How Sashee Chandran raised $1.9 million from top tier VCs without connections in Silicon Valley

LinkedInTwitterLinkedInCopy Link
Chandran shares the step-by-step process she took to found her business, bootstrap it, and eventually secure venture capital.
Facebook Rho Business BankingTwitter Rho Business BankingLinkedIn Rho Business BankingCopy Link
RHO MARKET FIT

In late 2017, Tea Drops founder and CEO Sashee Chandran hit a breaking point: “If I don’t hire someone to relieve me of operations, I am going to run myself ragged,” she remembers thinking.

She was two years into running her California based-business, Tea Drops, which sells high quality tea leaves molded into small shapes. When stirred into hot water, the “drops” dissolve to offer the rich, aromatic flavor of loose leaf tea, without the need for a kettle or strainer. Grocery store tea bags were never good enough for Chandran — who grew up with tea brewed by her Chinese mother and Sri Lankan father — so she sought to recreate an authentic loose leaf tea experience, paired with modern convenience.

Today, Tea Drops has taken off: Its products are sold in over 3,000 retailers nationwide, spanning grocery stores like Whole Foods and luxury brands like Neiman Marcus. It also brings in well over $1 million in revenue annually — a milestone only 4.2% of all women-owned firms achieve, according to the National Association of Women Business Owners. And celebrities are giving rave reviews: Chrissy Teigen tweeted on October 22, “I can’t stop telling everyone I interact with about this tea … If you come to my house, you are hearing about this tea.”

But in 2017, growing pains were mounting. Chandran, who bootstrapped the business and had only taken a small amount of capital from an accelerator program, was scrambling to run Tea Drops on her own. Sourcing ingredients, scaling production, investing in packaging and marketing, negotiating contracts with retailers, and working with vendors — all at the same time — was adding up.

“When you’re working that many hours a day, you just can’t have any form of self care,” Chandran tells MarketFit @ Rho, the official blog of Rho Business Banking. “You just can’t by definition. You’re not caring for yourself. I knew that was going to be a huge detriment in the long run.”

She needed to hire a team. But to do that, she would need to take on real investment. “That’s when I came to the full realization: I needed to raise money,” she says.

Bootstrapping the early years

Chandran first began testing tea blends in her kitchen in 2014, while working full time in marketing at eBay. By 2015, she wanted to explore it as a business.

After testing the product at local farmers markets, Chandran was convinced she had something great. She quit her job and dove into Tea Drops full time. The first step was scaling production, so Chandran went to her local bank to ask for a small business loan.

“They told me, ‘Well, you know, you don’t have enough history of doing business,’” she remembers. “I only had maybe $30,000 in sales.”

So instead, she opted to take out a home equity line of credit on the home she’d recently purchased.

“I also pulled together my savings,” she says. “Between the two, I basically had between $125,00 to $150,000 to really start this business.”

“My logic was that I could go to business school — and if you go to private business school you might be spending the same amount — or I could start this business and use this as my MBA education. That’s what I decided to do.”

She began traveling to trade shows and getting the product in the hands of buyers, drawing on her cash to fulfill orders.

“I would have to pay $5,000 for packing here, and a couple thousand for ingredients, and it was definitely a stressful time,” she says. “By the end of 2015 and going into 2016, I realized that this would be a very challenging business to build brick by brick.”

She started researching how fundraising start-ups worked, with a copy of “Venture Deals” by Brad Feld and Jason Mendelson in hand.

“I spent a lot of time asking myself, ‘Do I really need investment? And if I do, do I take on other people’s money? And what does that mean for me, personally? Because I have never operated that way. Being personally responsible to [investors] carried a lot of weight,” she says. “And in the meantime, you’re still trying to grow your business. I knew that if I wasn’t producing enough revenue I wouldn’t be able to garner the interest of an angel investor let alone a VC.”

“It took me about a year to feel comfortable with the notion that, ‘Hey I actually know what I’m doing. I know what I want to build. I know what I would do with the money,’” Chandran says.

Getting a boost from an accelerator

That preparation paid off in early 2017, when Chandran got her foot in the door with venture capital.

“The way I got our first small round of investment was I had a mentor who introduced me to AccelFoods,” she says, which is a New-York based, women owned venture capital firm. “At that time they had more of an accelerator model, and they would take on small emerging brands that they thought were promising.”

“So I talked to AccelFoods, we had many conversations, and they decided that they would place me into this accelerator program,” she says. “That was my first taste of like, okay: What does this VC world entail? How does it all work? I got familiar with what venture capital was, and how VCs operate and think.”

The accelerator provided a small amount of capital in exchange for equity, but as Chandran progressed through 2017, the need to raise a proper seed round became evident. “The point that pushed me to really raise was realizing that I needed to hire all star people,” she says.

Finding the first investors

“I wasn’t born with a network of people who are just angel investors or venture capitalists,” Chandran says with a laugh. “I had some investor meetings made through introductions, and they all just went pretty poorly. I didn’t know how to position my business correctly. I didn’t know what the language was that they were speaking when they said, ‘How much is your pre-money valuation?’ I didn’t understand what they were saying. So a lot of those meetings were just educational.”

She began networking with other founders in LA, and soon found Women Founders Network, which hosts an annual pitch competition. Chandran decided to enter Tea Drops as a way to get some practice with her pitch.

“I ended up making the top 10,” she remembers. “The top 10 were given pitch coaches, and I was lucky enough to get an amazing pitch coach named Lisa Elia. She looked at my pitch deck, and not only did she help me with my delivery, but she really helped crystalize what information is most pertinent to an investor. By the time she was done with me, I was very clear on what my business was, what my value proposition was, what the market was, and how I would scale the business.”

Chandran won the competition. But that wasn’t all. Jesse Draper, the founding partner of Halogen Ventures, was a judge on the panel. “She said, ‘When you’re ready, I’m interested in investing,’” Chandran recalls. “I had a few other women come up to me that night and say the same kind of thing.”

Chandran realized these competitions could help her stitch together enough support for a seed round.

“I just started entering more and more pitch competitions,” she says. “I thought, ‘You know, for someone who doesn’t have a ton of networks independently this is a great way to meet people. If nothing else, people will hear about your business, and there might be investors in the room, and it helps me practice the really nitty-gritty elements of my pitch.’”

“I really spent a lot of time just pitching my heart out,” she adds.

Chandran later took home first prize — and $100,000 — in a pitch competition held by Tory Burch, part of the Tory Burch Foundation’s annual Fellow’s Program. The panel of judges included Burch, Jesse Draper at Halogen Ventures, and Tony Tjan, CEO of Cue Ball Capital.

Her networking strategy and diligent pitching paid off. Tea Drops closed a $1.9 million seed round led by AccelFoods, with participation from Halogen Ventures and Cue Ball Capital in June of 2018.

“This whole process took a lot longer than I anticipated,” Chandran reflects. “It took pitching over and over, you know, 70 or 80 people. I lost count at some point.”

That persistence has led to great success: Power women like Michelle Obama and Chrissy Teigen have commented on the brand, and it was even featured in The Oprah Magazine.

Chandran says keeping an open mind is her №1 piece of advice for fundraising.

“I think the biggest thing you can do as a founder is be receptive to feedback. Not to compromise on who you are, but to be receptive. Ask yourself, ‘What are they telling me? If they’re telling me no, how can I turn that into a yes? And also realizing that a no isn’t a no for forever. I’ve had a lot of investors who’ve come around.”

“Maybe it was a no in the beginning, but then as they see how committed I am to it, their no becomes a yes.”

Talk to Rho

Rho helps drive business growth by providing access to corporate cards, banking, AP and more all on a single fee-free platform. To learn more about how Rho can boost your business get in touch here.