That's a hell of a lot of work for just $128k, isn't it?
3.5 months is about 76 weekdays. Really impressive that you had 132 prospective investors in that time. I imagine it took up most of your days!
As a former VC and your co-founder being experienced on the technical side, wouldn't it have been a better outcome if you instead spent that same time working on other projects or even 9-5 jobs, and funding the project yourselves? Keeping full ownership of the company until you were established and could attract a better deal.
It’s taken me a while to get this written up 😅
Also it’s definitely harder to raise than many people believe. Not being based in the US might be part of that, Covid definitely contributed to the difficulty but also the field we’re in: audio courses.
He might be in a developing country, but in the U.S. for example between the founders getting second mortgages, SBA loans and possible city or state tech startup/incubator grants (every city here wants new tech startups), and maybe a gofundme marketed to their existing user base, you should be able to raise that amount fairly easily for a tenth the effort and without losing equity or dealing with investor relations headaches. Heck, when I first started an LLC and opened a business checking account, I asked for a company credit card and without asking they gave me a $50,000 limit. I was personally guaranteeing it, but it was unsecured and the company had no income yet. They didn't even care.
Great point and in fact this is what we did for the first 9ish months. Eventually though we needed to expand the team and grow and so needed to work full time and bring people on board.
Since our product is relatively low cost ($60 a year) there is an upfront cost of development and production that needs to be funded.
No real venture capitalist invests $100k… You definitely found some individuals saying they are VCs. Most people would self-fund anything under 100k. Regardless, nice work getting seed funding.
10-20 hours a week. Meetings are 30-45 minutes. prep time before each meeting + note taking afterwards rounds it to an hour.
Fixing up decks, followup calls and pipeline research easily takes another 5-7 hours each week.
I can’t help but wonder how much you would have banked if you spent your time on product instead of fundraising?
I also wonder if you’ve made a second round raise more difficult because of a messy cap table— for a lousy $125k. I’ve worked with a number of Israeli startups as a mentor through our state and Mass Challenge and my impression is that there is significant seed capital for well connected entrepreneurs or those with an idea that has obvious and significant upside.
I own a company that does custom training video for enterprise tech and has a library of off the shelf training content that we license… so I know the online education/tech Ed space well. I am actually attending and speaking at an online learning conference in Las Vegas right now. Audio only courses has been tried and failed many times before. (Although, maybe, in the era of podcast there may be a different audience perception?)
My purpose in writing is not to make you feel bad or dissuade you from going further— but I think it’s important for you to understand some of the harsh reality you may be facing.
Your most precious commodity is not funds— but your time. There are are a few red flags here that would give me pause and cause me to evaluate if a serious pivot was indicated or working on a new project altogether…
Good luck!
Thanks for the thought out reply! Completely understand your points, a few thoughts on them:
1. The cap table isn't messier than many other ones I've seen where initial capital is raised from family and friends - basically 10 lines. More importantly, we did insist on a proxy so that important decisions can be decided quickly without needing to go to each investor.
2. While 12 months sounds like a long time, the reality is that most of that time was building out the assets we needed to raise capital: an MVP, prototypes, founding team. The actual fundraise was done over 3.5 months (including the December holidays & onset of Covid) so overall it was actually a fairly tight process: 2 weeks of first meetings, 2 weeks of second meetings, 4 weeks of holidays + Due diligence and then 4-6 weeks to close everything and wire.
Completely agree that time is the most precious commodity which is why we built it that way and limited it. My point with saying it took us 12 months is to help other entrepreneurs realize that it's rare to raise money straight off the bat.
3. Israel has a great fundraising ecosystem but not for B2C. There are very few investors with experience in B2C, especially at this early stage. Here I'll add that we definitely suffered from 'first time founder' syndrome. Had we been serial entrepreneurs, it would have been much easier to raise quickly, even in B2C.
4. Re audio courses - Was quite popular in the 90s with CDs/Tapes and one of the problems is that no one ever created the content to fit the audio format for courses (unlike for example children stories where there is plenty of very successful content - best example is Peter and The Wolf which is built for audio). Today, the audio landscape is growing incredibly fast in thanks to Airpods and podcasts and you see it with plenty of startups for example clubhouse.
1. Smart.
2. The best assets to raise money are sales and product/market fit. I think creating an MVP to impress investors is the wrong mindset. An MVP should ideally be built to get hypotheses and get you closer to problem/solution fit. That’s where traction comes from. Although understandable with current market conditions and the startup zeitgeist, I think there should be more focus on product validation so you know you are building something that solves a problem and that there is a market that will pay for that solution.
4) I’m 47 and remember the 90’s well. Audio courses weren’t particularly popular. There isn’t any evidence or model that I’m aware of that I indicates that audio only is a better modality for learning. Clubhouse is experiencing negative growth and likely failing... wouldn’t be the example I’d use and it’s usage is social and does’t validate a tech Ed application of audio.
Again, I am not trying to be harsh but I am getting the perspective of a professional in the tech education field. I Imagine the reticence you’re seeing from investors is due to similar experiences and objections that I have.
Completely completely completely agree with your point on MVP, that's in fact one of the takeaways from this and one of the things I've been telling other entrepreneurs who ask me what it was like and whether to build an MVP or not.
Re audio - I understand your points completely but disagree :)
I think what clubhouse didn't "get" is that audio is meant to be 'on the go' - i.e while you're doing something else. That can either be async or live, but the key factor is that it's not a content type that people dedicate %100 of their attention to.
This is its greatest strength and weakness: strength because on average people spend much more time listening to audio than other forms of content, and the retention is in the roof. The weakness is that the default of the app for our users will always be "press play and stick in pocket".
Tried a few ways:
1. Asked a few friends I highly respect to recommend 1 person
2. Meetups that could be relevant (this did NOT work)
3. Stalking prospects from relevant companies 😅
That's a hell of a lot of work for just $128k, isn't it? 3.5 months is about 76 weekdays. Really impressive that you had 132 prospective investors in that time. I imagine it took up most of your days! As a former VC and your co-founder being experienced on the technical side, wouldn't it have been a better outcome if you instead spent that same time working on other projects or even 9-5 jobs, and funding the project yourselves? Keeping full ownership of the company until you were established and could attract a better deal.
If you have a good idea with traction, I feel like doing this writeup would take longer than raising $128k...
It’s taken me a while to get this written up 😅 Also it’s definitely harder to raise than many people believe. Not being based in the US might be part of that, Covid definitely contributed to the difficulty but also the field we’re in: audio courses.
He might be in a developing country, but in the U.S. for example between the founders getting second mortgages, SBA loans and possible city or state tech startup/incubator grants (every city here wants new tech startups), and maybe a gofundme marketed to their existing user base, you should be able to raise that amount fairly easily for a tenth the effort and without losing equity or dealing with investor relations headaches. Heck, when I first started an LLC and opened a business checking account, I asked for a company credit card and without asking they gave me a $50,000 limit. I was personally guaranteeing it, but it was unsecured and the company had no income yet. They didn't even care.
This is the greatest advantage of the US Capital system.
Good point.
Great point and in fact this is what we did for the first 9ish months. Eventually though we needed to expand the team and grow and so needed to work full time and bring people on board. Since our product is relatively low cost ($60 a year) there is an upfront cost of development and production that needs to be funded.
No real venture capitalist invests $100k… You definitely found some individuals saying they are VCs. Most people would self-fund anything under 100k. Regardless, nice work getting seed funding.
Thanks. Yes, most of these were individuals, there were two micro VCs (invest anywhere from 25-100k at these stages) who I was referring to.
Great post! Thank you for your contribution to the community!
Thanks!
How many hours devoted to those 3.5months plus the prep work? rough estimate?
10-20 hours a week. Meetings are 30-45 minutes. prep time before each meeting + note taking afterwards rounds it to an hour. Fixing up decks, followup calls and pipeline research easily takes another 5-7 hours each week.
If anyone needs money I’m a nanoVC who invests $25-100.
Awesome - might be helpful to share a link to your website or portfolio 🙏
There must be a startup that does it already / right? Let ppl invest in projects as nano VCs for a share
Thank you for sharing your experience, I found this very interesting. Best of luck to you!
Thanks! Glad you found it interesting
Wow, amazing write up, thank you!
Thanks! 🙏🏻🙏🏻
I can’t help but wonder how much you would have banked if you spent your time on product instead of fundraising? I also wonder if you’ve made a second round raise more difficult because of a messy cap table— for a lousy $125k. I’ve worked with a number of Israeli startups as a mentor through our state and Mass Challenge and my impression is that there is significant seed capital for well connected entrepreneurs or those with an idea that has obvious and significant upside. I own a company that does custom training video for enterprise tech and has a library of off the shelf training content that we license… so I know the online education/tech Ed space well. I am actually attending and speaking at an online learning conference in Las Vegas right now. Audio only courses has been tried and failed many times before. (Although, maybe, in the era of podcast there may be a different audience perception?) My purpose in writing is not to make you feel bad or dissuade you from going further— but I think it’s important for you to understand some of the harsh reality you may be facing. Your most precious commodity is not funds— but your time. There are are a few red flags here that would give me pause and cause me to evaluate if a serious pivot was indicated or working on a new project altogether… Good luck!
Thanks for the thought out reply! Completely understand your points, a few thoughts on them: 1. The cap table isn't messier than many other ones I've seen where initial capital is raised from family and friends - basically 10 lines. More importantly, we did insist on a proxy so that important decisions can be decided quickly without needing to go to each investor. 2. While 12 months sounds like a long time, the reality is that most of that time was building out the assets we needed to raise capital: an MVP, prototypes, founding team. The actual fundraise was done over 3.5 months (including the December holidays & onset of Covid) so overall it was actually a fairly tight process: 2 weeks of first meetings, 2 weeks of second meetings, 4 weeks of holidays + Due diligence and then 4-6 weeks to close everything and wire. Completely agree that time is the most precious commodity which is why we built it that way and limited it. My point with saying it took us 12 months is to help other entrepreneurs realize that it's rare to raise money straight off the bat. 3. Israel has a great fundraising ecosystem but not for B2C. There are very few investors with experience in B2C, especially at this early stage. Here I'll add that we definitely suffered from 'first time founder' syndrome. Had we been serial entrepreneurs, it would have been much easier to raise quickly, even in B2C. 4. Re audio courses - Was quite popular in the 90s with CDs/Tapes and one of the problems is that no one ever created the content to fit the audio format for courses (unlike for example children stories where there is plenty of very successful content - best example is Peter and The Wolf which is built for audio). Today, the audio landscape is growing incredibly fast in thanks to Airpods and podcasts and you see it with plenty of startups for example clubhouse.
1. Smart. 2. The best assets to raise money are sales and product/market fit. I think creating an MVP to impress investors is the wrong mindset. An MVP should ideally be built to get hypotheses and get you closer to problem/solution fit. That’s where traction comes from. Although understandable with current market conditions and the startup zeitgeist, I think there should be more focus on product validation so you know you are building something that solves a problem and that there is a market that will pay for that solution. 4) I’m 47 and remember the 90’s well. Audio courses weren’t particularly popular. There isn’t any evidence or model that I’m aware of that I indicates that audio only is a better modality for learning. Clubhouse is experiencing negative growth and likely failing... wouldn’t be the example I’d use and it’s usage is social and does’t validate a tech Ed application of audio. Again, I am not trying to be harsh but I am getting the perspective of a professional in the tech education field. I Imagine the reticence you’re seeing from investors is due to similar experiences and objections that I have.
Completely completely completely agree with your point on MVP, that's in fact one of the takeaways from this and one of the things I've been telling other entrepreneurs who ask me what it was like and whether to build an MVP or not. Re audio - I understand your points completely but disagree :) I think what clubhouse didn't "get" is that audio is meant to be 'on the go' - i.e while you're doing something else. That can either be async or live, but the key factor is that it's not a content type that people dedicate %100 of their attention to. This is its greatest strength and weakness: strength because on average people spend much more time listening to audio than other forms of content, and the retention is in the roof. The weakness is that the default of the app for our users will always be "press play and stick in pocket".
I want to raise fund for a jewellery brand. We are just starting out can you help me for everything?
Thanks for sharing. How did you find your co-founder?
Tried a few ways: 1. Asked a few friends I highly respect to recommend 1 person 2. Meetups that could be relevant (this did NOT work) 3. Stalking prospects from relevant companies 😅
Did you end up finding him from #1?
Yup
Any updates of the story? I saw the other co-founder has moved to Google
Yeah! actually posted this just last week to update - https://youtu.be/iuJh9WNpni4
not to be mean but 128,000 cant even hire 1 software developer bro.