Most financing announcements are incredibly similar. They include the amount of cash raised, the investors, what the cash is for (“we’re hiring!” Yes, we know…), and if the press can get it, a big focus on valuation and occasionally metrics. As Brad Feld pointed out, these types of funding announcements don’t tell a real story and there is little to learn from them. Now there is a very small group of people beginning to publish transparent funding announcements which we believe are far more interesting.
So in the spirit of transparency, one of our founding values, here is the full scoop on how we raised our seed funding for VENTUREAPP.
We previously wrote about how we landed on the idea for VENTUREAPP, detailing our initial efforts to create a startup studio, which turned into the platform we’re building today. As mentioned, we couldn’t raise enough capital to really get a studio off the ground but while we were pitching that concept, an initial studio project idea piqued the interest of one investor. The concept was a software platform to help aggregate key resources for startups. At first, we thought this would be mostly content based, which you can see from the initial mockup below.
The more and more we thought about the platform, the more we realized that the end goal of the platform is really similar to the studio’s – help entrepreneurs succeed – but much more scalable. As we spoke to a number of tech companies in Boston, we quickly learned that companies of all sizes need help with many different aspects of their business. Whether they were pre-funding, seed-funded, or much larger, all professionals we spoke to wanted direct connections to solutions for their professional needs.
In March 2015, we dropped everything to focus on this platform. After a long session of riffing on the product, we all agreed on loving the word “venture” as it embodies the pursuit of building something from nothing. Following this session, we conducted a lot of research and spoke to many entrepreneurs, landing on the decision to name the platform VENTUREAPP. While we knew from the beginning that VENTUREAPP could be a large scale professional network, our initial focus was to help entrepreneurs, which “venture” implies. And, the domain was surprisingly available for about $50.
Jeff Fagnan & FKA, soon to be Accomplice
I first met Jeff Fagnan in early 2011 at the old Atlas Venture offices. I had been introduced to Jeff by Ryan Moore, who at the time had just left Grandbanks Capital to join Jeff at Atlas. I had been pitching Ryan at Grandbanks for Streetwise Media when he made the jump over.
When I first pitched Jeff, Atlas was moving offices from outside the city into Cambridge. The place was big and empty and ultimately would be the first of many VCs making the move from Waltham and other suburbs to the city. I printed out a copy of my deck and as we sat down, Jeff flipped through a few pages and quickly discarded it.
“So what are you building?” he asked me. I responded, “a media empire.” He laughed, asked a handful of questions and within about 15-20 minutes told me that he was “in” and to use his initial commitment to raise a seed round.
Fast forward to March 2015 and a lot had changed. We sold Streetwise at the end of 2012 and Atlas had announced at the beginning of the year they would be splitting its tech and life sciences practices into two funds. Over the past four years, the Atlas tech practice had developed into one of the early stage leaders in Boston VC. They took on a lot of the challenges Boston’s tech ecosystem faced by seeding a high number of companies, particularly those with untested founders.
We spoke to Jeff and Ryan about the studio concept and both were supportive personally, though it wasn’t a fit for the fund. This was a relatively common answer we received from VCs in the area. So when we decided to try to raise a seed round for VENTUREAPP, we were a bit weary of immediately circling back with a number of the funds we already pitched for a new concept. We simply didn’t like the idea of pitching multiple ideas. Luckily, I had known Jeff and Ryan for a while, and I knew we could have a relatively casual conversation about the idea.
Right at the end of March, we sat down with Jeff and ran him through a short deck outlining VENTUREAPP. Jeff quickly said he liked the general concept and had kicked around a similar idea with a number of people over the years. He told us to flesh out the product mockups more and to come back in a week after he had the time to talk to some people and do his own research.
After several months of what felt like pushing a boulder up a hill trying to raise money for our studio concept, this kind of interest felt great. We quickly developed our product vision and met with Jeff a week later. Our big focus was to make sure we shared the same vision and philosophy on what the platform could and should become. After about an hour or so of discussing and poking holes, Jeff said to give him a week and come back. By April 8, and after our third meeting, we had a term sheet from Accomplice to invest $1.25M at a $7,500,000 pre-money valuation. Similar to four years earlier, Jeff told us to take the commitment and fill out the round up to $2.5M.
Filling out the round
Naturally, having a lead makes filling out a round easier. That said, many a deal have fallen apart after locking down a lead. After Jeff was committed, we took a few meetings with seed funds, a few bigger funds, and one strategic investor. Boston Seed, investors in Streetwise who had also been supportive of our studio idea, committed quickly. Mark DeNino from TL Ventures, who had lead the Streetwise deal, also quickly committed. The strategic investor that we were in talks with wanted to fill the rest of the round, which wasn’t ideal in our opinion because we wanted to get more folks from the tech community engaged with building the network. We decided to slow play the strategic and see what angels would want to invest. We were rolling.
By May we had a few seed funds that were very interested, two funds that typically do A rounds, and a handful of angels interested. The first “no” we received came from a fund here in Boston who didn’t believe the market was big enough. Frankly, I thought the reason was BS, but it’s all part of the game. We received a few other genuine “no’s”: funds were investors in businesses that were tangentially competitive, they thought the price was too high or because we were too early and didn’t have enough proof. It’s never fun getting no’s but we weren’t worried because we still had our strategic investor to fill out the full round. Until we didn’t…
At some point in May, our strategic basically went dark. We actually were in close contact with them, but just never heard back on closing an investment, or the reason for not closing. While we had $1.6M committed, we pledged to close $2M. Our budget to get us through 18-24 months required ~$1.5M and anyone who knows anything about startups knows nothing goes according to plan. So, after taking our foot off the gas with some other funds, we needed to figure out how to get to $2M.
Our team sat down and put together a comprehensive list of every angel we knew in Boston to reach out for a meeting. Luckily our shared time at Streetwise and DailyBreak got our foot in the door quickly with a number of great people. From our past experiences, we also knew the best way to fill out the round would be to continue to make progress on the business. So while we began to pound the pavement for angels, we also cranked on getting businesses to sign on to a platform that didn’t exist yet.
Our first angel commitment came from Jason Robins, CEO of DraftKings. In one phone call, Jason quickly grasped the concept of the business and committed to investing. Next was Diane Hessan, then Sarah Hodges, then Mike Baker, Dharmesh Shah, and so on. We ran an intense, two month angel fundraising process and ultimately got to $2,035,500. By the end, we pushed so hard some folks heard about the raise and came to us.
Our last investor signed in August, three months after we closed with Accomplice. It was one of the longer seed fundraising processes that I’ve heard of from first to last check, but for our type of business, it was important to us that we have a strong network. And, now we have a significant amount of people who support entrepreneurs as investors in VENTUREAPP, which aligns well with our mission. Here is our full investor list:
- Fullstack Ventures
- Boston Seed Capital
- John and Laurie Garbarino (Webster Capital, parents)
- Jason Robins (CEO DraftKings)
- Diane Hessan (CEO Startup Institute)
- Dharmesh Shah (CTO Hubspot)
- Mike Baker (CEO DataXu)
- Fred Shilmover (CEO Insight Squared)
- Ty Danco (TechStars)
- Brian Shin (CEO Visible Measures)
- Mike Salguero (CEO Butcher Box Delivery)
- Sarah Hodges (VP Pluralsight)
- Phil Beauregard (Objective Logistics)
- Brent Grinna (CEO EverTrue)
- TJ Mahony (MD BOSS Syndicate)
- Bridge Boys
- Michael Krug (CIGNA)
- Rick Desai (Co-founder Dashfire)
- Andrew Paradise (CEO Skills)
- Charley Polachi (Partner Polachi)
- Pat Kinsel (Polaris, NewCo)
- Allison Capolupo (Twitter)
- Rod Fisher (President, Fisher International)
During this process and our other experiences raising capital, we learned a lot about how the Boston investment community works. We hope by sharing more detail than usual regarding these experiences, that you’ve learned something new, too. Please feel free to reach out to us directly with any questions, we are happy to help: firstname.lastname@example.org.