How Yishi Survived (Again) — A Brief Fundraising Story

As an entrepreneur, I often get asked what challenges I’m faced with, and sometimes, if my business has almost died before. There have always been challenges since I launched my business two years ago – the pandemic, supply chain disruptions, ingredient shortages due to a rare drought and an ongoing war, an economy that flipped overnight, a cold funding environment, and now bank run fears. Being a small business owner has certainly not been easy, but those challenges never scared me, and I never thought my business could die, until August last year.  

In August, I started our second round of fundraising as planned, to raise $1.5M to extend our runway. Knowing that the private capital market was tightening, I felt some stress but remained optimistic because I thought that early-stage investment might remain relatively resilient and that the good relationships I had with existing and interested investors would make this round quick and easy.  

Oh, how naive I was.

This round could not have been slower and more difficult: the passionate interest from investors turn to “a conservative strategy”, the cross-sector investors went back to stick with their own sectors (mostly tech), and the investors that committed $1.5M and turn cold feet last minute before signing the document. It was obvious—everyone was nervous about a confusing future or even faced financial challenges. I was able to raise a fraction of the initial goal over the course of three months, during incredibly busy daily nitty-gritty and exhausting travels to trade shows and conferences, and the fundraising difficulty was only getting stronger as time went on.

Mid-November, I was under deep stress. As the only person responsible for fundraising, it was my job to get new capital to cover our high cash burn (even though it was reducing) of over $100K per month. We would run out of money soon.

I felt stuck. I felt hopeless to close the funding deficit before the holiday season (investment is usually quiet from November to January) and our cash reserve will be depleted by January. What’s more, I hated the idea of telling my team that I couldn’t raise money. We had a team of ten employees who were passionate and loyal. We see each other as family and the company is the baby of all of us. How can I fail their trust?

After depleting every investor lead, I put together all my courage and made a difficult, but I believed the right decision to aggressively cut costs. With the support of my co-founder and investors, I first talked to my team, explaining our business performance (even though we were growing, some of the challenges we went through did financial damage), fundraising progress, and finally, the decision to lay off employees. I had one-on-one meetings with every team member. There were tears, confusion, and deep frustration; but they were all understanding and express trust in me and the remaining team to continue our mission. After laying off half of the team in December, we further cut SG&A expenses such as our downtown office, some nice-to-have software tools, and any non-core marketing activities.

These changes saved us. We were able to keep the light on, keep shipping products to retailers, and we even launched new products and made strategic improvements to our products and supply chain. Most amazingly, we are on the path to profitability and our top line continues to grow at an accelerating pace. It was only six months ago when we were on the verge of shutting down the business. Well, we survived another challenge, and I will be ready for the next one!

This morning, I was reading about all the SVB-related fiascos and saw a closing comment from a WSJ journalist: no one saw it coming. That’s not an answer or a solution; always being prepared and acting quickly is. Never feel comfortable, and maybe you will never be surprised.