The Bittersweet Journey of Winding Down Fundid
Winding down a startup is often a complex emotional journey for founders, filled with both pride and regret. For Stefanie Sample, the founder of Fundid, a fintech startup aimed at providing capital solutions for small businesses, this journey has been particularly poignant. Despite raising $3.25 million in seed funding in 2022, the company ultimately succumbed to a combination of rising interest rates and challenges from venture capitalists and partners.
The Birth of Fundid
Before launching Fundid, Stefanie Sample had a successful career as a franchise owner in Montana, managing 12 Taco Bell locations and previously owning two Massage Envy franchises. Her experience in the franchise world exposed her to the significant hurdles small businesses face in accessing capital. This firsthand knowledge inspired her to create Fundid, a platform designed to offer innovative lending solutions, including a business-building credit card and a grant-matching tool, primarily targeting women entrepreneurs.
The Impact of Rising Interest Rates
Fundid’s operational model relied on a debt facility partner to underwrite its loans. Sample had pre-negotiated the secured overnight financing rates (SOFR) with this partner, which initially seemed favorable. However, between spring 2022 and the end of 2023, the Federal Reserve raised interest rates 11 times, drastically altering the financial landscape. Just as Fundid was preparing to launch its first credit card product, Sample received disheartening news from her debt facility partner: the numbers no longer worked.
“The cost of capital would cost Fundid so much compared to the fees we could charge that we would essentially be paying our customers to use our product,” Sample explained. This unsustainable model forced her to reconsider the viability of Fundid’s offerings.
Tough Decisions and Emotional Strain
To adapt to the changing environment, Fundid needed to provide significantly more collateral. An investor was willing to help, but this would mean giving up more equity in the company. Sample felt trapped, realizing that the cost of capital and the terms being proposed would lead to losing control of her own company. “It was like, ‘Well, what are we doing?’” she recalled.
In the summer of 2023, Sample made the difficult decision to remove the credit card from the market, despite having just raised an additional $2 million. This contradiction—raising capital while contemplating shutting down—was a source of immense stress. Sample’s board encouraged her to pivot, believing in her ability to innovate. However, the financial commitments made towards the credit card left her feeling constrained and overwhelmed.
The Heartbreak of Layoffs
In November 2023, Sample faced one of the hardest moments of her career: laying off her team of five. “It was a heartbreaking day,” she said, recalling the emotional toll of saying goodbye to colleagues who had become friends. The decision was not just about the business; it was about the relationships built over time and the shared passion for their mission.
A Shift in Perspective
As the venture landscape shifted, Sample began to lose faith in the traditional venture funding path. Despite meeting key metrics, the constant changes in the financial market left her feeling disillusioned. She observed that female founders often face additional hurdles in securing funding, with data showing that women received less than 19% of all venture dollars in 2022. This reality compounded her frustrations, as she felt the odds were stacked against her.
“The goal posts are always moving, or the rug is being pulled out from under you,” she lamented. Sample recognized that female founders often have to sacrifice more to secure funding, leading to feelings of inadequacy and frustration.
A New Chapter: Pailor Capital
After winding down Fundid, Sample took time to reflect on her experiences and the lessons learned. She penned a postmortem detailing her journey, acknowledging the failure of Fundid but also expressing a desire to continue supporting small businesses. “Fundid may have failed as a company, but we acknowledge that we failed the small businesses that need innovation in capital markets,” she wrote.
With a renewed sense of purpose, Sample launched Pailor Capital, an investment company focused on helping women acquire existing profitable businesses. She believes that empowering women to buy established companies can create a more significant impact on gender equality in business. “If we really want to make a dent on gender equality and business, we’re better off encouraging women to go out and buy existing profitable businesses,” she stated.
Looking Ahead
As she embarks on this new venture, Sample has already made seven investments in 2023, all aimed at supporting women entrepreneurs. Her journey through the challenges of Fundid has not only shaped her perspective but also fueled her passion for creating a more equitable business landscape. With Pailor Capital, she aims to redefine success for female founders and create pathways for sustainable growth in the entrepreneurial ecosystem.