From Rejection To Raising $1.5 Million In Capital – with Jon Crawford

by Tim Jahn on March 29, 2011

Jon Crawford is the founder of Storenvy, a social e-commerce platform.  Last year, he applied to the well-known startup incubator Y Combinator, was accepted, then kicked out, and went on to raise $1.5 million in capital for his company.

I invited Jon here to share his story, how failure and not being afraid to fail again has pushed him forward, and how doing things the hard way has made him stronger in the long run.

Transcript

Tim Jahn: So in 2010, you were accepted and kicked out of Y Combinator, in your own words, and you lost your co-founders, and then you raised a million and a half, I guess no one says that.

They say $1.5 million from some really well known investors, and this is all for Storenvy, which you had started previously, back in ’08, and you had customers, revenue. You had the whole shebang. You had a business. Well, let’s start back there. What is Storenvy, for those that don’t know?

Jon Crawford: Storenvy is kind of a new approach to an old idea, which is setting up online stores, and we let anyone set up a free online store. They can design to look however they want, and we host it, and it’s a lot like setting up a blog, or something like that, but it’s a store.

You can set money, you can set whatever you want, but then, anything that you add to your store gets put in our big, broad social shopping marketplace, as well, so as opposed to getting people to come to just your store, people can show up at store and browse across all the thousands of stores, all in one place. Discover what’s cool, what are the best sellers, search for terms that match all the thousands of stores, and it’s like, basically, a big mall. A one-stop shop for everything Indy and cool and creative.

Tim Jahn: Where did the idea come from? Do you shop a lot online, or, I mean, were you looking for a more social way to shop?

Jon Crawford: So, the idea came from, I used to do a lot of websites for other people, and I was running my own web design shop, web development shop, in Kansas City, and for a few years, it was pretty successful.

We were turning down work every week and all that stuff, and we built a number of e-commerce websites for people. Just custom-built things that they wanted and needed and, you know, I was checking out all kinds of other software and, and I just, it really hit me that, that nothing was cool.

Like, there was no software out there for selling online that was, that felt like you were using the social web, or the consumer web, and I was seeing that a lot of my customers were, they weren’t e-commerce experts. They were just, like, normal, average people that needed to sell their stuff online, and so, pair that with just kind of like, the emergence of, obviously, Facebook is kind of catching on, becoming a big deal, and realizing that nobody’s building anything that kind of, just, is built with this social web inside of it, that is built sort of like, from the ground up to include the social web, and so, yeah, this whole thing is just sort of like me saying, “You know, I bet if I did e-commerce, it would be not as lame and boring and nerdy as what all these other products are.”

And so, yeah, it was just sort of, kind of a personal expression. Kind of, sort of, starting with the bottom and the simple thing, and like, the average Joe, and moving forward, instead of starting, like, at a big business point of view.

A lot of places will — a lot of software, e-commerce software is built for a few big businesses, and we focus more on a lot of small businesses.

Tim Jahn: Gotcha.

Jon Crawford: Yeah.

Tim Jahn: That’s an interesting take. So you, you just saw that you could probably do this in a lot better ways, so you did?

Jon Crawford: Yeah.

Tim Jahn: So, as I mentioned, you were doing pretty well with the company. You had revenue, you had customers, you had a good little business going. I don’t mean little, and, you know, to belittle you, but —

Jon Crawford: Sure.

Tim Jahn: You had a business going. Why did you apply to Y Combinator?

Jon Crawford: I actually didn’t apply to Y Combinator. It was sort of an accident. A guy that I met who has now become one of my best friends, went through, and I met him when I was already out here, like, pitching investors and things like that, and he just, without even asking — he had asked, “you know, would you ever consider doing something like Y Combinator?” I was like, “I don’t really think it is, I don’t think we fit the model.”

And, you know, we’re already pretty far along, we have all this revenue, we’ve got our product already. So I hadn’t even thought about it. And then, he went home and he wrote an email intro to the guys and I got together with them, just, you know, it was kind of like, well, it’d be stupid to turn them down, if they want to like me. So, it’d be good to at least meet the guys, and all that.

And then, a week later, they were like, we like it. We want you to come do an interview. We’ll pay for it. So again, like, this would be dumb to say, “No.” I’ll go out, fly back out there again, and then they just were like, “You’re in.” So I didn’t really — it was more just, like, showing up. Showing up for appointments.
Tim Jahn: So, in a sense, you kind of accidentally got involved with Y Combinator. You weren’t seeking it.

Jon Crawford: Yeah, yeah 100%. I didn’t try at all. Yeah. I mean, I was trying on a lot of other stuff. I was, you know, working really hard to pitch investors, and we were one of the first companies to get on AngelList and, you know, everything was going well with all that, but with the actual Y Combinator part, I didn’t — that kind of happened on accident.

Tim Jahn: And then, so you meet with the Y Combinator guys, and you get accepted, but then you’re gone. You’re kicked out, or you’re, you know, you’re no longer part of Y Combinator. What happened in the middle, there?

Jon Crawford: What happened in the middle is, they said, “Great, you’re in. Can you be out here in seven days,” and it was just like, (screeching noise), “Huh?” You know, we couldn’t even believe how much time — how much we had to do in so little time, so you know, I had two other co-founders, at the time, and they, like, have families and children and we had all just recently relocated to Austin because we’d been spread out before. One guy had been in Orlando, one guy in San Diego, I was in the middle in Kansas City, and we said, we need to get in the same room more often. Let’s relocate.

And so, we just picked Austin as the place to go for that, and so we’d all three moved there like, barely two months before that, and then, all of a sudden, we had to go out to San Francisco in seven days. And kind of, to put the cherry on top was that, we were actually — I flew from San Francisco to Atlanta for LessConf, which is a conference my friends Al and Steve put on, and so we’re in Atlanta at a conference that we were helping to sponsor for the first two days of that, so shave off two days.

So then, we all go back to Austin for five, so, we had to, like, decide in Atlanta whether or not we were gonna do this, and nobody even got to, like, talk it over with their wives in person. And so, then we went back to Austin and just had to, like, shuffle and like, start booking airfare and figuring out where we were gonna live, and figure out, you know, who we have leases we’ve got to take care of. We gotta start putting our stuff in storage.

And then, we kind of, like, threw all the stress of that, had a bunch of conversations, and just kind of realized that, that I really had kind of a different scale dream than the other two guys. Like, they, they were great at what they do. They still are. They’re still doing great design, and great sales, and that kind of stuff, but for a different company, now, and so, they didn’t really want to blow it up to, like, global proportions the way I did, and so, so we just decided, look, okay, it’s probably best that you guys run what was our T-shirt printing company and we were, we did over $1 million in revenue, and all this crazy numbers of T-shirt printing, and we decided that they would stay in Austin, they would get that half of the business, and give me the website business, and then, kind of fund, you know, give me a little bit of runway to get going, since Storenvy doesn’t charge anything at the moment.

So we—they decided to stay home and, I mean, that was the right decision, and so, then I, like, we got to that arrangement on, like, day six, and then I called Paul, basically, as soon as I knew Paul Graham, from Y Combinator, and I said, you know, here’s the deal. These guys are gonna stay home. They’re gonna take the printing and I had asked one or two of my, kind of, business advisors and stuff, like, what do I do? Is this gonna be okay? And the tone seemed to be, “Well, yeah, but I mean, it’s gonna be interesting, but YC’s gonna be good for that. They see this kind of thing all the time. They’ll help you get back on your feet and help you, like, navigate the situation.

So, to be honest, I wasn’t worried, going into the phone call, that there was going to be some kind of a meltdown. I was just sort of telling them, you know, here’s the deal. I just want you guys to be aware, et cetera, and, but then, they said, I wouldn’t get on the plane. We need to figure this out before you start, like, move your life out to the West Coast, and that is when my, like, you know, my stomach just like, clenched up and I felt like I was gonna vomit.

Because I didn’t really, hadn’t really thought this was gonna be the kind of thing that could just put this whole thing in jeopardy. And I had already emailed, like, all our future investors and been like, “Hey, you know, we’re gonna stop this investment train. Right now we’re gonna do Y Combinator. I’ll talk to you in three months,” and then, so, how do you, like, pick that conversation back up with those guys and say, “Oh, just kidding. Will you invest in us again?”

So, you know, it felt like, oh my God, everything’s gonna fall apart. This is gonna be, like, the worst thing ever. But, alas, when he said that, I was already, like, on my way, driving away from the storage unit that we had just put all of our stuff into, and our friend was picking us up to go to the airport, so like, our plane was in like, three hours. So there was no stopping the machine that was already in motion, so we got on the plane, flew out here.

The next day, I got together with the YC people, and they said, explain what’s going on, and I gave it to them and they said, “You know, so much has changed that you’re gonna spend the whole summer just, sort of like, doing the legal stuff involved in splitting up this business, and alas, the timing is just so bad, since today is the day it starts that, you know, we just don’t think it’s gonna work, so feel free to reapply in the winter. We like the business, but it’s just not gonna work this time. So, in and out in seven days.

Tim Jahn: What did you do. I mean, that day or that night, when they said, you know, I’m sorry, this just isn’t gonna work. Come back next time. What do you even do?

Jon Crawford: I was on the phone for the whole rest of the day because, for one, you know, they didn’t exactly like the numbers and the arrangement that we had worked out between me and my partners, and so they had said, you know, that you’re not gonna be able to move forward with the business in that arrangement, and so we decided to, so, I got on the phone with these guys and I’m like, “We need to work out another deal.”

I basically just tried to save the situation for the whole day. “We need to work out another deal, you know? Get on the phone with my attorney.” Four-way phone call with the attorney. It was just — it was a lot of just really, it turned out to be worthless trying to save the situation. Calling people, trying to get them to give me the thing I could say to Paul to solve it. To, like, fix the situation and there just, there wasn’t really anything to say.

Tim Jahn: So, I mean, you didn’t go sulk or anything. You sprung into action trying to —

Jon Crawford: Oh, yeah.

Tim Jahn: — move things forward.

Jon Crawford: Yeah. It had already been a really, like, exhausting and non-stop couple of months. Like, I — when we were moving out of our house in Kansas City, to move to Austin, I’m packing boxes while I’m on the phone with, like doing investment pitches, and then, like, we move to Austin, and the very next day, I was in an investor’s office doing a pitch, and so, it had already been, like, a crazy couple of months of just trying to, like, grow a website, learn about investing, flying out to all these different places that I’d never even really been before, pretending like I knew a thing or two about, like, Silicon Valley, and all that stuff, so getting kicked out sucked but like, just dealing with the problem was very run-of-the-mill, as far as what had been going on for the past few months, so it wasn’t like I was tempted to just sit there.

I — all I had been doing for months was, like, okay, we got a problem, here’s how we’re gonna solve it. I mean, that’s just kinda how I roll. I tend to, like, want to fix a bad situation rather than, like, feel bad about it.

Tim Jahn: So then, after, you know, you try and save the situation, there’s really nothing that, you know, that you can do in terms of continuing with YC. Was that when you decided that you’re gonna continue, you know, really hardcore pursuit of funding?

Jon Crawford: No. You know, the thing about fundraising is, it’s hard. Well, there are many things about fundraising, but one of them is, it’s hard to do it if your heart’s not in it. Like, you have to be sold out, you have to have your business tattooed on your face, and like, you’re just going for it, and so, after this has happened, I was in a low place.

Like, I was unmotivated for like, a month. I knew we had to do it, but I wasn’t, like, just fully psyched and energized. Like, I knew we had to keep moving forward, and, but, you know, it was like, “Maybe, now I’ll redesign the blog.” You know, it just wasn’t like, big, like, kill the universe kind of initiative there for a while.

And so, I knew we had to give ourselves a little time to recover and then give ourselves a little time to build some inertia, because I didn’t—I wanted to be able to waltz in to a investors meeting and say, “Yeah, I started this company with a couple other guys. They’re no longer involved, but look, we’ve kicked ass for the past three months.” Still, given everything that’s happened, we’re still able to execute. We’re still able to move forward and make progress, even though we don’t have those same team members.

Tim Jahn: So you kind of wanted to put the whole debacle behind you and really just focus on making sure that people understood this company is solid, you know —

Jon Crawford: Yeah.

Tim Jahn: Regardless of what happened, we’re gonna keep pushing forward and we’re doing well.

Jon Crawford: Yeah. I wanted to make sure that, that I wanted to prove that we could still execute, given a different arrangement of the team.

Tim Jahn: Gotcha. And then, so you –I mean, a few months later, you felt like you were back on the horse, so to speak and you were ready to go out and start pitching and, and you did, and then, how did you end up getting $1.5 million? I mean, you know, going from that low place to all of a sudden finding a bunch of people that really do believe in your business. How did you get to that point?

Jon Crawford: Well, you know, first, by just being friends with people. So you know, I spent a lot of time eating breakfast with other founders and a lot of time going to parties on Saturday afternoons where we were eating only fried food because it was, like, a Midwesterner-only party, and you know, I mean, just things, like social events.

And so, social events were good because, you know, I would meet people that were, you know, for lack of a better phrase, kind up the food chain than me, and become friends with these people and then, you know, when it came time to raise money, I said, “Hey, who can you introduce me to?” And they were happy to do it, because they had spent time with me and knew that I was, like, not, like, a crazy person or whatever. And so then, you know, these great people wrote me amazing introductions to investors and I set out, originally, to raise less money because I just, I was thinking that, that you know, shoot, if we got this far with one developer, me, what if we had two or three. Like, imagine the possibilities.

And it just seemed like there was enough of a, sort of, connection between the investors I talked to and the idea to where, they had been looking, they had kind of been looking for this project already. You know, like, I connected with the guys, Smart Capital, who’s the investors in Tumbler and, you know, for them, the Tumbler of e-commerce is a good fit for, like, kind of what they feel like their strengths are and what they’ve had success with, and you know, so it seemed like, just, it’s a good product that they knew the market enough to know that, you know, it had a potential of being successful.

So in terms of how did I do it? I spent nine months or more, like, learning how the VC game works. And I had already kind of been punched in the face a couple times to the YC thing to where, I wasn’t afraid to, and sit across the table and be bold and be, you know, kind of ballsy with stuff, because I already knew what rejection felt like. So, yeah.

Tim Jahn: Yeah, I mean, the lesson I get from you is that, you got knocked down and you just got back up and you ran harder and worked harder than you ever did before and, I mean, clearly, it paid off. In the blog post I read from you where you kind of outlined everything that happened, you said that you believe that the biggest factor that led to this was that you — because you had already failed and you weren’t afraid to fail again, and I think that — what do you mean by that?

Jon Crawford: Well, kind of like what I just said. Like, I knew what it felt like to get rejected. And so, I wasn’t afraid of rejection. But a lot of —

Tim Jahn: And that made you stronger?

Jon Crawford: Yeah. A lot of people that I’ve talked to, you know, they — okay, it’s not just, it’s not just fail, it’s not just rejection, it’s also having to do it the hard way. Like, what’s nice is when you come up with an idea, you send it in to somebody like Y Combinator, they like it, then they invite you to come and you work on it for three months, and then they show you off at demo day, and then someone invests in your company. Like, that’s really nice. Like, that’s the easiest way to do that. While, what’s really freaking hard is to do it all yourself and to even, like, lose your team in the midst of it and, you know, live in an Extended Stay Hotel in South San Francisco next to the airport for a month, and blah, blah, blah, blah.

So, I did all that the hard way, and I did the — I kind of, you know, I had to do the investor thing the hard way, you know? I had to, I had to, you know, talk to 75 people all at once, like be creating 75 different relationships all at once because like, six were gonna work, and instead of, like, being hand-delivered to the guy that’s gonna invest, I just had to, like, do all the freaking. I mean, this is what most people that raise money, outside of an incubator, do, is, you just have to, like, hustle by, like, talking to a thousand people at once, and six of them are gonna invest.

And, you know, but the problem is, I’ve seen a lot of, a lot of entrepreneurs that may not know a lot about the (inaudible) or whatever. They spend some time, they’re like, “Oh yeah, I’ll just talk to Dave McClure.” Dave McClure’s a great guy who makes a lot of great investments, but there are other investors. And so, like, learning who the people are and doing all the legwork and the homework and the hustle and—it takes to educate yourself about who the heck all these investors are. You know, I’d already had to kind of do that, so I think that was one thing that, just learning how to do things the hard way, and being willing to go through all the extra steps that you have to go through to do it the hard way, and kind of the, like, not being afraid of rejection.

Check out all our interviews with entrepreneurs!

Join our newsletter and get everything Unpluggd!