In 2006, Joseph Heller went to China where he spent the next decade learning about the manufacturing business. Based on that experience, he eventually built a startup called The Studio. The idea was to help connect people with a small business idea to manufacturers in China in a fully digital way.
In 2016, he transformed his startup into a $ 10 million a year company with 100 employees worldwide. But when it came to raising money in the United States, Heller found it wasn't easy for a Silicon Valley outsider to get in without contact.
He persevered and in 2018 got a $ 11 million A Series from Ignition Partners, which allowed him to expand his business. But he still wondered if he would do even better with the capital and guidance that comes with working with an early stage VC firm in Silicon Valley much earlier in the process.
We recently caught up with Heller to learn how he built a company from scratch with little outside help and what it was like to raise those funds.
Starting out
While Heller was in China, he learned to navigate the manufacturing landscape and was able to create a beautiful consulting business by helping big brands get products manufactured there. But he saw an opportunity to do more, and especially to help small businesses looking to produce goods in China in much smaller batches than large operations would normally require.
The latter was much harder to do, and Heller sensed that there might be a job opportunity to work with small businesses licensed by platforms like Shopify with a way to sell goods online. What was missing was a way to make them.
"I just heard it's crazy that we democratized the ability to create a web store with Shopify and use Instagram to spread the message. Everything was democratized for these small brands, but the production piece was still very hard to break into," he said. Heller told ProWellTech.
He decided to build on that idea by creating a company that would make it easier for small businesses to order customized goods from micro factories in China, giving them access to the same opportunities as big brands, but in much smaller batches. That idea became The Studio.
"We basically ended up building relationships with these small micro factories in China that we trained to run production in smaller batches, and then we created software that allowed these SMEs to place orders with these factories. So instead of having to order 30,000 pieces, they can order 100 pieces, "he explained.
Struggling for meetings
When Heller went looking for funding, he had raised the company to $ 10 million in annual revenue and believed he had a strong enough organization to attract the attention of venture capitalists.
After all, this was a business he had carefully built and grown into a healthy company at an early stage based on years of experience in the field. He had brought it to the market. It had proven to be suitable for the product market. He had clients. It looked like it would be a blast to get funding.
In reality, however, he struggled to get matches. While Heller, who is black, says it can be difficult for black founders to have access to venture capital firms, he sees it as part of a larger problem of general lack of access for those who don't have the right connections.
"For starters, there are some people who just don't have access to VCs. And it's not just a black matter. I think it's more a matter of just very exclusive VCs and it tends to be mostly white who have these kinds of connections." he said.
He added: "If you are not in Silicon Valley and not in that exclusive VC club, it is practically next to impossible to raise funds and therefore it was never even an option for us. [early on], "He said. Instead he started the company with his own money, but when he built the company to the level he had, he wanted outside capital and believed he was in a good position to get it.
Climb the mountain
Heller was able to get a meeting thanks to a connection from his days at the University of California, Berkeley, who had been a venture capitalist. This led to other encounters, which mainly led to many disappointments. To be fair, it's hard for anyone to break into this system and present a compelling case, but Heller had built his business for $ 10 million in revenue. That had to count for something.
"It was very clear that I was an outsider in Silicon Valley trying to break into it, and this was already a $ 10 million business with a very skilled engineering team. We had shown a lot of things and I think if I had been part of that kind of exclusive VC network, we would have raised money much faster, "Heller complained.
He noted that he believed being black was at least a factor in his struggle to get the attention of venture capital firms. "It is especially difficult for African Americans and other founders to get just the start-up capital to start their own business. I have spent a lot of my personal money and years making mistakes, because I was so far from the centers of the capital, "he said.
Heller says he felt he might have lost something along the way because of this. "I've seen countless founders who have good VC connections that can raise $ 1 to $ 5 million in seed rounds, literally with no product and just an idea," he said. "This option was not available to me."
Getting to yes
After 18 months of dating, he finally received $ 11 million from Ignition Partners. He said that due to his struggle and the time and energy it took to keep launching, it was a great feeling of accomplishment when Ignition finally funded his company.
"This was something I really wanted, and it somehow confirmed that we had a real business that was worth funding," he said.
Although Heller says this year has been tough for international manufacturing due to the pandemic, he has grown his business to $ 20 million in annual revenue and around 150 employees since he got his A round in 2018.
Earlier this year it also launched a new business called SuppliedShop.com, which allows very small businesses to purchase ready-made inventory from factories. He reports that the new business is already growing 50% month-over-month.
Connections certainly matter as Heller discovered, but sometimes it also takes grit, determination and a good idea to build a company. This is what Heller led to this process. He still believes it's better to look at the result rather than focus on the fight it took him to get there.
"I think that even if there is racism and there are these real struggles, I also think that people should be recognized for trying to make changes, and hopefully this will be a catalyst for people to make more changes," he said.
