Black Friday Sale! 50% Off All Access

When an Investor Bailed, Finery Founders Brooklyn Decker and Whitney Casey Had to Do Major Damage Control Finding new capital, calming staff nerves and making sure the brand's reputation was intact called for calm leadership and quick thinking.

By Stephanie Schomer

Entrepreneur+ Black Friday Sale

Our biggest sale — Get unlimited access to Entrepreneur.com at an unbeatable price. Use code SAVE50 at checkout.*

Claim Offer

*Offer only available to new subscribers

Finery

In the Women Entrepreneur Series My Worst Moment, female founders look back on the most difficult, gut-wrenching, almost-made-them-give-up experience they've had while building their business—and how they recovered.

Finery is a digital wardrobe-management platform that tracks your online clothing purchases and helps create and manage outfits. (Yes, it's the Clueless closet come true!) Founders Whitney Casey and Brooklyn Decker launched the company to make women's lives easier, but getting the startup off the ground was anything but easy. When a well-known investor backed out of a deal, the women worried that the reputation of their operation was at stake—not to mention the peace of mind of their employees. Casey, the startup's CEO, tells us what went wrong.

"As a new startup, having an investor with a recognizable name is a big indicator to other investors that your concept has legs. We had great, solid, top-notch investors who had put money behind big brands in our space like Reformation and RewardStyle. But one of the original technical founders of Uber wanted to angel invest, and because he was a name and outside of the fashion-tech space, it provided even more validation. Having a thought-leader behind an idea can really create buzz and lift behind a company.

Related: 4 Things Women Entrepreneurs Need to Know Before Approaching Angel Investors and VCs

When he verbally committed to the investment and asked for wiring instructions, we were thrilled. The next morning we had a breakfast to tell our team and our other investors—we wanted to get everyone fired up and keep the momentum. But that afternoon, he flaked out. We were devastated. That entire day, he kept putting us off. We sent the wiring instructions with a closing deadline, which is standard procedure, and he never responded. Eventually we got an email saying he changed his mind.

We take some responsibility here. We didn't do our due diligence on him as an investor. How many times had he pulled out of deals? Was he trusted in the investment community? Were his motivations just about equity? What value would he bring our company? These were all questions that I didn't ask, and I should have. Turns out, he met with a lot of companies and became an advisor to a lot of them—and what that means is, he takes equity without putting money in. Having great advisors that you "pay" with equity is often a great idea. But our need was capital, not ideas.

Related: 10 Tips for Women to Improve Their Persuasion Skills

Additionally, as CEO, I never should have told my team about the investment until the money was in the bank. But when we did tell them the deal went through, we didn't belabor it. We just picked right up from where we left off, and filled the round with another investor within our friends and family round. The best way to ameliorate the situation is to not sulk in it (though that is what I did, personally, at home, alone). We took some great advice early on: don't let your team go on the great emotional rollercoaster ride that you have to go on as a founder and CEO. Give them as stable a ride as possible—there will be enough ups and downs naturally without you adding to the mix. As CEO, the only person you really need to learn how to manage is yourself.

Related: 15 Women Leaders on Risk, Mentorship and Following Your Dreams

We have a much different process when we consider investors now. We interview other entrepreneurs who've taken money from this person, and talk to someone they've been on a board with. When the going gets rough, how does this person respond? We did a ton of due diligence on our lead investor, Tony Florence from New Enterprise Associates, and not a single negative comment came back. In fact, everything was beyond glowing. Taking money from an investor is a long term relationship—so do your homework."

Stephanie Schomer

Entrepreneur Staff

Deputy Editor

Stephanie Schomer is Entrepreneur magazine's deputy editor. She previously worked at Entertainment WeeklyArchitectural Digest and Fast Company. Follow her on Twitter @stephschomer.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Franchise

An Executive's 5-Minute Guide to Building a Legacy Team

This guide delves into the critical aspects of building a legacy team, emphasizing the importance of nurturing a strong internal culture and leading by example to attract and retain top talent.

Business News

'Father Time Always Wins': Warren Buffett, 94, Just Announced Major Changes to His Plan to Give Away His Money

Warren Buffett continued his Thanksgiving tradition with a $1.1 billion donation of Berkshire Hathaway stock to four of his family's foundations.

Business Ideas

63 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.

Starting a Business

Best Friends' 'Scrappy' Side Hustle Led to a Product on Track for $1 Million Annual Sales: 'Rare to Find Somebody With This Same Passion'

Alissa Sullivan and Leslie Hendin, co-founders of Liis, immediately bonded over their fragrance obsession when they met at a wedding in 2009.