Raising a Seed Round in 21 Days
MightyMeeting is a company that lets you start or join online meetings directly from a smart phone or tablet. We just raised a seed round. Here is our story.
To Raise or Not To Raise
An answer to this question is not as easy as it may seem.
The network bandwidth, storage, and servers in the cloud are dirt cheap. One can presumably do consulting or keep a day job and bootstrap a company on the side.
Bootstrapping a company on the side, however, is a painfully slow process. One-off projects tend to suck out all the time and fun from the Universe.
We had the whale of an idea and decided to give it our full undivided attention. For most folks, us included, this means raising a round.
How Much to Raise
An idea is worth very little, regardless of how brilliant. Execution is everything.
To raise a good chunk of cash at a decent valuation we had to prove not only the idea itself, but also the fact that we could execute around it. This meant building a basic service and delivering tangible value to a few early adopters before we even started talking to the investors.
This is where the friends and family came in. Their support kept us going until the service was up and running. Once we got there, we still needed 300-500K to take the company to the next stage.
Valuation
This is totally demand and market driven.
All entrepreneurs, us included, are totally in love with their companies. We think our company is worth millions as soon as we get the web site going. Unfortunately, it is not what we think, but rather what other people are ready to pay for it. Every case is unique.
We started high and then gradually came down to a number where we began to see some traction. It took time. I wish we knew the number when we started ...
Location, Location, Location
This may sound obvious to some, but we learned it the hard way. Nothing beats the Silicon Valley as the place to raise a round for an early stage start-up.
Early stage investment is a risky business. A typical angel investor does about 10 deals a year, at 25 to 50k each. This is done to spread the risk. To minimize the risk, the angel will also only invest in a business that he or she understands well and can emotionally connect with.
There is only one place on Earth that has the critical mass of people who can emotionally connect with a risky online venture. If you are raising money for a start-up, that’s the place to go.
This approach is not without challenges, especially for a company that is based outside of the Bay Area. The majority of angels prefer to invest locally. We got under a lot of pressure to relocate.
Fortunately for us, New York, where MightyMeeting is based, was still OK for most folks. Our decision to stay put did cost us a few tremendous opportunities.
Ultimately, it was a business decision. The Valley is a great place to raise money. New York City is a great place to find customers. We decided to stay closer to customers, people who will be paying our bills in the long run, even if it meant raising a bit less money at a slightly lower valuation.
Resources
We’ve been fortunate to get great advice from a few good people. Let me mention some of them here.
First, there is Adeo Ressi’s Founder Institute. I did not get a chance to attend the training program, but I did have the pleasure of pitching at the Founder Showcase.
The outcome of the event has been tremendous, and Adeo’s advice has been invaluable, always blunt and to the point. One of his emails started with: “You are making rookie mistakes and your round will fail”. Got my attention.
True to the style, Adeo's thefunded.com offers an honest review of the investment community. Definitely worth a look.
Second, there is Venture Hacks. The blog is run by Nivi and Naval. I actually discovered their book before I discovered the blog. Both are highly recommended. Good stuff that will educate you and save you tons of time.
Venture Hacks also runs AngelList. You can apply online. If you got the goods, you will get intros to angels in the list. The intros carry Venture Hacks credibility, which is significant.
In our case, the intros we got through the Founder Showcase and through Venture Hacks lead to great connections and, ultimately, money in the bank.
I also had good experience with the Open Angel Forum and the DEMO conference. Both are very selective. Both are also very high quality in terms of the advice and the connections that they offer.
The exposure and intros we got helped us build the funnel.
The Funnel
It helps to look at fundraising as a sales process. You generate the leads. You qualify the leads. You make your pitch. You seal the deal.
Every sale is a relationship sale. It is driven by the emotion, the gut feel, the connection. You can only achieve this if you talk directly to the decision maker, someone who signs the check. My advice is to go after these people first. They are your angels.
Do your homework. The early stage investment community is very small and very connected. If NO is a likely answer, it is better not to ask the question. You want a few solid MAYBEs, and you definitely want a YES, preferably from an investor who can set the terms and lead others into the deal.
We were fortunate to meet George Zachary of CRV, the lead investor in MightyMeeting, very early in the process. To a great extent, his support made the round happen.
The Pitch
You need a kick-ass one liner. We started by sending out long email messages that listed every good thing about the company. We do this, but we also do that.
In the end what mattered was the punch line, the one-liner that got replicated in tons of emails and conversations: “webex for the ipad era”.
People either loved it or hated it. The ones who loved it gave us their support. You cannot be all things to all people.
You also need a kick-ass demo. I quickly found out that doing long introductions and quoting market opportunity numbers invariably bored people. Doing a quick demo at the very beginning worked great. An experienced investor knows a good opportunity when she sees it.
You do need a great slide deck, mostly to answer the questions that follow. I love everything that Guy Kawasaki wrote on the subject of PowerPoint. His advice worked for us again and again. Presenting using MightyMeeting also helped. Eat your own dog food.
Closing
Two pieces of advice here. First, get a good lawyer. I was introduced to Cooley LLP at the Founder Showcase. The experience has been nothing but great.
Second, check out this interview on Venture Hacks. It is all true.
Happy Fundraising!
Be Kind. Use Larger Font.
Building Slides for Web and Mobile
If you follow recommendations in this excellent blog post by Guy Kawasaki
The 10/20/30 Rule of PowerPoint
your slides will look great on any device: laptop, iPhone, or iPad. They will also look good when published on your blog or posted to Twitter.
The font size part of the rule is very important. This applies not only to text in the bullet points but also to captions and labels in diagrams.
You may not be able to use a 30pt font inside a text box, but try not to go smaller than 18pt. According to Guy, folks who are 36 and younger must still be able to see it. You will have to read the captions, slowly and loudly please, to the less fortunate.
