How to Raise Money in a Meltdown
Remember the financial system meltdown of 2008? Chief Financial Officer Lynn Atchison (pictured) sure does. She was in the midst of a $250 million capital raise. It was the second huge funding round she had managed for HomeAway, Inc., which helps owners of vacation homes find renters looking for holiday housing.
Atchison set a record with that raise, and she did it at an incredibly challenging time. On top of that, she's one of only about 9 percent of CFOs who are women. Few CFOs manage initial public offerings, and few have raised a total of $417 million in private capital. All of this is to say that Atchison has rare insight into what makes investors want to hand over their money. She spoke with me recently about what it took to pull off a record capital raise during a financial crisis, why women don't raise as much capital as men, and what women need to know to in order to improve their odds. Q: What was it like to navigate the $250 million round in the midst of the 2008 financial meltdown? A: It was the largest deal for an Internet company since 2000, and it was a very rocky stretch. Everything changed from week to week. HomeAway was profitable, but at the same time, we were looking to refinance $90 million in debt. That was not going to happen. So we increased the amount we raised from equity and paid down the debt with that. On top of that, HomeAway operates in five countries, and we had to do due diligence in all of them.
Q: What was the story for the investors? What were you raising the $250 million for? A: We were a growing, profitable internet company. All of this was very attractive to investors. Fundamentally, they wanted to be part of a huge market. We have about 10 percent of a $24.3 billion market. There are about 8 million second homes in the U.S. right now, and we have 500,000 properties. We have the opportunity to get more listings and get more renters.
Q: What did you learn during the 2006 capital raise that proved essential for the 2008 round? A: In 2006 we were buying Vacation Rentals By Owner (VRBO), and doing diligence on that, while the banks were doing due diligence on us. We had had very decentralized recordkeeping -- all the information was in different places. In 2008, it was much more streamlined. And in 2008, the fact that we had integrated VRBO and increased the value of the company was part of the story that investors wanted, so we were able to raise more at a higher valuation.
Q: So, delivering on the promise made in the first round made the second round bigger and better. You've done what women rarely do: get money from private investors. There's a gap between the aspirations of women entrepreneurs and their ability to raise capital. Last year, women entrepreneurs captured only 9.4 percent of angel investments. As a woman who has been there, what do women need to know about extracting money from investors? A: Women need to know what men need to know: that investors are fact-driven. They don't care if it's a male owner or a female owner. They want confidence that the leaders will get the business to the next level. And, they are looking for the CFO to be even more objective. I came up through accounting, so objectivity has been my career path. If you come from a marketing background, make sure you have a right-hand person balancing you.
Q: So a quant, or a left-brainer, to balance you if you're a right-brainer. And, it sounds like you're saying, 'Don't think that you alone have to have all the answers.' A: I think women are not as comfortable with transactions. If that's the case, you need someone on your team who has that confidence. Conveying confidence is the intangible. That's what investors are investing in: your confidence to deliver the business results.
Questions and answers in this interview were edited and condensed.