Startup tip: get scrappy

By: Libby Jacobson
A tech founder shares his insights about startup life, pivoting a business, and fundraising without a safety net.

The vision for this series is to surface and share insights of thought-leaders and trailblazers who live at the cutting edge of technology. While the opinions featured may not necessarily represent those of Verizon and its employees, we still believe that we can each learn from experiences and opinions of others, which is why we’ve chosen to feature them here. This dialogue is how we take the first steps towards making innovations that matter.

Aaron Fitzgerald has been through the startup ringer, and more than once. Four years ago, he quit his job as a congressional staffer to build his first business, a technology/social platform aimed at improving universities’ development and fundraising. When that business failed to take off, he went back to the drawing board and came back with Ncrease, a data analytics startup that helps companies boost their engagement with their existing customers and drive conversions through social media.

Aaron’s story interests me because of his background. He launched his first entrepreneurial venture – a resume writing service – at age 12. He discovered his love for technology as a child, but wouldn’t call himself a natural-born techie. As a person of color in the technology/startup sphere, he offers a unique perspective into fundraising and business development from within a community that is frequently criticized for being too homogenous.

Aaron and I recently caught up at ImpactHub, one of the many new loft-style coworking spaces that have sprung up in tech-centric cities in recent years. He shared with me his insights into learning from failure, evolving a small business, and overcoming funding challenges without a safety net. The following interview has been edited for context and clarity.

Libby:  Give me a little background into your history - how did you go from Capitol Hill to here?

Aaron:  I’ve always been entrepreneurial. I grew up in a family of four – my mom was a single mother for me and my two sisters. My mom worked really hard and we would do whatever we could to help augment her income. When I was younger, I started my first business venture. Instead of a lemonade stand I was writing resumes for people. It all kind of happened by chance – my mom was looking for a new job. I asked if I could draft her resume. Then, she promoted me to her friends, and that turned into some side income for me.

I built my first computer when I was twelve through this program, ‘I Built It!’ It was just a lot of fun and I realized I loved technology.

After college, I moved to DC to work on the hill for a couple of years. From there I realized I wanted to go back into self-employment and technology was something I was getting more involved in. I left the hill to start my first venture, which leveraged my background in campaigns as well as technology to build a funding platform for higher-ed institutions. The system used social data to get alumni to get their fellow alumni to give and targeted 'ask' amounts based on what people were posting.

That business didn’t work out as well as we hoped. But, with that knowledge and the expertise we gained, we transitioned to Ncrease.

Libby:  Can you identify why your first business didn’t work? What did you learn from that?

Aaron:  My co-founder and I set out to build a technology company that wasn’t necessarily a startup, and I think it’s important to distinguish between the two. We wanted to be a small business that sold a technology product. In reality, when you’re building software, because the market has already become accustomed to moving ‘hella fast’ and taking in as much capital as possible to reach your ends, we weren’t moving fast enough. Other companies came into the space and were able to raise a lot more money than what we had on hand. We ran into cash flow issues, like any other company. We had to go back to the drawing board... It was our first foray into startup land, and we were still learning.

We weren’t moving fast enough.

Ncrease is a lot of the backbone of some of the ideas we had for long-term future development. We weren’t done yet, we felt like we had a lot to do. We spent a summer trying to figure out that process. That’s when I’d say we became a “startup.” We went through customer discovery, we launched on DC Tech Day in 2014, with really no idea what our product would be. But we were able to get some interest from some pretty big companies in the area, and from there that led to conversations about what we could do. Our product slowly came to us as we got more feedback.

It was a matter of… coming up with a better story to tell what our product was.

Libby:  It sounds like you had this idea, but through trial and error and talking to people it evolved. What did you think you were selling initially?

Aaron:  We were selling some really hardcore data processing that really… (laughs). I don’t know actually. It’s hard to articulate, and I don’t think we could articulate it at the time. It was a matter of really refining and honing that message, and coming up with a better story to tell what our product was. We always had a long-term vision about what it would be, and it’s moving in that direction. But how we articulated that, and moving from technology toward the benefits of the solution was a big learning experience.

We sell to the hospitality space. Our focus is on existing customers, and really working on that engagement piece. We partner with the hotels’ rewards program. Everything we build and everything we design is about boosting the social conversion rate, which is about 1% right now. That’s followers converting to paying customers.

Libby:  So you’re trying to identify the buying intention that people presumably have with search, but in social.

Aaron: Yes. And social isn’t limited to what you can buy. When you’re talking about advertising and traditional marketing, there’s also sponsorship opportunities and things like that. In the past, a lot of those decisions have been driven by thoughts like “which event should we sponsor”? In five years, we want every business to think of Ncrease first when making customer-driven decisions.

Libby: If we can change directions, I wanted to ask: how did you get here? What was it like being Young Aaron and interested in technology? How did you cultivate that passion?

Aaron: I grew up in the rust belt of America. …. Being a little nerdy, queer boy who’s interested in technology in a town where Friday night football was huge was, you know, a challenge.

An opportunity for this summer program came up, it was called “I Built It!” We didn’t have a PC at the time, so in the program, I spent 2 months learning about every component in the computer and then for the last 2 weeks you actually got to put everything together. And I was obsessed. When I first turned on the computer I was like “whoa!” at the blank screen. I was so protective over that computer. I had it until I went to college.

It also showed me that whatever I wanted to do was possible. I think we often forget that. There are people who are naturally talented at things. I know I’m not the best technologically speaking, but I know I can be better as long as I’m competing against myself.

We’re not represented enough, we’re not in the room enough, we’re not coming in and pitching companies enough.

Libby:  I know you’ve said before that you’ve had a somewhat unique experience in trying to get your business funded; can you talk a bit about that?

Aaron:  There are some unfortunate facts when it comes to funding and minority entrepreneurs. It’s very difficult, and I think a lot of it has to do with “pedigree,” and your network. There are some elephants in the room when you are a minority moving in the tech space. We’re just so underrepresented that when you’re talking to a big investor, they get a little confused. CB Insights came out with a study that found that one percent of companies that were financed at the seed level were founded by African American entrepreneurs. It just adds an extra layer of difficulty, or a new bar that we as minorities have to reach.

The real issue has to do with the initial funding gap that exists. They say any business can raise series A, if the traction is there. But, really the issue is that if your network isn’t such that you can call your parents for a “family friend” round, that $60-100-thousand to get your product initially built, maybe bring on one person to help you out, you’re going to have to spend a lot more time making sure your immediate needs – shelter, food, paying the rent - are met. So you have all that stress in addition to the fact that you’re trying to get a business off the ground.

Another issue you have with funding is that we’re not represented enough, we’re not in the room enough, we’re not coming in and pitching companies enough. And I think it’s because that initial jump, that initial early capital, that “family friend” round. My family is relying on me. That’s a challenge, and that message has not been articulated well.

Libby:  I’ve never heard the phrase “family friend round.”

Aaron:  It’s very commonplace. You’re trying to raise between $25 – $100 thousand – that bridge to get you through that year where you’re figuring out everything.

Libby:  And to be clear, they’re not saying “go live in your parents basement and live rent-free for a year.” They’re saying:,“Surely your parents have some friends who can give you $5,000?”

Aaron: Yeah. It’s an example of the social bubble some investors are in. It’s a weed-out factor too. It says “if you can’t get money from your friends and family then why would I give you money?” Well, I don’t have friends and family who can just write those kinds of checks. And frankly, most Americans don’t! There was something on NPR recently about how the majority of white Americans can think of somebody that they could go and borrow $3-5 thousand dollars from. But if you look at other minority groups, like African Americans, it was like 10% of people.

When you’re pitching somebody, there’s a trust factor. That initial trust takes longer to build on my end than it does for somebody who looks like you.

Libby:  So how do you overcome those obstacles? When you launched your first company, you were still working another full-time job.

Aaron: Yeah, you do work a hell of a lot. At first I had a day job. And then there’s the tech myth: you need to save enough to live off for a year. I did that while I was working on my business. And of course life happens and that savings ended up not lasting the entire year. But you get scrappy. You learn how to move forward.

One of the most important lessons that I learned after college was to diversify your income stream. I learned how to make money off of my skills, and also all the experience I was gaining from Ncrease I realized I could turn that into a side-consulting gig.

At the end of the day, the worst thing I’ll do is go back to working for someone.

Libby:  What did it take for you to get comfortable, to get to the point where you said, “OK I’m going to quit my job and do this full time,” especially given that you didn’t have the “family friend round.”

Aaron: It was faith in myself that I would figure it out. I was scared. I was very scared. It hit the point at my then-job where it was time. I was ready to take that leap, it was scary, but I figured, “Hey, you’ll be ok. You’ll survive.” At the end of the day, the worst thing I’ll do is go back to working for someone. That was close to two years ago.

Libby:  Happy anniversary!

Aaron: Thank you!