16 8 / 2012
Part 1: Behind the scenes of a seed round
Every TechCrunch article makes raising a round look easy, but behind most rounds, it’s a real uphill battle. I struggled with deciding to write about our fundraising story, because I’m a fairly private person. But, since I know so many people trying to raise a seed round right now, I thought this might be able to help a little.
Part I: The hustle
500 Demo Day
Last week, we announced our first birthday at LaunchBit, an ad network for email, as well as our seed round of funding at LaunchBit. We started fundraising just after our Demo Day at 500Startups – *last year*. I think a common misunderstanding is that if you come out of an accelerator such as 500 or YC/TechStars/AngelPad, life is a walk in the park. I don’t know whether I speak for most entrepreneurs, but there’s a lot of persistence that goes into raising a round. I do think that these accelerators can really help A LOT with connections and introductions (from which we’ve benefited immensely), but we still had to hustle our way to and in meetings.
The Pipeline
Prior to Demo Day, I spent a few days researching investors on Angel List. I tried to find investors who had portfolio companies in the ads and email verticals. Initially, I created a spreadsheet of ~200 investors, both VCs and angels, whom I thought would really like our round. My co-founder Jennifer and I had decided that I would do all the hustling, and I’d only rope her into meetings if necessary. Afterall, we’d been told that fundraising would be a full time job, and someone needed to work on the actual business. And it was a full time job.
I’d been advised to keep a pipeline full of meetings for about 2 weeks in advance. I didn’t personally know a lot of the people on my list. Our advisor Andrew Chen was immensely helpful in doing introductions, and that’s primarily how I was able to schedule my first two weeks of meetings. While taking those meetings, I knew that I had to schedule more meetings for the following two weeks to continue to keep my pipeline full. So, I started reaching out to people in the 500Family, who were running portfolio companies of investors who were on my list. Sometimes I would meet with entrepreneurs who knew other entrepreneurs whose investors were on my list. In the end, I took 3-6 meetings everyday for about 6 weeks, heavily front-loaded in the first 4 weeks. This means that I went to meetings during the day, sent emails to schedule/coordinate more meetings in between meetings, and caught up on work at night. Lots of nearly all-nighters for 4 weeks. In the end, I met with about 90+ investors, both angels and VCs.
Creating Urgency
Keeping my pipeline full of meetings was critical for two reasons. 1) I soon learned that lots of investors liked to reschedule meetings at the last minute to meet with other seemingly “hotter” entrepreneurs. Having a full pipeline gave me leverage to say, “Well, we can move our meeting, but my schedule is so booked – I don’t know if our round will still be open by the rescheduled date.” This ultimately caused some investors to un-cancel our meetings. Conversely, 2) by keeping our pipeline full, it also gave us leverage in setting up meetings. If a VC told us the soonest they could meet with us was in 3 weeks, I would say that “I’m not sure if our round will be open by then…” This would cause the VC to move other meetings with other entrepreneurs to meet with us sooner.
I had one very well-known VC partner move my meeting with him 3 times. On the third time, I told his executive assistant that it wasn’t worth meeting at all and that it didn’t seem like he respected my time. All of a sudden, I had a meeting with him that very moment. He told me to follow up with his executive assistant for a second round meeting, but honestly, the disrespect for my time left a bad taste in my mouth, so I didn’t. I was looking for a partner who could help us with more than money, and this was not a good way to start. It’s mind-boggling to me that I get more courtesy from all the prospective customers that I cold-call than from some potential investors.
Urgency is absolutely critical in raising a seed round. Think about it from a pseudo-game theory perspective. Even if an investor loves your deal, what incentive does he/she have to invest right away? He/she is better off waiting to get more information and invest later. The only reason for an investor to invest today is if and only if he/she doesn’t have an opportunity to invest later – because a round is full. So, the only way to encourage investors to invest today is to create urgency – create a possibility that there may not be a chance to invest later.
On 100%
After taking meetings during the day and catching up on work at night, day in and day out, I was starting to get really exhausted. (Honestly, I have no idea how single founders do this.) By week 4, I went into a meeting with an angel investor. By the end of it, I asked him what he thought. He said, “I don’t want to say the wrong thing and call you a "meek Asian woman”, but I wonder how you’ll lead a company of 100 people.“ I was shocked – did I really just hear that? I perked up and asked him what he meant. I looked at him squarely and told him loudly that I have no problem confronting people in difficult situations. At first, I was pissed. What a dumbass! But later, I realized he did me a favor – how many other people consciously or subconsciously thought this about me?
At this point in this blog post, it would be easy to try make a statement about race or gender (or both). Maybe he thought that because I am an Asian woman? Maybe it was because I was tired-looking? Quite frankly, I can speculate all day why he thought I was meek or meek-looking, and I’ll never know. But, what I did know was that it didn’t matter. People will always think what they want, but the important thing was that I realized that I needed to be on my A game – 100% – in my subsequent meetings no matter how tired I was. I had to exude extra excitement and passion in a loud way – more than usual – to combat this opinion, in case others were thinking the same.
By the time week 5 rolled around, I was already sick of fundraising. Stay tuned to find out what happened next…
Special thanks to Omar Seyal of Tagstand, Cathy Edwards of Chomp (acq by Apple), and my teammates Audrey Cu and Jennifer Chin for their feedback and edits on this post.
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