In the latest article in our Female Founder Series, we interviewed Jennifer Mercer, Co-Founder and CEO of Metazoa, a TIMIA portfolio company, about her experience navigating the complexity of entrepreneurship as a serial female entrepreneur.
Jennifer Mercer caught the entrepreneurial bug while working for a small tech startup that was modernizing continued education for medical professionals. When WebMD acquired that company a year later, Jennifer moved to the Bay Area and joined another startup called WebEx in 1999 and she remained there through its IPO until 2002.
Her passion for the startup life led her to co-founding DreamFactory Software with her husband, Bill Appleton, in 2003, and was one of the first apps published on Salesforce’s AppExchange.
With DreamFactory, Jennifer and Bill created the Release Management space, now known as DevOps — before pivoting to an API platform. DreamFactory went on to become a leading REST API-generating platform used by major companies like Disney, Intel, and Verizon.
In 2018, DreamFactory was acquired by Xenon Partners, the private equity firm that funded companies like Dropbox and Earth Class Mail. Jennifer and Bill used their proceeds from the exit to start their next venture, Metazoa.
Metazoa is the developer of Snapshot, an admin and developer tool for companies with complex Salesforce organizations — or orgs — and is currently used by over 60% of Fortune 100 companies.
Jennifer’s success as a two-time female founder is remarkable but her journey was not without its challenges. In a recent interview with the TIMIA team, Jennifer shared some of her biggest lessons she learned along the way:
- Overcoming Challenges Raising Capital as a Female Founder
- The Impact of Early Funding Decisions on Exit Outcomes
- Getting in Front of the Right People
- The Value of Bootstrapping
- Why Debt Financing Was a Better Fit for Metazoa
1. Overcoming Challenges Raising Capital as a Female Founder
In the male-dominated, ego-driven environment of Silicon Valley, fundraising can be an intimidating experience for female founders.
Jennifer observed that women tend to be more risk-averse in their approach to fundraising pitches. Rather than focusing on the full potential of their companies, they often present more conservative narratives and growth projections compared to their male counterparts.
Venture capital investors, however, typically seek 10x returns and are inclined to assume exaggeration in financial projections. Consequently, investors may discount these already conservative projections, which can lead to women founders receiving lower funding. Research from BCG has shown that, on average, female founders secure one million dollars less in funding than male founders.
In the early stages of her first startup, DreamFactory, Jennifer chose not to engage directly with investors, instead delegating the responsibility to her male colleagues, the president and CTO. As she gained experience and confidence, she took on a more active role in fundraising, even turning down unfavorable venture capital deals.
DreamFactory ultimately secured a $5.6 million Series A round of funding from New Enterprise Associates (NEA) in 2006. The company developed over a dozen applications on the Salesforce platform and experienced steady growth. However, in response to the credit crisis in 2010, investors advised a change in direction to ensure a viable exit.
To pursue a new strategy, DreamFactory raised additional venture capital to create an open-source API platform for PHP developers. The company was ultimately acquired in 2017, in a deal that left the founders with just enough seed capital for their next venture, Metazoa.
2. The Impact of Early Funding Decisions on Exit Outcomes
During their time at DreamFactory, Jennifer and her co-founder Bill opted for the traditional venture capital route, as it seemed like the only viable source of growth capital. The funding rounds generated significant press attention, adding to the excitement of the journey.
However, as first-time founders, they were unaware of the long-term implications of preferred shares and other venture capital terms on their exit outcomes. After selling the company, Jennifer and Bill discovered that little equity remained for them. This experience taught them valuable lessons, leading them to bootstrap their second venture, Metazoa.
Jennifer observed that many founders today secure massive amounts of venture capital, sometimes reaching $500 million for a 70-person company. She questioned whether these entrepreneurs fully considered the necessary acquisition value—potentially in the billions—to achieve a successful exit.
“Such large-scale venture capital investments often result in tremendous pressure on founders to maintain rapid development, spend money quickly, and continually raise more capital. In the end, this can leave little to no value for the founders themselves upon an exit,” said Jennifer.
3. Getting in Front of the Right People
In an earlier article in the Female Founder Series, TIMIA’s president Monique Morden described how gaining access to venture capital, angel networks, and other influential people can be a challenging task. Female founders often rely on introductions to secure investments, partnerships, and sales opportunities from the right people.
Leveraging her vast network from her time at DreamFactory, Jennifer immediately reached out to her contacts upon launching Metazoa. “I wanted to approach things differently this time. I noticed that Salesforce partners were experiencing numerous successful exits. Given our deep understanding of Salesforce technology and the ecosystem, we decided to return to our roots,” she explained.
With over a decade of market research under their belt, Jennifer and her team had a clear grasp of their ideal customer and identified unique issues that no one else was addressing. Embracing this knowledge, they quickly established themselves and concluded their first selling to nearly 100 of Salesforce’s largest customers.
4. The Value of Bootstrapping
Metazoa, a fully bootstrapped company, is enjoying steady growth. Operating with a small, agile team allows Metazoa to easily adjust burn rates.
As Metazoa focuses on enterprise clients, their sales cycles can range from 30 days to a year. However, enterprise deals are lucrative and can provide a lot of financial breathing room for bootstrapped companies. The company is also concentrating on expanding into the Global System Integrator (GSI) space, where they see significant opportunities for disruption.
Jennifer and her team continue to grow their revenue and customer base as they push for higher valuations before considering investor funding.
5. Why Debt Financing Was a Better Fit for Metazoa
Venture debt has emerged as a disruptive alternative to traditional venture capital financing, and in the wake of the Silicon Valley Bank collapse, it is likely to gain even more attention. As venture capital remains scarce, it’s essential to explore other financing options for founders.
While building DreamFactory in the early to mid-2000s, Jennifer was unaware of debt capital for tech companies. They took the first venture capital deal available, as they felt they had no other options. Once a company becomes involved with venture capital, it is often difficult to break away from that path.
When Jennifer started Metazoa, she was determined to find alternative financing options. After conducting thorough research and consulting with numerous people, she discovered TIMIA and connected with Greg Smith, one of the original founders of TIMIA. As a former entrepreneur, Greg was highly supportive of startups and became a champion for Metazoa.
Venture debt provides companies with more options and financial breathing room, preventing them from being forced into unfavorable deals.
“When seeking funding, it is crucial to find the right partner, be it a venture capital firm or a venture debt firm, as they should be supportive and helpful when challenges arise, rather than merely scrutinizing your monthly reports,” advised Jennifer.
Jennifer is in no rush to exit her promising business. Although she is currently engaging in conversations with investors, her primary objective remains to foster the growth of her company and achieve profitability.
Learn more about Jennifer’s experience with debt capital on our blog.
More articles in the Female Founder Series:
- The Fight of the Female Founder
- Female Founder Spotlight: Monique Morden
- Friendly Financing for Female Founders
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