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Fundraising

Fundraising


(rock music) Fundraising – Heading into Digitas to
meet with my friend Alyse. And, surprise, I’m late. (rock music) I get asked a lot what it’s
like to run a start-up, and I always tell people
that I can summarize my job in three ways. One, hire a great team,
and give them everything they need to succeed. Two, provide a mission to the company, and make sure everyone stays true to it. And three, make sure we
don’t run out of money. But money is the tricky part, right? I mean, ideally, you build a business that makes money right off the bat. But in the case of software, like we have, it’s a little tougher. So you have to go out and raise money in various stages, in order
to build the software, prove that it’s working, prove that people want to pay for it, and that it’s a viable
product, market fit. And going out and finding money is in direct contradiction
to spend all your time on the business, make it the best you can. And really it’s considered a distraction. So, you want to raise as much as you can at individual points, yet not give away too much of the company, when it’s not worth as
much as it could be later. There are a lot of
variables to go into there. But one of those variables
is talking to venture capital firms. And generally, venture capital firms only want to get involved when you’ve got two million, three million,
five million, ten million dollars in revenue. Because then you’re a
proven business model, and it’s something they can get behind. But in most cases, software
that’s raising money isn’t in that spot yet. But what I’ve seen venture
capital firms doing lately is reaching out to people
that are early stage. I’d say about two to three times a week, I get emails from venture capital firms, and they call and say,
“Hey do you need money?” And I used to kind of address it and say, “Well, actually, we’re
kind of looking to raise–” And they immediately
stopped the conversation. What I’ve learned lately is you say, “Actually not right now. “We just finished a round.” Or, “It’s not something we’re
ready to talk about yet.” More calls start coming in. So it’s really interesting
to watch the industry change in that way. And when they do call, it’s
usually the same thing. They want to know about us. They want to create a relationship, because maybe they think
we’ll be something later. I think what venture capital
firms do that’s really smart, is they create these
relationships very early on. I know a couple of these guys
actually reached out to me very early on in our process. I mean, all the way to two years ago, when we were first really
getting off the ground, and building our MVP. People caught wind of some press we did, and reached out. But a lot of those calls sound the same. – [Man On Phone] Laser
focus on working with early stage growth equity companies. The way that we think about that is businesses that are
scaling pretty quickly, doing it in a pretty
capital efficient manner, and found some pretty
good product market fits. So, revenue somewhere over the
five million run rate mark, and have raised have raised less than 10 million of institutional funding. Then where we can come in, our investments always
fall somewhere in the call it seven to 25 million range. Ideally being used for
sales and marketing, or craft some level of
shareholder liquidity. Before we know, it’s
a pretty diverse firm. I’d definitely consider us
more of a stage focus investor. But a lot of B to B, SAAS, amount of marketing technology companies. Primarily, minority equity investors. That tend to hold their
position somewhere between, call it at 15 to 35% or so,
within our portfolio companies. Can you just give me a
little bit of background of product sale? Obviously, you can tell
the brands or agencies. Given the complexity in
numbers that people are connecting into, is there a large implementation process here? Is it pretty simple, just the… What are your capital
needs going forward, here, if you continue to stay open? That’s great, I mean, I definitely think this
sounds pretty interesting, product sampling for us, especially get it some of our investments. Have a potential partnership
opportunity there at some point. You’re a little bit
early, just for our focus. These conversations
are worthwhile to have, and so we get to know each other. Maybe I’d like to invest, when the time comes,
and you’re in our zone, and potentially looking to raise. And we get down to
Atlanta pretty frequently. So, I’m happy to let you know, next time we’re down there,
and grab coffee or something. Alright, stay in touch. – Bye. But the reality of the situation is that these guys really
only want to talk to people that have a viable business in place. And so, while they’re
doing their research, and they want to identify people early on, who they might want to invest in later, they’re looking for a two
million, three million, five million, 10 million
dollar annual revenue business to invest in. In our case, we kind of
fall somewhere in the middle of the money raising process. Over the course of the
last three years or so, we’ve gone out to friends, family, people in the industry that
will invest in technology. And really sold, at first, the story. Then we came up with a product, showed that people were interested in it. Then we had a product, bought
by a few large customers. Kind of further proving
out the business model. Four rounds of funding later, we’ve got a great team in place. We’ve got clients on
the platform using it. And we’ve got a great vision
for where we want to go. But the next step for us, when all these venture capital firms call, they want to see the business
model working, right? You’ve done your research
on what the product is, how it fits in market, you’ve
gotten people to use it. Now show me revenue. Show me revenue, I’ll
pour money on top of it, and you will be able to
go forward from there. (rock music) I just realized that I spend
the majority of the time in these videos from inside my car. To wrap up the conversation on
raising money for a start-up, even if you are raising
money and getting money from people to build a product, know that eventually, in any industry, your business is gonna have to make money, and you need to focus on
that from the beginning. Ideally, you don’t raise money. I always had people congratulate me on raising rounds of funding, and I kinda get this icky feeling like, look, if I didn’t have to
raise money, I wouldn’t. I mean, technically, I’m giving
away pieces of my company in exchange for money. And ideally I wouldn’t have to do that. There’s a lot of good information online about raising money, but essentially it comes down to having a great story, having a great product,
having a great team, and having a business that
can actually make money. It’s certainly not easy. It’s something we struggle with every day. Every entrepreneur, in any industry, deals with this day in and day out. It’s the number one concern. How do we get our business
to generate more revenue? And that’s the game. It’s a hard game, it’s a long game, and there’s a lot of competition. Anyway, it’s Friday. I’m gonna go inside, finish up the email I did not get a chance to get to today, and then figure out
what kind of cheat meal I’m going to have for dinner.

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