Money Rehab with Nicole Lapin - This Founder Was Rejected By VC Funds— and She's Thankful

Episode Date: April 7, 2023

When Daniella Pierson, at 23, pitched her newsletter The Newsette for VC funding she was "laughed out of the room." Cut to the present: she still owns nearly 100% of the company— which, by the way, is currently valued at over $200 million. Daniella joins Nicole to talk about how she scaled her company, her gutsy pitch to Diane von Fürstenberg and lessons from sales "survival mode." Net-net, remember: the next time you're disappointed with an outcome at work, hang in there: that disappointment might just turn into nine figures. Check out The Newsette here: https://thenewsette.com/

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Find a co-host at Airbnb.com slash host. I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab. The startup world is changing. If you're up to date on your money rehab, this is not breaking news. If you're not cut up, let me fill you in.

The crash of Silicon Valley Bank has sent ripples through the VC and startup economies. Silicon Valley Bank was the bank of choice for many startup businesses. So at first, it was a major concern that SVB's crash would take the startup world with it. However, the government did swoop in to help businesses who are banking with SVB, and then the scraps of SVB were purchased by First Citizens Bank. So we're no longer really worrying about a complete upending of the startup scene like we kind of were last month. But some people are speculating that it will be more difficult for businesses to get investor funding because the hullabaloo in the banking world has made everyone more conservative and hold their budgets a little

tighter. To all my fellow founders out there who are rolling off the lint from their best suits and ready to start pitching VC firms on Sand Hill Road or wherever, this door closing might feel extremely stressful. I know that feeling all too well, but it really doesn't have to feel that way. And that brings me to my guest today, Daniela Pearson. Daniela is the founder of the female focused newsletter company, The Newsette, and Forbes reports that she's one of the wealthiest women of color in the United States and the youngest. Not to give too much away, but when she did try to fundraise, she, well, didn't raise any funds. But now she is glad that's part of her story. So I talked to her about that story from the beginning to the end. Here it is. Daniela Pearson, welcome to Money Rehab.

Hi, thank you so much, Nicole. I'm such a fan of everything that you've done. I think I actually heard you speak at DVF's studio once. DVF is my mentor and fairy godmother. And so very excited to be on your show and thank you for having me. Well, it's a mutual admiration society and DVF is an amazing fairy godmother to have. Yeah, yeah. How did that happen? It was pretty crazy. So I started my first company, The Newsette, which started out as just a newsletter when I was 19 as a sophomore in college. And so when I finally moved to New York, you know, I was able to make money and profit the very first month after graduation, use that to move to New York and hire a few interns. So I was in New York for

about a year, probably. And then DVF's team actually reached out. And they said that they were readers and DVF wanted to meet me. And I went into her office. And I essentially on the spot pitched her an idea. And she said, Okay, I'll think about it. The next day, she sent me an email. And all it said was, I love you. And ever since she has just completely changed my life, as well as Sandra Campos from DVF, who was the former CEO, a lot of incredible people have opened doors or given me opportunities and changed my life. So she's definitely one of them. Oh my God. And what was the idea that you pitched her? It was a commerce and content strategy. And we partnered for something called the Weekly Wrap. And it was an email newsletter to their database to add value as well as showcase their new design.

And then also build an ecosystem and database for them that was woman in charge. And then we actually had a printed version as well that was around the world at the stores. That's awesome. I actually remember getting those too. I've always been Diane von Furstenberg, if anyone doesn't know what DPF stands for, fan. I remember the very first wrap dress I could afford. I was so proud of myself. And I am a major fan. So awesome partnership. Let's go back to New Zet for a second. You said you started when you were a sophomore in college. Did you think of it as a passion project at the time? Or was your goal to make money from day one? You said you used some of that money to move to New York. Yeah. It goes a little beyond that. Back in time,

It goes a little beyond that back in time. I am an identical twin. My twin sister is a genius. She really takes after my mother, an immigrant from Colombia who literally had to win the one scholarship at her school every single year until she graduated because she didn't have money for that school. And so they both are incredibly good at school. I am more like my dad, where I, you know, I'm more street savvy, and I just don't really buy into school. And even from a young age, you know, in elementary school, middle school, high school, you learn about the Earth's crust, like 13 times and an amoeba and like all these different things, like how to measure a triangle, and I knew 100% I will never need to measure a triangle. And I knew 100% I will never need to measure a triangle in my entire professional career. I can almost bet you and count on it. What about a hexagon? No? Yeah, no. And if it were the case that I were doing that, somebody like made a mistake hiring me because I was not a mathematician by any means. And so I just didn't really buy into it. And

I was like a B and C student while my sister was, you know, top of the class, all AP classes, etc. And I realized, okay, if I don't get my shit together, I'm going to be stuck in Jacksonville, Florida for my entire life. And that's not what I wanted. I wanted to move to a big city. I wanted to do big things. And so I got into Boston University. I only applied to two schools. So as a sophomore, I was like, okay, I have four years or I guess three years at that point as a sophomore where my only job was to just not get kicked out of school and find myself, have friends, whatever. I am never going to have this lack of responsibility in my entire life moving forward.

So why not use every second that I'm not in the classroom or studying, building something so that when I graduate, I can hire myself because I knew nobody was going to hire me. So I had to hire myself. So that was really the reason why I started my company. I knew I had to make money reason why I started my company. I knew I had to make money eventually, but I was so lucky that since I was in a dorm and unlike the cafeteria plan, whatever, I didn't have to make money immediately. So I had the tremendous opportunity to use the first two and a half years of the newsette to just focus on growing a community instead of like 50 50 splitting the time between the content and the community and advertisers so that alone was really valuable because as you know many media companies who try to please advertisers more than readers

etc just like a losing game and the fact that i got to spend two and a half years just focusing on getting people to read the news at making it as good as it could possibly be. And then launching big, literally the day I graduated. It was a huge gift. That is a huge gift. What was that time like focusing on your readership? What did you learn? How did you figure out how to develop community? Well, I knew absolutely nothing. I was not a writer by any means. I didn't even know who I was as a person. I truly at that point felt like I was a chameleon. I was just whoever anybody wanted me to be in the worst way. So I look at what I love to do. And I always loved reading magazines. And my dream would have been to be an intern at a magazine. But I realized that in order to do. And I always loved reading magazines. And my dream would have been to be an intern at a

magazine. But I realized that in order to do that, you had to have really great grades. So I knew that was not going to be my path. So I thought, what if I take the feeling of inspiration and motivation and happiness and delight that I feel when I'm going through a magazine and checking my 50 favorite websites every morning. And I put it into a five minute read that's almost like a gift in someone's inbox. And the reason why it's a newsletter is because I liked the idea of being delivered to you. At that time, a lot of bloggers were big. And so you didn't have to go on a website or go find this content. It was coming to you as your personal gift. And the content, I just focused on what inspired me and what I thought would inspire other people.

And it's really funny. The sections of the newsletter and the kind of content that we do still 8 years later is very similar to what the very first 10 issues had. So the day I had the idea, the next day I sent out the first issue to eight people who felt that for me when I posted about it on Facebook and signed up. I'm pretty sure half of them were my family. And then basically every single day since that day for five years, every weekday, I wrote the news at 5am. I would run to my classes, do my classes, go to the library in between, email people to feature because I was only creating the content and doing the social media that I had no expertise in and doing the marketing and getting new subscribers and running

the ambassador program. But I also had to reach out to people to feature and interview them. And so I was literally a one woman show. So whenever I say we, for the first, you know, three years, it was me, myself and I. Yeah, totally. And then I wrote the newsletter every single day for five years until we finally, you know, gave up the reins. And now we have incredible editors who, you know, write every day. And I'm just so grateful that it's been elevated. But it was really cool to be able to practice something

every single day for five years and see how much better you could actually get at it because I really started at negative talent. So we is now a legit we. Yes, we is about 40 people right now. But it's funny because we never got fundraising and it was not a choice. A lot of people were like,

so why did you choose not to fundraise? And it's like, oh, I didn't choose. I was 23 years old in New York City and I was laughed out of literally every VC office. And so I realized I was spending more time trying to get money from five people to get $1.5 million instead of spending that time trying to get money from five people to get $1.5 million instead of spending that time trying to get money from 100 businesses who would give us $1.5 million in sales.

And so I don't know if it's because I was a woman because I'm Latina and unfortunately, 0.4% women of color get funding, less than 2% of women get funding. It's so ridiculous. The people who get money and don't. I also have ADHD, OCD, depression. I just have everything going against me. And in those moments where I didn't get funding, I actually feel so grateful now. Then I wanted to just completely just give up and wanted to sink into a hole because I thought this is over. These professionals are telling me that this is not a business, but I literally had no other option. And so that is literally what forced me to then have to make ad sales for the next month. It was survival mode.

I had to survive. There was no cushion. So now eight years later, we sold. And I say we because I gave a small piece of the company to my mother, who was basically my only supporter for a very long time. She and I sold 1.25% of the company at a $200 million valuation. So now it's valued at $200 million. And we are profitable. And, you know, we went from a million dollars in 2019, seven million dollars to 2020, and then 40 million dollars in revenue in 2021. And when we did 40 million, we only had 15 people on the team. So why originally were you even interested in getting VC funding? Like, did you see it on Shark Tank? Did you think that that's just the way you're supposed to

do it? Yeah. So in the media, even now, but even more so five years ago, if you raised money, it was like you were a god on a pedestal. And so many people measure people's success by, oh, they raised this much, they raised this much. When in reality, people just assume that it's not possible. But going back to when I was 19 and then 22 and seeing all these people getting fundraising, it was literally like you were not taken seriously by any other entrepreneur or any investor or even lawyer if you didn't raise a ton of money. People should be praised for raising money. It's very hard. But why are we treating them better than people who are actually using sweat equity to build businesses? Even though both are incredible feats, I feel like a lot of people, including myself,

were discouraged that if they weren't able to raise money, that meant they were not going to be successful because every single person you saw that was a success story that had a big exit that was featured everywhere, they all had raised money. So I'm not saying that raising money is bad at all. I'm just saying that I think people need to realize that if you can't raise money, do not count yourself out of being successful just because 20 VCs told you no. Again, someone is going to tell you yes. And maybe you just need to prove to them with, you know, sweat equity, and maybe partnering with other people that can help you without having to have a big investment that your idea is real. But you shouldn't take that as a, you know, you are not going to be successful, because that's the way I took it.

Totally. And, you know, you're first generation American, so am I. I rejected a lot of these sort of basic ideas around money, like, don't take on debt. If you don't have money, don't buy something. And so I think later in life, I realized very similar conclusions that, you know, taking money is maybe not the end all be all being profitable, like coming back to basics is much more impressive. So kudos to that. Thank you for sharing. And thank you for opening up about so many of your struggles. After that rejection, it sounds like you reframed it to redirection. I'm sure that wasn't immediate, though. Like how long were you in this transition period

where it started actually working for you to be reinvesting? It took me a little over five years. And that is, you know, a long time if you think about companies that go public within, you know, four years and, you know, whatever. But it took much longer for me because I had to make mistakes. And luckily, I couldn't make a million dollar mistakes because I did not have that kind of capital. I was literally like, we have to sell and then we have to use that money to support the next month and the next month. And so that put me in almost like survival mode. And so obviously, I had some of my most depressing states and most mentally unstable states in college. And now I'm actually going to be the commencement speaker for the business school this year, which I'm really excited about.

Wow. And then being rejected by VCs and realizing I only had money for one more month. All of those times, I could have easily given up. But I was like, I have to make this work. I built this, made this bed. I have to easily given up. But I was like, I have to make this work. I built this, made this bed. I have to lie in it. And so finally, when we felt like we had resources and we were becoming a really big business

was when we started getting RFP'd. The very first one was Ulta. And I'll never forget this. And I always call out Ulta. I had two people on my team, myself and someone else. And we got an $100,000 RFP and we won it. And I was like, that could pay literally our entire year of expenses at that point. Then all of a sudden, other big Fortune 500 companies wanted to work with us. That was a point where there was a lot of money coming in. And we felt that we could hire more people

and make more risks because we had money in the bank, which was very foreign to me because I always was thinking worst case scenario. What if we have nothing at the end of the month? Then what do we have to sell? And so being able to have actual money in the bank and it grow to the point where it's like A figures was crazy to me just because

of how hard it was to get every single sale and how hard it still is to get every single sale and not just get, you know, wired millions of dollars by an investor. Hold on to your wallets. Money Rehab will be right back. I love hosting on Airbnb. It's a great way to bring in some extra cash. But I totally get it that it might sound overwhelming to start, or even too complicated, if, say, you want to put your summer home in Maine on Airbnb, but you live full-time in San Francisco and you can't go to Maine every time you need to change sheets for your guests or something like that. If thoughts like these have been holding you back, I have great news for you.

Airbnb has launched a co-host network, which is a network of high quality local co-hosts with Airbnb experience that can take care of your home and your guests. Co-hosts can do what you don't have time for, like managing your reservations, messaging your guests, giving support at the property, or even create your listing for you. I always want to line up a reservation for my house when I'm traveling for work, but sometimes I just don't get around to it because getting ready to travel always feels like a scramble, so I don't end up making time to make my house look guest-friendly. I guess that's the best way to put it. But I'm matching with a co-host, so I can still make that extra

cash while also making it easy on myself. Find a co-host at Airbnb.com slash host. And now for some more money rehab. As you started seeing your bank account grow, did you feel like you needed money rehab? Or how did you learn financial literacy when you started taking in the money? Yeah, so I think first I was like incredibly frugal because it was actually kind of crazy. It's like the first time I paid myself a dividend. And then after taxes, you see and you're like, oh my God, what? That's what's left? I would literally watch the number drop. It was almost like people say, keep your cash in your wallet so that you can see how much you're spending. I was super afraid. I had points where I was like, Oh, wow, like, I can buy this. And I

did. And then sometimes I regretted, you know, those things and thought, you know, why did it make me happy, etc. And so now I think I'm more to the point of, I know, what makes my life better. And I like helping people, my family, you know, people who people who need support. So I think I'm at a phase now where I have my budget and I know what my expenses are. But I had to learn the hard way. But luckily, I started off being incredibly cheap because I had to be so cheap with the New Zets money because we had no money. So I almost treated my money when I finally got it because before it was never my money, even though technically it was because I owned the business, I never saw it as my money. So when I finally got a distribution, I kept the same

mentality. Sometimes I'll splurge and I had a phase where I wanted to buy things that traditionally men would buy their wives. And literally had so many people say like, oh, you want those earrings? Where's your husband? And me literally put down the credit card and be like, I'm my own husband. Yeah, girl. Hopefully society is changing where you don't look at somebody, a woman in first class and think, oh, she must have a rich dad or a rich husband. But I think those moments didn't bring me as much happiness as I thought they would. And so now I just try to live my life as consciously as I can while spending less money than I think I was spending before.

Then you go through it. I went through the same thing. And then, you know, you recalibrate. Danielle, I end my episodes with asking for a tip listeners can take straight to the bank. I'm sure you have so many, but what is one that's top of mind right now? A piece of advice for young entrepreneurs. I think right now the, I guess, financing economy, the startup economy is really in a bad place. People are incredibly, incredibly tight with their cash,

especially institutions because of what's been happening with the banking system, etc. So I would say level set on what your goals are for the next few years and raise amount of capital that feels realistic to you. And don't be afraid to maybe give up more than you want to for a good partner, rather than, you know, if someone offers you more money for less equity, and they're not a good partner, because you really want somebody who's going to continue to invest in your business. So I think grow lean and grow strong, but just realize that the next year it's going to be incredibly hard to raise money. And so if I were an entrepreneur right now starting my first business, I would maybe like friends and family, more like angel investors, et cetera. People like

me, people who write even bigger checks than me, because we're looking for a place to put our money that's not like a bank right now. Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin. Money Rehab's executive producer is Morgan Lavoie. Our researcher is Emily Holmes. Do you need some money rehab? And let's be honest, we all do. So email us your money questions, moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me. And follow us on Instagram at moneynews and TikTok at moneynewsnetwork for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself,

which is the most important investment you can make.