and VCs as a barrier to information flow.

"It would be fantastic if there was less asymmetry of information."

Melody expresses her wish for a more equitable distribution of information in the VC and startup ecosystem, which would benefit all parties involved.

• Starseed aims to focus on revenue generation, marketing, and achieving profitability.
• Melody's vision includes driving maximum return for customers and maintaining a positive environment for the team and community.

"This year we've started to turn on revenue to a higher degree and so we're focusing on that as our next big push."

Melody outlines the strategic focus on revenue and growth for Starseed, indicating a shift towards financial sustainability and expansion.

• Foundersuite offers a CRM for raising startup capital with a large investor database.
• Greenhouse Software provides tools for hiring and has been recognized for its workplace environment.

"Foundersuite customers have raised over $130,000,000 in seed and venture capital."

This statement promotes Foundersuite's success in assisting startups with capital raising efforts.

"Greenhouse currently works with over 1500 of the world's most innovative companies, such as Airbnb, Slack, Snap Inc. And Lyft."

The quote serves as a testament to Greenhouse Software's credibility and its adoption by leading innovative companies.