Shmoody: Calm for College Students

Josh: Welcome to The Pitch, where startup founders raise millions and listeners can invest. I’m Josh Muccio.

Lisa: And I’m Lisa Muccio. On the show today we have Nate with Shmoody. He’s raising 3 million dollars.

Josh: Shmoody is a wellness app for when you're feeling schmoody.

Lisa: I feel shmoody sometimes.

Josh: There are a ton of mental health apps out there. Calm, Finch, Headspace, to name a few. But Schmoody is different.

Lisa: Nate and his co-founder built Schmoody for themselves. It's not a quiet meditation app or an overly sincere journal. It's really something they actually wanted to use when they were feeling schmoody.

Josh: What they're building obviously resonates with people 'cause they just hit 1.5 million in annual recurring revenue on a consumer product.

Lisa: W- which is crazy.

Josh: But that's not what Nate showed up in The Pitch Room today pitching. No, no. Schmoody is pivoting to edtech 'cause universities also wanted to use this product for their students.

Lisa: It's now being used to help retain students by keeping them from crashing out and dropping out.

Josh: He does have some early momentum on the edtech product, but will there be enough evidence for VCs to back his pivot?

The Pitch for Shmoody is coming up after this.

But first! We’re hosting two events this November. A live show in New York TOMORROW if you’re listening the day we publish, and then our Big Pitch Event to record season 17 in San Francisco next week. Come join us at either event, you can learn more at pitch.show/events.

BREAK

Welcome back to the pitch for Shmoody. Let’s meet the investors.

Charles Hudson with Precursor Ventures

We have 500 companies, so, you pick it, we have it

Ellie Bahrmasel with Peranaut

Entrepreneurship is the dance between hubris and humility

Elizabeth Galbut with SoGal Ventures

Not all exits are created the same

And Jeff Cantalupo with Listen Ventures

Do you want this to be a premium brand?

Josh: Say the name of the company and then clap it

Shmoody [clap]

Josh: Nailed it

Nate: Sup y’all

Charles: Hello

Nate: Hi there

Charles: How are you

Nate: I’m Nate.

Ellie: Hey Nate, Ellie

Nate: Ellie, nice to meet you

Ellie: Nice to meet you

Elizabeth: Nice to meet you

Charles: Hey, Charles, nice to meet you

Jeff: Jeff. How are you?

Nate: What's up, Jeff?

Jeff: Good to meet you.

Nate: So I'm Nate Thomas. I'm the co-founder and CEO of Shmoody, and we're building the engagement layer for institutional wellness. We know more about how to be well than any generation in history, but we're doing worse than ever. So a little story. I'm 17 years old. I'm full of promise. I'm an academic rock star at the time. I'm an athlete. I go off to college, and I proceed to squander it all. So I have anxiety, I have alcohol issues. I don't know how to ask for help, and it's not until years later that I hit rock bottom. I find the help that I need. I transform my life, and I end up working at Goldman Sachs, helping the rich get richer.

Charles: That’s what they do

Nate: And wellbeing-

Elizabeth: Recipe for mental health.

Nate: That's exactly right. I learned everything I know from there. And, wellbeing remains an important part of my life, and being of service to others becomes my mission. So while I'm at Goldman, I meet my co-founder, Mike, at a 12-step meeting in New York City. And Mike has built a wellbeing app that's fun and irreverent, exactly the thing we would've wanted when we were struggling the most. So we built this app that we loved, and other people loved it, too, and we grew like crazy. One million users, 4.8 stars. Last year we did 1.5 million in consumer revenue. Just last month, Apple's app of the day. But a totally unexpected market comes to us, and that's universities, and that's the exact place where I was when I lost my way. So they come to us saying, "Hey, we have resources. What we don't have is engagement." So we now have 10 university partners, including Texas Tech, Duke, three HBCUs, and 100% renewal rate. And we're seeing 10 times higher engagement with students. And higher engagement means that more students thrive and less students drop out of school. So that results in direct ROI to the institution. And with higher engagement, we're unlocking data insights that transform how universities respond to student needs. With our new SMS product that we just launched, we now reach 100% of enrolled students with no download required, becoming the engagement layer for the entire campus. So we're raising $3 million to help every human thrive.

Charles: How did you come up with the name?

Nate: The name, Shmoody, 'cause sometimes you're feeling kinda Shmoody. Um, Mike, my co-founder who's dealt with depression He has a very good friend, one day he calls her up and he says, "How are you doing today?" And she goes, "I'm having a pretty Shmoody-pants day." And he said, "I don't know what that means, but I know exactly what that means." And the whole point is to be fun and irreverent. That's when people will actually use the technology

Elizabeth: So walk me through, like, what that means in practice, and how it shows up in your product.

Nate: Absolutely. We didn't know the term human-centered design when we started. We just wanted to build something that we would use. We like meditation apps. We, you know, we're familiar with some meditation apps like Calm. But we wanted something that was broader, that would help us across the board to take action. That's how things change. So how do we make it engaging? The whole tone and approach of the technology is built with the end user in mind, and what does it feel like to be that person who feels like they're completely alone, who feels like there is no solution and they're always gonna feel like this. It is amazing in technology how much of that is lost and doesn't connect with what it feels like to be that person.

Elizabeth: So who developed, like, all this content? How'd you guys test it?

Nate: Mm-hmm.

Elizabeth: How'd you know, like, this is the right tone, voice?

Nate: We tested it on ourselves and our friends. Mike built it. All of it is based on clinical principles, right? So DBT, CBT share a common principle which is behavioral activation, which is when you take action, it changes the way that you feel. So mindfulness, social connection, physical activity, joyful actions, like positive psychology. But the tone, we worked with a humor writer early on, who's actually also in recovery. We just tested it with users, and we went from 100 users to 100,000 downloads in nine months.

Elizabeth: is that just organic downloads, or what was driving this very rapid growth?

Nate: Yeah. We actually read this book, Traction by Gabriel Weinberg.

Charles: Oh, yeah.

Nate: Highly recommend.

Charles: I know him well.

Nate: And there are 19 possible traction channels, and you can't test them all, but you better believe you should test four or five, including several you don't think will work. And early on, I tried something that seemed out of the box, which was funny memes. I found some meme influencers.

Elizabeth: Mm-hmm.

Nate: And I said, "Hey, you do funny memes about depression, about social anxiety, about being an introvert. Can you do some funny memes about Shmoody?" Later I would create those myself. I was the meme lord in chief for a considerable amount of time, and in that time between midnight and 1:00 AM I was like, "I need to reclaim that, Later, we found ways to grow with Meta ads on the consumer side. But at this stage, the focus for us is all about universities, because they came to us. And there's this huge, huge opportunity where we see a clear path to really scale.

Elizabeth: And what do those contracts look like? How much are universities paying per student?

Nate: So our first contract was with Texas Tech for $100,000, and we said- We're gonna make this real easy. Everyone gets access to the full premium version of Shmoody. After a year, we said, "All right. We're gonna dive in really deep with you on this data." You have thousands of students using the app. We had hundreds of students who were what we would call highly vulnerable or at risk. These were students that were coming in, and they were reporting moods like hopeless, miserable. And those students were becoming the power users of the app. And it doesn't take a rocket scientist to draw the line to those are the students that are likely to drop out, and guess what? they're losing millions of dollars to retention.

So when they said, "Oh, it's $100,000 a year contract, and you're helping not just thousands of students that are out there using it, but hundreds who are really at risk of dropping out," they said, "This is a no-brainer." They renewed for five years. They paid up front and built us into their, what's called a quality enhancement program, which is for their accreditation as a university. Now, since then, we've partnered with some smaller schools too, because we are a mission-based company, so we're not gonna turn away. We have a couple of small HBCUs we work with, and they're amazing. We're not charging them $100,000 a year. So that brings down our ACV a bit to about $35,000 right now, but we have a direct path to take that up to 100,000

Elizabeth: Who's doing your selling for that? Is it you?

Nate: It's me, and then I do have a sales rep. She's amazing. and we're doing a great job. I mean, we've closed schools like Duke for three years, Texas Southern for four years, Texas Tech renewed for five years, but the main reason why we're raising right now, we're raising a $3 million round, is to scale sales.

Elizabeth: Jeff, you were an early investor in Calm, right?

Jeff: Yeah.

Elizabeth: How were they thinking about it this early on versus how he's thinking about it?

Jeff: I mean, they, they were maniacally focused on the consumer product until they were 100 million-plus in revenue before they ever diversified into B2B, but they did diversify into B2B largely because they had people coming to them. So I think, just happening to him a little bit earlier in the curve. The engagement issue is, I think, is very real for these universities, and I think that sounds like your product's solving it. What I'm really curious about is what are the engagement metrics that matter with the student population? it sounds like the real ROI for them is the vulnerable. And so while you can be for every student, it's, might not be how many are on it. It's actually about how many are deeply engaged so what are the, how do you measure that?

Nate: That's exactly right. So University of Louisiana renewed with us, and they just looked at, "Oh, wow, you have, 15% engagement or whatever. That's literally five times higher than we're used to. Renewed." And we said, "Cool, but let's dive in here a little bit more because what we really wanna show with your highly vulnerable users is that they're using the app a lot." Those users are 27 times, on average, right? Which is actually far, far more than what they would ever be used to. The vast majority of apps in our space are used one time.

Jeff: Mm-hmm.

Nate: And so when we can show them the resources that were accessed, so how many times are the at-risk students using it?

Jeff: Yeah.

Nate: That's a big deal. What are the resources that we're connecting them to? And then what we just unlocked with our SMS product, so we launched this at the very beginning of April, Right now, we have 96% opt in, and we already have 45% engagement across the platform.

Jeff: Hm.

Nate: This is in in 23 days.

Elizabeth: I'm curious kind of when you're looking at this initial data from universities, From the users that are using the app, what percentage then falls into that vulnerable category?

Nate: 15 to 20%.

Elizabeth: And how are universities thinking of this? I know when I went to school, like, a lot of their counselors are pretty, like, strapped, and it may be, you can't even get in to see one for four months. Which is obviously not when somebody's highly vulnerable the answer they wanna hear. How are they thinking about that in your product?

Nate: Yeah once we explain our ability to reach those students that they would never see, or that they don't have time to see, that this is huge. Because they can get help to those students. And again, it's not just what's in the Shmoody app, it's all of the other resources that are available. Because they're spending millions of dollars on these resources. Many of which are completely unused.

Charles: What were they doing to distribute these resources before?

Nate: honestly, a lot of it's websites.

Elizabeth: Email.

Nate: It's like, and if you... the students sometimes don't even wanna go to the hub in the app. You better believe, Charles-

Charles: Yeah, yeah, yeah

Nate: they do not want to go-

Charles: I believe you

Nate: to a website that looks like it was designed in 2005.

Charles: 'Cause it was.

Nate: 'Cause it was.

Ellie: All right. I'm gonna get personal with you for just a minute, Nate. I was on the cap table of a company that was doing something similar. They've since sunset. but, mental health is really personal for me. My dad was my person. He's the reason I became an entrepreneur and investor, and he was agoraphobic. He ran his businesses from home. And so when I think about all of the ways that he was limited because he didn't have resources to help him navigate his mental health journey, this is so deeply personal. And today would've been his 83rd birthday, so getting to be here with you right now in this moment feels like a little wink and a nod from the universe. But this is deeply personal for so many of us, right?

And when I think about, First, the people that we're not reaching, right? So what's the PLG motion within the product itself? how is the product doing the lift to get, if I'm feeling schmoody, how do we give the schmoody bat signal to each other as peers? And then I wanna know about your reten- like, your 30-day retention.

Nate: Mm-hmm.

Ellie: Because I have to ask that.

Nate: Absolutely. So thank you for sharing that about your dad. And, the way we think about it, if we can make it more social, that is huge we're building a new version right now of Friends. And, you know, the other reason why we're raising this round right now is to be able to bring on a new product designer and grow out both the current product, and then also the larger university platform.

Ellie: So the company where I was on the cap table, conversion was great. Seven-day retention was great. Something happened around day 15, where they just couldn't figure out what the nut to crack was. Right? So tell me about what's working in your funnel right now. Like, what's conversion rate looking like? What's seven-day retention, and then where are we at 30 days?

Nate: One thing I do wanna make an important distinction on, because it's one of the reasons why we're pivoting to focus on B2B, is that we actually are not trying, to become something you use forever. We just aren't. And I know that that might not appeal to some people, and I frankly do not care. we're trying to help people change their life. We don't have to have people that stay on it forever. This is the opposite of social media. This truly is human-centered design, which is like, let's give people the tools to make change and get them off of their screens.

Outside the pitch room, that answer perked up the one and only Mike Ma. He wasn’t on the panel, but he was still watching pitches. He’s always watching. Mike invades The Pitch Room… when we come back.

Nate: This is the opposite of social media. This truly is human-centered design, which is like, let's give people the tools to make change and get them off of their screens.

Ellie: So I wanna probe at this a little bit. Because I think there's the, the first motion of I'm not in a great place. I need the right support ecosystem to make a change. But as we both know, once you make a transformation, then you have to maintain the transformation, right?

Nate: That’s right.

Ellie: I hear you, like, you're not going for maximum retention. I like that. But it seems like you go from that to a very opposite extreme where it's like use it once or twice, and that's good enough for us. And I wonder how you split the difference when you think about the product roadmap for that maintenance phase where it's like maybe once or twice a week there's something that helps support you in staying in that good place to the best of your ability so that when inevitably life lifes you know to go back. So what does that look like?

Nate: Yeah. Well, right now I have a notification, that Shmoody's checking in right now, super friendly and funny, we're checking in with notifications regularly. Here's the thing about the new SMS product that's so cool. This is sending a text pulse. Every one week or two weeks, depending on what the school wants to do, and this also can drive students who need it back into Shmoody. So the two are gonna work together. as a flywheel so we have higher overall engagement and can get the right people into the Shmoody app, but we also can get the right information and the right resources to those who don't need the app.

Ellie: And just a quick clarifying question.

Nate: Mm-hmm.

Ellie: Are you guys abandoning the B2C motion altogether? Or-

Nate: No. It's a good question. We will invest more in it because, it's a great sandbox to build the best product, We also have brand awareness, We have 600 students at University of Texas Austin using Shmoody, You better believe we're in talks with them right now. Western Governors University, a thousand students using it, and we're in talks with them right now, So we're not gonna abandon it altogether, but we don't look at that as the main driver of our success as we scale.

Elizabeth: Yeah. So I'll share where I'm kind of at on this. My godmother was actually a counselor at a university, for her whole career, and she unfortunately passed away very suddenly, but at her funeral, over 100 of her students came, saying how she was this motherly figure in their life. Many of them said, you know, "I was having tons of suicidal ideation, and she's the reason I'm still here,” And it was very clear, you know, the impact that I could see that just one person had had on so many. And I think from your early data here, like you've found a scalable kind of way to do this. I also have had some mental health startup failures in my portfolio. also some that seem to be getting interesting. I can't say yes or no today, but I would love to learn more.

Nate: Thank you.

Jeff: Is Shmoody, as you think about a platform play and you think about the SMS product When you think about the B2B2C strategy. Is Shmoody still front and center as a brand?

Nate: It is. although we are actively talking right now about-

Jeff: About white label?

Nate: not a white label. There are possibilities to do that, too. But in terms of the platform, if it's a different name. We're calling the SMS product Campus Pulse. Uh, that market has been proven, by the way. There is a company called EdSites, they don't do anything around wellbeing like we do. They just raised $80 million doing just SMS.

Charles: Yep.

Ellie: I feel like half of venture is looking for the Goldilocks moment, right? Not too much capital, not too little capital just right. And so I wanna understand more about that 3 million that you've arrived at. Tell us a little bit more about how you got to that number, and if we were digging into what this 3 million gets you to 18 months down the road. What's happened?

Nate: It's gonna be awesome 18 months from now. Let's just, let's just hone in on that. So right now 350,000 in recurring university revenue. We're gonna get that north of 1 million this calendar year, 4 million next year, 12 million the year after that. And that's by doing two things. That's scaling the sales team. as well as investing in some top of funnel tools, like Starbridge right now is absolutely crushing it in our space, and-

Elizabeth: I do have a little feedback on that. So I do have one company that actually returned my first fund twice. It was a university company, and the CEO actually led all the sales till he was past 150 universities.

Nate: You, you best believe I'm gonna be involved with all of these. But can't do it all, all myself. I need people building these up, but I do appreciate that feedback. And yeah, I plan to be intimately involved with all this.

Elizabeth: Cause it seems like you're really good at sales, so.

Nate: Yeah. Yeah. we really believe, to, to get to a $3 billion company there’s bigger than an ed tech play, But in the ed tech space, we can get to 50, I believe to 100, million in recurring revenue.

Elizabeth: And what's the valuation of this round?

Nate: 15 million.

Elizabeth: Okay.

Nate: Post-money, SAFE.

Charles: So I think I have too many conflicts to say yes now. you're really impressive, and you've cracked a bunch of problems I think are hard, and if I can clear these conflicts I would love to look at making an investment.

Nate: What size would you be looking at, Charles?

Charles: 25 to 50.

Nate: 25 to 50. Okay. Well, we would love to have you on board-

Charles: Yeah

Nate: if you can clear those conflicts.

Charles: Yeah.

Jeff: I completely agree with Charles. You're super impressive. I love the push there, which is go on every sales meeting, 'cause I think you'll continue to crush it. I love the flywheel you- that you've built into the product. For me, I think the path you're taking with the engagement infrastructure layer is gonna look more B2B in practice as a business. And all I do is consumer. I just don't think that I'm probably the best investor for you for this next phase of growth. but I really like what you're building. So, I'm not in, but uhh I love to see how you're building it.

Nate: I appreciate that.

Ellie: All right. So I like a B2B2C, Here's where I feel a little limited right now. I come from product design, and doing human-centered design, and doing all of the consumer insight piece. I'm a product nerd and I wanna nerd out on this. And so it's hard for me when we're talking digital product to not go through all my nerd trappings to get to the yes. Here's what I can say. Regardless of whether we do this through Peranaut or this is a little baby Ellie angel check, I will do something. I cannot give you a hard number right now but definitely wanna participate.

Nate: Something.

Ellie: Yeah.

Nate: Yeah. Really happy to have you on board, and would love to product nerd out with you. So this is awesome.

Ellie: I have to thank you from building from a place of your pain. Pain is a very, very difficult place to live, and it's hard to get unstuck from there. And if you can get unstuck and find a gift in the pain, and translate that gift at scale, it's a really beautiful thing to witness, and I really appreciate the fact that you and your team are translating the pain into a gift for all of us.

Nate: Well, thank you for saying that, Ellie. I appreciate that.

Ellie: Yeah.

Nate: And I do think ultimately that kind of struggle and pain can be turned into a force for good. And it's kind of actually the theme of my life. If I can take the things I struggled with the most and the things I used to feel the most ashamed over, and turn that into a way to help others, that's the mission. So thank you.

Ellie: Yeah. We can't toxic positivity our way out of these problems.

Nate: No.

Ellie: But we sure can fight the good fight.

Jeff: And that passion's clear.

Nate: Thank you.

Jeff: Yeah.

Ellie: Thank you.

Nate: I appreciate that.

Elizabeth: Thank you.

Josh: So we have a, another VC who's been listening in. Uh-

Elizabeth: Ooh ...

Josh: Mike Ma is interested in, in jumping in here.

Nate: What’s up, Mr. Ma?

Mike: Hello. So I'll, I'll start. fuck it, I'm interested. we're writing quarter million checks. when you said, "I don't care about LTV," I put in the chat I was like, "Everyone pay attention. That was a gangster answer." Gangster. when you said founder-led sales, those two things got me over to yes. That being said, I don't love the price. I don't know if I can participate. I got strings. I'm not an easy yes. ask around- ... outside. I'm not an easy yes.

Nate: Your reputation precedes you. But a yes means a lot from you, Mike

Mike: Sure. So, um, I'm in.

Nate: I love it.

Jeff: Thanks, Nate.

Charles: Thanks, Nate.

Nate: Appreciate it. Thank you all.

Ellie: Thank you.

Mike: Thank you.

Ellie: Thank you.

Ellie: How often does that happen where an investor comes in from the other room and is like, wait for me, cause I’m down.

Josh: that's the first time.

Charles: Yeah.

Ellie: Yeah.

Josh: man, I just love Nate. I don't know why.

Jeff: Yeah.

Josh: Just like-

Ellie: Yeah.

Jeff: Just fantastic.

Ellie: He's the antidote to feeling Shmoody. You know what I mean? You're like, how could you feel Shmoody around this guy.

Josh: Yeah

Ellie: When he's in the zone?

Elizabeth: I think the ROI part's quite interesting, right? If you have 150 students at a university that are, you know, thinking of not enrolling, that contract price of $100,000, $200,000 becomes real cheap-

Josh: Yeah

Elizabeth: real fast-

Ellie: Real fast.

Elizabeth: For a university, and that becomes a really quick like, "I don't even care about anything else."

Charles: Yeah.

Elizabeth: "If you just keep four students of mine out of that 150, I've made my money back and some more."

Josh: Yeah. I mean, I don't know about you guys, but I've spoken to so many, like, AI mental health apps that just made me feel-

Charles: Black mirror.

Josh: icky. but, like, I wanted to solve the problem, but, like, none of them felt right.

Elizabeth: And that's why I'm interested in, like, he has such good reviews.

Josh: Yeah.

Elizabeth: He has good engagement. I'm like, what is this product? Like, he tried to describe it. I didn't really get it.

Josh: Yeah.

Elizabeth: And like Ellie, I'm like, "I gotta get my hands on this and see what this magic sauce actually is."

Josh: I mean, it's definitely marketed towards another generation other than me.

Charles: Yeah.

Josh: but if the numbers say it works.

Charles: Yeah.

Ellie: He had me at irreverent, right? Like, I think that everything has been so soft and gentle, which isn't a bad thing, but at a certain point, it's like, if that's now become the dominant and it's no longer the outsider thing-

Elizabeth: It has no meaning

Ellie: to be soft, right? So that irreverent piece where, like, it's either laugh or cry, and sometimes laughter is the best medicine. And if you can lean into that feeling, I'm just wildly excited about that value proposition.

Josh: Yeah. Yeah, we talked to this team, or we spent a good bit of time with the co-founder, and they've been at this for five years. slogging it out on the consumer side and then made the switch last year. so it feels like they've done their time, like figuring out what works on the consumer piece, and I think that's what excited me, despite like the cap table obviously not being a, a great price at the moment.

Mike: Nope. it isn't. However, when he says things like, "I don't care about LTV," I'm interested. those are the people who break curves.

Josh: Yeah.

MIke: I, I don't know if he's gonna get there, at least in terms of how I'm seeing the curve, but I, if I don't find out, I'm gonna kick myself.

Josh: That was a fun day. Thank you, guys. you were a great panel. that’s a wrap on season 16

Charles: Yay, I gotta run

That’s ALMOST a wrap on season 16. We still have some some bonus episodes coming your way. Anyway. Nate walked out of The Pitch Room with commitments from Charles, Elizabeth, Ellie, and Mike. Can he win them over in shmiligence? That’s coming up

BREAK

Welcome back. A few months after his pitch, we caught up with Nate

Josh: Nate, hello

Lisa: It’s Nate!

Nate: Lisa!

Josh: And Josh, don't forget about me.

Nate: Hey, what’s up Josh

Josh: Nate doesn't wanna talk to me. Tampa, so you were the very last pitch at our Tampa event. I'd love to hear from your perspective, what was your experience like pitching on the show?

Nate: Yeah. My experience on the show was incredibly positive. I didn't know what to expect in terms of how my pitch was gonna go, but I had all this evidence of how other people's pitches were going because I was last to go.

Josh: Yeah. 'Cause you were there for all three days.

Nate: Yeah. And I was always trying to be out there high-fiving people and rooting them on. But of course, in my mind, I'm like, A, I wanna raise additional funds here, and B, this is a huge podcast that y'all run, so I sure hope I don't get out there and sound like I don't know what I'm talking about.

You know? And so I, and I was, you know, of course, just prepping like crazy. I would go for these walks around the block, where I'm sort of rehearsing my... You know, like a crazy person. People are looking at me like, "Why is that guy loudly talking about engagement layers- and institutional wellness, to no one in particular?" You know, as I walk around the blocks of Hyde Park, Tampa. Loudly enunciating. Um- So it was... There was a lot of nerves. I would be completely lying if I said there wasn't nerves-

Josh: Yeah

Nate: going into it, but the environment was amazing. It was kind of electric. And then as soon as I got in there and sat down with the VCs-

Josh: Mm-hmm ...

Nate: in person, and made eye contact, I felt connected.

Josh: Yeah.

Nate: And that's an experience I usually have. Obviously, I have to pitch on Zoom and whatnot sometimes, and that's fine. But I really value that ability to connect with people, have some rapport and that just immediately happened. And then it just went great. I mean, the pitch itself, and then the question and answer I felt was really strong. You know, we had this crazy situation where Mike Ma jumps on mic from the other room.

Lisa: Yeah.

Nate: Yeah. Which was-

Josh: So let's start with that. Obviously, your pitch went super well. You got four commitments in the room, Elizabeth, Charles, Ellie, and Mike, who wasn't even on the panel. Let's start with Mike, the one VC who wasn't even supposed to be in the room. What happened?

Nate: Llong story short, Mike did not end up moving forward. I wanna say we had two calls, and they had great questions. We have this new very powerful SMS product, but I think there was a little bit of a disconnect there where Mike didn't fully understand how the two products actually are part of the same engagement solution.

Josh: Yeah.

Nate: He kinda looked at them as two separate products, and that's a challenge and useful feedback. So no hard feelings.

Lisa: You are actually the one pass from Mike this season that wasn't because of sales or go to market. So, like, you didn't get investment but you got that stamp of approval from the guy who doesn't think anyone is good at sales. Congratulations. Yeah. But how did that feel? No, thank you.

Nate: Thank you. No, it... Well, that does feel good, and Mike's o- obviously like a tough nut to crack. Like, I, I know that. That's his reputation, and I could tell that, like, he's not just saying stuff. He's not just, like- you know, spouting compliments to people that he doesn't believe in. So I think-

Josh: No, not at all

Nate: I think he saw that, you know, I've been able to do founder-led sales and build a sales motion in a tough space, 'cause obviously higher ed's not easy,

And I think Mike saw that I'm, uh, able to articulate the value in a way that resonates with people, and so we're gonna keep building on that on the sales side.

Josh: All right, so next up, Charles. You had a pretty classic Charles call after the show, and at the end you tried to upsell him.

Nate: I'd love to ask you, you know, what you would need to see to go in at the higher amount. You mentioned that you could go in maybe at 50K. I mean, we'd love to have you on board at 100K if you could, but what would you what would you need to see?

Charles: Two things. One is, like, we have a bunch of other portfolio companies that are doing follow-ons right now, so part of this is me just trying to manage, like, what do we have available? And then, most of the checks I write on The Pitch are in the 25 to 50K range, so 100 is a little bit outside of that band, but like, you know, certainly happy to write it if, if everything lines up.

Nate: Okay.

Nate: Always be upselling. ABU.

Lisa: Do you always try that move?

Nate: No, not always. But in the case of Charles, he seemed actually quite receptive, 'cause when I brought it up, he said, "Yeah, no, that, that seems like that could be an option." He didn't have a ton of follow-up questions. And so I really thought like, "All right, cool. This is kind of a slam dunk." And I love what Charles is about. He's kind of no BS. So ultimately, Charles decided, you know, not to come in. I was surprised, I will say that.

Lisa: Mm-hmm.

Nate: Cause it just really, it seemed like he wasn't asking the same kind of challenging questions that I would expect from somebody that was on the fence. He seemed like he was on board.

Josh: Yep. That's a pretty classic Charles call. You think-

Nate: Yeah

Josh: things are going well, and it sounds like they're going well, and-

Nate: Yeah

Josh: then either two months later he's in and he's wiring the money, or two months later he's out and you're like, "Wait, why are you out?"

Nate: Yeah. No, exactly.

Josh: Next up, we have Elizabeth Galbut. What happened with her?

Nate: In fairness, Elizabeth was the one on the pitch itself who was really a maybe. She hadn't said for sure.

Yeah. So I thought, "Hey, my job is to see if I can win her over," but never got to have that next call. So I pushed for, you know, a meeting and said, "Hey, let's follow up. And once or twice she wrote back saying she was apologetic that she'd been so busy and this and that, but it became clear that she was super busy and it wasn't a, a priority for her. So ultimately I just had to accept that that maybe was actually a no.

Josh: So three passes. That all kind of felt various forms of vague. How are you feeling at this point?

Nate: At this point, good, because I really had a strong connection with Ellie in the pitch room, and in my view, this is the perfect investor who understands the traction of the company, who understands the sales motion, but also deeply believes in the mission. And to me, that is the sweet spot. I'm a big believer that, like, mission on its own isn't enough. You know, good intentions alone do not a great company make. But it can be such a powerful driving force if you're executing well. And so I think Ellie saw both, and I knew from the nature of her commitment in the room that she was really bought in, and she continued to be.

Josh: Yeah. Ellie was your final commitment in The Pitch Room, and you jumped on a call with her and your product person, Laura, and you guys got to nerd out about product together. What was that like?

Nate: That was great. Laura is exactly the person to be geeking out on product with Ellie, and Ellie, I think, really loved that. I know Laura did on our team because she's a product nerd, self-admitted.

Josh: How was the rest of the Ellie diligence process?

Nate: It was good. The only area of uncertainty with Ellie is that she is a big believer in the power of Shmoody as a consumer app. Ellie also understands that we're … It's not a full pivot to just B2B because we have this amazing consumer app. But also, right now, there is this opportunity to grow B2B. We had to talk through some of that, and what's fun is we'll still be talking about that with Ellie here now that she is, you know, spoiler alert, she is on board.

Josh: Now, I understand during the diligence process, you also tried to hit Ellie with the upsell. How did that go?

Nate: I did, and it became pretty clear that Ellie was sticking to her guns- ... with the, you know, 25K check. Ellie: We are happy to stay with our 25K commitment that we made in the deal room.

Josh: I mean, that's two out of the four investors, the ones that you, like, seemingly got pretty far with. You tried to upsell them. So, like, it sounds like this is pretty standard fare for you.

Nate: If, i-i-if, if and when it, it seems like an appropriate thing, uh, 100%. Oh my gosh. And, um, you know, I, I-

Nate: Salesman Nate.

Nate: I do believe that when we go into a new school or when we, you know, when a new consumer downloads us, we are having a major impact in a positive way. So it's like why wouldn't we put our best foot forward in terms of the product that we're offering in a sales context and talking to an investor? And they can always say no.

Lisa: How often does the upsell work?

Nate: With investors, um, it has worked I'd, I'd say probably less than 50% of the time.

Josh: Yeah, 'cause as a VC, like you have your check sizes, like you have your ownership targets, and you model that out, and so you have to stay true to your portfolio construction, as they say.

Nate: Yes. Yeah.

Josh: So I would be surprised if it was very effective.

Nate: But, you know another way to look at it is like, what is the downside of just putting that out there? Because any VC that would be in any way offended or like hold it against you that you asked for more, it's like, who are you investing in? Don't you wanna invest in people that truly believe in what they're doing and are willing to be bold in getting it out there into the world, right? So I think even if you get a no, it still sends that strong message of how much you believe in yourself and what you're building.

Lisa: So on the show, you were trying to raise 3 million. What has happened with the round since the show?

Nate: So right now we've decided to split it into two tranches and do 1.5 million now and the rest perhaps later in the year, and we'll see whether the valuation will stay the same.

We might think of that as becoming a different round. So we've raised over 800K as of right now, but we're putting that 3 million target kind of aside for right now

Josh: You already know this, but for anyone doing the math at home, 150K of that is from The Pitch Fund.

Nate: That's right.

Josh: So we're excited to be in as well.

Nate: Which we are very grateful for, and exci- I couldn't be more excited to have you all on board.

Lisa: All right, we gotta get this out of the way before we can recap the season for you.

Josh: No offer to invest in Schmoody is being made to the listening audience on today's show, but if you invest in The Pitch fund, you get ownership in all the companies we invest in on the show. We're open to new investors through the end of the year. To learn more, go to thepitch.fund. Phew. We did it.

Lisa: Yeah.

Josh: 12 pitches, season seven- 16. I'm ready to go on to the next season, Lisa. Let's go. Although, before we do that, I have to say we had some pretty good episodes this season.

Lisa: We did.

Josh: Starting with your pick.

Lisa: Yes.

Lisa: Natalia from Pitz who raised 1.5 million as a result of the show.

Josh: We rediscovered Rohit's evil side during Supercool Earth.

Lisa: Church AI got the first-ever commitment from a VC in a group chat, a $1 million term sheet from Draper.

Josh: We backed back-to-back drink companies, Wonderade and Jubilees, so our kids can get jacked.

Lisa: We had some life-changing hardware with HapWare, helping blind kids flick people off.

Josh: [laughs] We had the brightest light The Pitch room, or any room, has ever seen.

Lisa: And to finish it off, we had Shmoody, but it's hard to feel shmoody with all those investments flying around.

Josh: The total raised on season 16 was over 3 million between the VCs, angels, and the 1.2 million invested by listeners via The Pitch Fund.

Lisa: And we're about to head off to SF to record season 17 and do it all over again.

Josh: But before that, we've got some bonus episodes coming your way, an interview with a founder who bootstrapped his business for almost 20 years before reluctantly taking VC money, and our live show from SF Tech Week.

Next week on The Pitch…

Elia: Almost all of them sounded the same. We're a, you know, a, a $10 billion fund and we're out of here, and here's our thesis, and here's what we d-," It just all felt very cold and transactional. It was pitching you on them, like I should be impressed. And frankly, I probably should've been, but it didn't, I didn't have the same allure to me, right? I wasn't Silicon Valley still. I didn't get the whole thing

That’s next week! Subscribe to The Pitch on your favorite podcast player so you don’t miss future episodes. You can watch full length versions of every pitch over on our Patreon at The Pitch Uncut.

And if you’re a founder raising a pre-seed or seed round, apply to pitch at our next event! It only takes a couple minutes to apply, go to pitch.show/apply

We’ll see you next week, in the BONUS ROOM.

–

This episode was made by Josh Muccio, Lisa Muccio, Anna Ladd, and Enoch Kim. With deal sourcing by Peter Liu, John Alvarez, and Phoebe Sun.

Music in this episode is by The Muse Maker, Breakmaster Cylinder, The Firmware Rebels, Our Many Stars, Imagined Nostalgia, Soul City, Dreaming of Stars, and Peter Jean & The Runaway Queen.

The Pitch is made in partnership with the Vox Media Podcast Network.