Are you considering raising capital? Meet Stephanie Newby. As founder of NY-based Golden Seeds, an investment firm providing early stage capital to women-led tech companies, and as CEO of a big data startup raising outside capital, Stephanie has been on both sides of the table. Stephanie weighs in on the value of taking risk, how to find the right investors for your startup, and what it takes to lead a fast growth company. She also shares key takeaways from successfully closing a recent Series C round of growth equity financing.
Audra Ryan CFO at Crimson Hexagon
Just Using Big Data Isn’t Enough Anymore by Randy Bean, Harvard Business Review
The Advantage, Enhanced Edition by Patrick M. Lencioni, iBooks
RICHARD BRANSON: ‘Social justice is good for business’ by Rachel Butt, Business Insider
Golden Seeds Takes Bold Steps to Empower Women Entrepreneurs by Emmie Twombly, HuffPo
Gender Intelligence by Barbara Annis & Keith Merron, iBooks
Going Against the Flow: Stephanie Newby, CEO of Crimson Hexagon by Charu Sharma, HuffPo
She founded Golden Seeds to change corporate culture for women. Here’s why she left — and why she doesn’t regret it by Caroline McMillan Portillo, Bizwomen
Sageview leads $20 mln investment in Crimson Hexagon by Stephanie Rogan, The PE Hub Network
10 Things Entrepreneurs Need to Know about Entrepreneurship by Murray Newlands, Inc.
The Growth Equity In Venture Capital by Glenn Rieger, TechCrunch
8 Secrets to Credible Startup Financial Projections by Martin Zwilling, Entrepreneur
How To Boost Confidence When Seeking Funding For Your Startup by Sujan Patel, Forbes
How founders can tell a great startup story by Elisa Schreiber, Fortune
Guest bios & transcripts are available on www.broadmic.com.
STEPHANIE NEWBY (formerly Hanbury-Brown) is Crimson Hexagon’s CEO and previously founded investment firm Golden Seeds. Her prior experience was in financial services, the majority of which was with J.P. Morgan, where she headed several global businesses and served in various roles including head of e-commerce. Stephanie has extensive board experience with private and public companies, and currently retains a board position with Amec Foster Wheeler plc. She holds a Bachelor of Arts degree from the University of Sydney.
Stephanie: I actually I think I was born to be a CEO. I feel that the opportunity is here for me to do something, not just to achieve something for myself, but to create a company that makes work work.
Kelly: I'm Kelly Hoey, host of BroadMic. I speak with the most accomplished entrepreneurs, investors, and thought leaders about the issues that matter in building a business. You will get the inspiration as well as the picks and shovels you need to become a better entrepreneur. Be inspired, take action, think broad.
I am pleased to welcome Stephanie Newby to our studio today. Stephanie is Crimson Hexagon CEO. Crimson Hexagon helps the world's smartest brands use insights derived from social data to drive strategy across their organization. She is responsible for the company's operational excellence including its vision, values, and corporate strategy. And in her past life, she was on Wall Street and is the founder of New York based investment firm, Golden Seeds. Welcome Stephanie.
Stephanie: Thank you, Kelly.
Kelly: So I wanna give you a massive congratulations. You've completed a $20 million Series C round.
Stephanie: That's right, yes. I'm excited to have it in the bag I can tell you.
Kelly: I wanna say you've worked on Wall Street. You founded Golden Seeds. Was this the however raising Series C? Was this the biggest challenge so far?
Stephanie: It may well be actually. Actually, I think mostly because it's creating such a turning point for the company. So yeah, it does feel like a really, really important thing to have achieved, and interestingly in spite of all of that background, how much I had to learn that I didn't know.
Kelly: Okay, tell me more about that.
Stephanie: So people think if you work on Wall Street then you know all about raising capital and so on, but the reality is there are lots and lots of different types of jobs on Wall Street. And I was actually more of an intrapreneur on Wall Street because I was starting small businesses turning them into big businesses, throwing a project. "Do you think this is going to be a good market opportunity? Okay, let's get these going." And so very, very operational and always really focused on technology within that to create competitive advantage and not really about raising capital.
So when I started Golden Seeds, I had no idea how to do that, and I really learned that through joining New York Angels and learning about angel investing and all of that, which is still extremely different to raising a growth equity round. So each phase, I think, it definitely equipped me to do better and more than I could have without the prior experiences, but I was really quite shocked at how much I needed to know and how much I had to draw on those experiences to raise the growth equity round.
Kelly: We're glad you did. So what do you think in terms of your early career experiences or maybe it was before jobs on Wall Street and the rest of it that really enabled you to be that risk taker and leader that you are?
Stephanie: Well, I think risk taking is something that you do in your whole life. It's not that you don't take a lot of risks and suddenly you say, "Now I'm gonna start taking risks." I think it's a little bit innate. And so perhaps the fact that here I am in New York after a long career on Wall Street and working in a technology company and so on, having grown up in the outback is a testament to a multitude of risk taking all along that continuum. But I think that mostly, I think it took me a while to realize that I actually was born with an engineer's DNA even though I've never done engineering. It's about process. So I am always looking to improve a process or create one or become more efficient. And that's actually really valuable when you're building things.
Kelly: So what drives you to keep going? And I'm just sort of thinking you've had two very successful careers so far. Why take on this challenge of being a CEO of a startup?
Stephanie: I actually think I was born to be a CEO, and it took me a while for the right opportunities and the right risk to take to land in, it was definitely not planned. I talk about my career as the random walk theory in practice. And so I think that it's just I feel that the opportunity is here for me to do something, not just to achieve something for myself, but to create a company that makes work work.
And by that I mean really I wanna make a company that works for women and not just for women, because today both men and women need the same thing, which is they need to be able to create less conflict between work and family. And that's essentially why I started Golden Seeds anyway, to make more women entrepreneurs be successful, get funded, help them with their companies so that that female influence could encourage a slightly different culture that would make work work. Now I can do that myself.
Kelly: Doing that yourself in terms of your team and how you're building Crimson Hexagon?
Stephanie: That's right. Well, if you look at the executive team at Crimson Hexagon today, there are three men and three women. And it wasn't terribly deliberate. I haven't said, "Got to have a woman in this job," but I was delighted when I found a female CFO because that meant, "Oh well, now the next job I fill will still have quite a lot of balance and it really doesn't matter what gender that is."
But I do believe in the power of diversity not just around gender, but other things too, because I love myself to be challenged. So I don't want people around me that are like me at all. And so that's sort of how it's come about so far. We haven't done very much on actually focusing on culture yet, because with small companies, first you have to focus on survival as we all know. And secondly then, getting to the point where you're big enough with the critical mass to know that the path to success now is more about you getting things right than just not having all the right resources. But we are in that point now.
So we've started to focus on values, and I'm not talking about values, and really turning them into things that drive our behavior and our measurement and recruitment and so on. And that's the fun part.
Kelly: Well, I wanna say some of the things drawing on your past experiences of picking and growing companies and growing opportunities. Now you're like, "Okay, put all of this into practice." How many employees is Crimson Hexagon now?
Stephanie: We are 140 now.
Stephanie: Yeah. So we got to cash flow breakeven back in 2014. We were at about 60, and we'd held that number for quite a while. And then we started to grow from our own cash which is a great position to be in, and it gave us the opportunity to settle a few things in place and test out some new systems, make sure that they were working. And by that I mean we put in place a new sales and marketing model, and that really enabled us to when we went out for the growth equity round to be confident that things were...we weren't bringing capital in to fix problems. We were bringing capital in to put fuel on an engine that was working properly, and I think that enabled us to get over the line.
Kelly: Novel idea, money to actually do something as opposed to fix all these past problems. What motivated you to take the plunge and leap from being an investor to being the CEO of a startup?
Stephanie: So with a lot of my moves as I've said, it's the random walk theory so was completely unintentional. And Crimson Hexagon's board of directors was looking for a new CEO, and I realized that boards get a little antsy when they've got a leaderless company. So either one of them has to sit in the seat or they've got to...sometimes they can make decisions too quickly. And this was an important portfolio company for Golden Seeds.
So I offered to go up to Boston. I think I went on 24 hours' notice just to sit in the seat as interim until the board found a new CEO. And after a couple of months, I found a couple of things that happened. One is Golden Seeds was working perfectly well without me. Secondly, I was discovering at Crimson Hexagon a company with...where the technology was way more exciting than I had realized. The people were just really, really high quality. The customer base was really high quality and the market momentum was moving.
So actually the board asked me to stay in it and that was the first moment where I thought, "Well, maybe I even might do this," and only thought about it for 24 hours and I said yes.
Kelly: "This opportunity is way too exciting. I'm not giving this to anybody else."
Stephanie: Well, I also had to make the decision if I felt I could make a positive impact, because I'd be shooting myself in the foot if I, as an investor in the company as well as the CEO if I didn't think I could. And I really felt that I had what it took to get us to the next level. And that has been proved out, I suppose, at this point which is great.
Kelly: I would say that's an interesting point of self-awareness and thinking about how many people start companies and they're the right entrepreneur to start a company, but they're not the right entrepreneur to grow or scale to that next level. But what's your thought now that you've had that moment where you had to assess whether or not you were the right person for this company and put being an investor and having a financial stake to the side? What would be your guidance to someone else who is assessing an opportunity and saying, "All right, this is how you think about whether or not you're the right person"?
Stephanie: Well, a lot of founders that I've met actually typically are quite enlightened on this point. And particularly when they've started a company with a motive that they're really passionate about, you know, solving a particular problem, and it's less about how big can we grow and how much money can we all make than it is about solving that problem and proving to the world something.
And so those entrepreneurs typically are able to put their ego aside and do what's in the best interest of the company, and so I really feel what I...one of the things that I'm always looking for in people is their ability to do that. So, "Check your ego at the door," is on every single job description that I write, and in building a team that's also what I'm looking for. So that's maybe the best advice, but to just get out of your own way perhaps.
Kelly: Check your ego, get out of your own way. I look at your career in terms of fundraising and your ability to successfully fundraise. Are there two or three things that you can share with our listeners on what makes or what improves your chances of success when you're fundraising?
Stephanie: Well, definitely understanding that the process is different at different phases of a company. So, of course, at Golden Seeds, we see a lot of early stage companies there. So that process, I understood extremely well and leveraged that in order to get money in the door when I first took over in 2012 when I realized we only had a month's worth of cash in the bank for a 50 person company. That's pretty serious.
And a lot of that is about networking, and you and I were chatting earlier about networking and that's really effectively what the angel investment, class of investing is about. Because that's how you meet angel investors and they'll, of course, network with each other as well to bring each other into deals that they like. So that's important capability to be able to draw upon.
And then when you're talking to venture, it's very different. And so when you show venture capitalists your projections, they're looking for something different than what angel investors are. Which the angels are often looking for, "I wanna make sure that they can get to breakeven with my cash, because otherwise they're desperate and I'm getting screwed." Venture capitalists care about the fact that you're actually going to be burning enough cash to get the company to the next stage.
And I was talking to private equity, the growth stage equity, and the dilemma for me was trying to work out how much money to ask for. This is what we knew we needed to burn. And I wanted to be talking to the guys that had minimum check sizes of 20 million, but we didn't need to burn that much. So knowing that actually our need for cash for more like 8 million or 9 million still justify the $20 million check. Took me a while to get to. Because even there were some investors that would have liked to have written a $20 million check, but only see us burning 2 or 3.
So I'm scratching my head saying, "Well, why am I raising 20 then?" And until I understood that really what they want to do is put 20 million...they wanna buy $20 million worth of your shares. And if you think about that in the same context as the public markets, it's easier to understand where they're coming from, because in the public market, you buy some shares. It doesn't mean you want the CEO to use up all your money. And so some of it's about strengthening your balance sheet, but also giving them the opportunity to have a reasonable stake in the company.
Kelly: How do you pick a growth investor? How's it been in terms of your guidance and advice at the different stages of what type of investor that you need? Because it sounds to me at that growth stage, it's about the money.
Stephanie: Actually, not just, and there's a very big difference between all of the firms. There are so many firms and they have their strategies that they stick to, because they've raised their capital based on the strategy that they've told their limited partners they're going to deploy. So really you've got to get to know them and understand what they're looking for in investment, and of course, never take it personally when you're not their favorite company. But finding one that sees your market the way you see it, that agrees that now is the time to burn cash versus just conserve it really has connections and contacts that could be valuable to your company, understands the metrics that drive your business, and that's what we found in Sageview Capital.
And we've learned a lot from them just in the due diligence process, particularly around some of the metrics and so on, and that's the kind of partner that I want to have because I want to keep pushing myself and my team to do more and learn more, and we think that they can challenge us.
Kelly: Any other important differences for entrepreneurs? You sort of sit back from your CEO seat as a CEO of a growth stage company, but anything else you think about in terms of, all right, looking back at all these different phases of fundraising and having sat on both sides of the table? Anything else that you think that, "All right, here are some important differences that entrepreneurs should know"?
Stephanie: Well, definitely being very clear what milestones you need to have achieved to make you a suitable investment candidate from their point of view. And I think with everything and particularly in negotiations, you've got to be able to get out of your seat, walk around the table, sit on the other side of the table, and sort of look at the people in front of you and say, "What are they thinking, and what's driving their decision?"
So I think that's probably a good weapon to have, just to think that through so that you can see and not try to make your story fit. Once you do understand what they're looking for, but find the one that works for your story, where the fit is just gonna be like a glove, I think.
Kelly: So it's like one of those things I'm sure someone listening to this would think, "Oh well, that's really easy for you to say, Stephanie, because you've raised money." Do sometimes, with respect to entrepreneurs, we lose sight of the fact that it's not money that we're after?
Stephanie: I have a lot of sympathy for taking money from wherever you can get it. So let's not get too disciplined about it all. But I do think that even being prepared to take money from wherever you can get it, which sometimes we're forced into doing and I understand that, try not to have too many strings attached to that kind of money. For example I was on the board of a company where we took money from someone who was an extremely unsuitable board member, but made that as a requirement of the investment, and that became really problematic for the CEO and the other board members.
So you've got to work out where you're gonna draw the line in terms of selling your soul, but I think we all have to compromise a little bit. But I did want to also say that we decided to raise the capital with an investment banker, and it definitely helped because if you're following what I'm saying, and it's only one piece of advice, which is find the right investor, it doesn't mean that you've got to have a large screen, and the banker did that, really.
We had lots of relationships that we'd been cultivating over the years. So we gave them those connections, but they also came with a bunch of people that they were working with. And even though the process itself was six months that I lost from running the business, it would have been really intolerable, I think, if we were trying to run it because the banker does two things. They create urgency by creating competition, and they also force a process. Because as an entrepreneur, investors are ringing you all the time, because that's their job. They hire people to call and say, "Want to learn more about your company. We're looking at the space."
Most of that's just bullshit. They might be investigating another firm, or they're just keeping up, but corralling any of those into a real process, that's huge and the banker did that for us in a way that was extremely helpful.
Kelly: But this is the first time you use a banker in the growth stage?
Stephanie: It is, that's correct.
Kelly: Which kind of makes sense at that stage, not too early.
Stephanie: Yeah, but I'm thinking if I could go back and do it, maybe I'd even consider it because it was really so valuable.
Kelly: At what stage?
Stephanie: I don't know, as early as possible just because I don't have to go through it again in any big hurry.
Kelly: That's hilarious.
Stephanie: That's the best advice I have for right now.
Kelly: What role does confidence and establishing credibility play in fundraising?
Stephanie: I think a huge amount, because what confidence enables you to do is be willing to expose both where you've got weaknesses. No company is perfect. No individual is perfect, but be willing to expose that in a way that's not actually a weakness. And so I kept saying to my team when we were under the microscope, "Don't try to gloss over that we've got an issue in this part of the business. We're working on it. We've got a lot of good initiatives in place. We're still learning. We're not shoving it under the rug, and it is what it is."
You don't want someone to get past the initial conversations and get into due diligence and then find out that you were just putting a glass over the top of something that wasn't working as well as you wished it was. So I think that you need confidence to be able to do that.
Kelly: How did you become confident in fundraising? Because we've already established that was not part of what you were doing when you were on Wall Street, and all of a sudden you're starting an angel investment group that becomes a fund and you're fundraising for that. And it's one thing to, I wanna say, raise a fund. It's another thing to say, "Hey, look at my company," and invest in it. What were the shifts and the changes in terms of your ability to become really confident in pitching and fundraising?
Stephanie: There's nothing like a necessity to force you to be confident, and I think that actually I also had to train myself to be a little more of a marketer because I tend to be quite tough on myself. And that means that I often go to all the things we're not doing. And so I had to get that marketing cap on, which remained authentic, I hope, but still at the same time was all about really selling how great a team we had, how much progress we'd made, what a fantastic company this is. We can take this to the limit, etc.
I did have to school myself a bit in that because I err on the side of explaining why all the things that we aren't doing right. So I think that entrepreneurs have to be really, really good at selling their company and be willing to talk about themselves and not all of us are comfortable with that either. But you do have to do that, and I remember hearing years ago...I don't remember who it was now, but someone saying, "You just can never get tired of telling your story," and that's really clear. You have to tell it with a lot of energy every single time.
Kelly: Even when you're sick of it. I was gonna say, I was gonna ask you, "Was that your best piece of advice for entrepreneurs?" But you may have just...
Stephanie: You can never get sick of it.
Kelly: Enthusiastic. Every single time.
Stephanie: And there's a distinction between that and bullshit because you can see through the bullshit.
Kelly: Now that you're on the other side of the table as a CEO, do you look at...particularly put your hat back on as to the day when you were an angel investor? Do you ever kind of think, "Oh God, look what I did back then. Now that I'm the CEO of a startup, here is what I would advise my past self as an investor to do." Is there anything in terms of now that you're the CEO and looking at your past self as an investor that you would do differently?
Stephanie: Well, I think that it's important to be an entrepreneur-friendly investor, I think that I did try to be that. But sometimes I think investors can require more than the entrepreneur can give. And so you do have to remember how they just...especially in those early years, scrambling around, trying to make ends meet and not have to face the worst which is, "Now, I've got to fire some people." And you have to be able to juggle a lot of really, really tough balls all coming at you at once, and sometimes I do wonder how people with less experience are able to get that done. Because I've got a lot of business experience at this point, and I was quite astonished at how I had to draw on every single one of my resources and experience to get through.
So yeah, I'm not sure that I answered your question, but I do think that investors have to...they keep have to saying to themselves, "I've got to be entrepreneur-friendly," because you can't give your entrepreneur one second of doubt because there's just too much to deal with all at once for them to have some kind of niggling thing about their board member bugging them. You don't have room for that kind of negative energy.
Kelly: All right. I wanna get to the part of our podcast that I ask the Pay it Forward questions, the questions I ask every guest. So this is meant to be quick answers, no pressure. All right, so first question, what are your primary sources of information?
Stephanie: Actually, I use podcasts quite a bit, because I drive up and down to Boston. So podcasts are great. I actually use my Twitter feed to find articles for me, so I use it a lot as a source of media and I love HBR, always have Harvard Business Review. I think of that as my main mentor.
Kelly: How do you discover new information?
Stephanie: Twitter feed.
Kelly: What book are you reading?
Stephanie: "The Advantage" by Patrick Lencioni. It's about how to create competitive advantage through organizational health.
Kelly: Do you have any rituals or habits that you swear by as CEO?
Stephanie: Ruthless prioritization. So I've done lots of to-do lists over the years. I always do that first thing every morning and I make sure I don't have any more than five things to achieve in a day. I do have a secondary list in case I get through them all early. But I found this great app called Todoist that might be the best one of those I've ever used.
Kelly: Who are three entrepreneurs or leaders you admire?
Stephanie: I've already mentioned Richard Branson, and that's because I love how courageous he is. Also Joanne Cochran who's our board member, and what I really like about Joanne is that she's ruthlessly objective.
Kelly: What's the best advice you ever received?
Stephanie: Somebody that I confided in gave me great advice about recruiting one time, because I had said, "I don't think I'm very good at hiring people, because even if they're a bit odd, I always like them and I find excuses for why they are a bit odd, and of course, then I make lots of mistakes, and that's not good." And this guy told me, "You're only looking for two things, it's not that hard. You're looking for, 'Is this a learning person and is this a happy person?'" And I've used that ever since. It's great.
Kelly: That's brilliant. Are they a learning person? Are they a happy person? Because you want someone who wants to learn and you don't want someone miserable to work with. Amazing. Seriously, that might be the best advice ever. Are there are any particular myths that you would like to dispel for our listeners?
Stephanie: Well, I think we touched a little bit on one which was that generalization about women are like this and men are like that. And actually I read a great book about that by Barbara Annis called "The Female Brain," and I would really recommend that. Another one is women are not risk takers. We've touched on that as well, and the other one is that Aussies like to go walkabout because they don't like working. So yeah, I went walkabout years ago, but I've been working the whole time.
Kelly: That's hilarious. And you also dispelled the myth that everyone on Wall Street raises money. So we're just busting myths left, right, and center. What words of advice would you give to our listeners about taking risks and closing the confidence gap?
Stephanie: So I really think that you have to be willing to jump at opportunities, and I just think don't overthink it. You can make some mistakes, but they're not that bad mistakes. They're things to learn from.
Kelly: And what does think broad mean to you?
Stephanie: So I happen to know that the founder of Think Broad worked on Broad Street, and there is already double meaningful for broad, so on Broad Street. So I can think broadly about that.
Kelly: There we go. I like that a lot. I like that a lot. Thank you so very much, Stephanie. It's been such a pleasure to talk to you.
Stephanie: Thank you, Kelly. It's fun to be here.
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