We’ve written quite a bit on why a VC might say “no” to a startup. But what about the flip side? What makes a VC say “yes”?

A few weeks ago we explained our “yes” process about Daily Blends.

We thought it might be helpful to share another story about a totally different type of company. This one is called The Cru, a female-focused community-driven startup.

Quick reminder that our investment team evaluates companies based on these 5 pillar:

• team
• problem
• solution
• market
• traction

Our goal in sharing this with you is to help you gain a deeper understanding of how VCs think when we hear founder pitches. Hopefully this information helps you to raise funding more effectively.

Alright, let’s dig in.

Who’s The Cru?

The Cru is a virtual membership organization for professional women who have big goals.

Women join for an annual fee. They're placed in a cohort with other women. Each cohort has a group leader (another paying member). The group supports one another and helps hold each member accountable to her goals.

There are also events, mentorship, networking opportunities, etc.

Honestly, it doesn’t sound like a typical venture backable business.

So, why did Hustle Fund invest in The Cru?

Pillar 1: The Team

This is The Cru’s founder, Tiffany.

Tiffany’s life's mission is to lift up other women. For real:

• Tiffany authored a book – which was praised by Melinda Gates, Sheryl Sandberg, Soledad O'Brien, Time Magazine, Business Insider, The NY Times, etc.
• She was on the Board of Girls Who Code
• She ran a non-profit called Levo that helps young women launch careers
• She was a founding team member of Lean In
• She's been featured in The New York Times, ESSENCE, O, The Oprah Magazine, and NPR
• She's presented at Fortune Magazine’s Most Powerful Women Summit, TEDWomen, and MAKERS

Basically... Tiffany knows how to sell, has a history of elevating women, and is surrounded by the most powerful women in the world.  

This made Elizabeth – the investor from our team who led this partnership – believe that Tiffany would stick with the company no matter what. And founder persistence is a key trait of many successful businesses.

Pillar 2: The Problem

Women have a LOT going on. They work high-pressure jobs, run the household, raise children, care for their aging parents, check in on their friends, the list goes on.

It's incredibly hard to manage all of those things AND be successful at all of them. Or any of them.

In taking care of so many other people, women often de-prioritize their own goals, which makes them unhappy, resentful, and/or depressed.

(Of course, not all women do all these things, and certainly many men also do and feel these things. But for this article… let’s just talk about women first.)

Pillar 3: The Solution

Tiffany believed one way to solve this problem was through community. She created The Cru to help her audience find support from other women in a similar situation.

She charges a membership fee of $499 per year. The user is matched with other users in a cohort, and cohort members hold each other accountable to their goals.

There's also an opportunity to layer other products on top, like events or investing.

Pillar 4: The Market

As a VC, Elizabeth needed reason to believe that this investment could yield a 100x return.

Tiffany's ideal user is any woman who works and has goals. She was starting with the U.S. market, but this could easily accommodate an international audience, since the program was all virtual.

So, let's do some rough math:

• the U.S. has roughly 300m people
• roughly 65% are between the ages of 25 and 64 (so 195m)
• roughly 50% are women (so around 97m)
• Tiffany charges $499 per membership. Let's assume everything goes right and she wins 20% of the market share. 20m people paying $500 a year – that's a revenue opportunity of $10b.

The other reason Elizabeth believed in this market is because she saw her own female friends doing something similar to what Tiffany was doing with The Cru.

Her fellow GP Shiyan Koh was hosting professional dinners for her businessy friends. Another teammate was doing the same thing.

Elizabeth saw the big "pie in the sky" market opportunity AND the "this is actually happening" reality and decided to take the bet.

Pillar 5: Traction

At the time Elizabeth heard Tiffany's pitch, The Cru was less than a year old.

There were 100 paying members, and another 800 on the waitlist. And the cost to become a member was $499 per year.

Tiffany had also developed partnerships with Disney and Morgan Stanley. She charged $1800/year to curate "crus" within those orgs.

And she had raised over $1m.

Problems Tiffany Faced

Running a business that focuses on building connections among people isn’t exactly the most automate-able, immediately scalable business. There were some concerns from VCs, like:

Operations

In the early days, Tiffany did most of the operations herself. And it was almost all manual.

She processed applications, onboarded new members, curated cohorts, helped group leaders run their cohorts, processed payments, etc.

Many VCs were concerned that these ops would be hard to automate, and would distract Tiffany from scaling the biz.

*Her solution: it took some time but Tiffany did add tech to automate many of these processes. She's now focused on what she does best: selling the product.

Retention

Some VCs, even ones that ended up investing in The Cru, had questions around customer retention.

Would cohorts simply connect outside of The Cru when their annual membership expired? How would Tiffany combat this?

*Early investors believed that Cru members would see the power of The Cru's community and want to stay within that orbit. Many also believed that Tiffany could upsell members on other products that would make their membership even more valuable.

The Pandemic

In the beginning, Tiffany focused on a direct-to-consumer marketing strategy. This worked well... until the pandemic hit.

Women were inordinately overburdened. Combine that with inflation and rising costs – spending money on The Cru suddenly became less of a priority for her users. Tiffany realized she needed a new strategy.

*Her solution: Go directly to businesses who want to support their staff. Tiffany is a superstar when it comes to in-person selling. She used this skillset to sell The Cru to enterprise companies.

Find who believes in you

Most investors tend to invest in companies that align with their own lived experiences... like companies that solve problems they deeply understand. Or serve an audience they identify with.

Unfortunately many of the folks Tiffany pitched couldn't relate. So she found investors who aligned with her audience.

It might take a ton of no’s before you get to the “Yes!”. But an investment is more than just a monetary transaction; it comes with people who are on the journey with you... people who will believe in you and who will fight fires with you.

Find investors who believe in you and what your startup stands for. And that might mean looking in creative places.