Raising money for your startup? Our series A & lessons learned
As you may have heard, just over a week ago (on Cinco de Mayo!) Dasheroo officially launched and announced our $3,250,000 Series A funding. Woo hoo! Now, I don’t know about you, but that’s a boatload of money. Sure, uber just announced an additional $1.6 BILLION (debt) raise on top of a recent $1.2 billion round, so $3.25MM could get lost under their couch cushions. Good luck, uber!
But back to ‘lil ‘ole Dasheroo, raising money for your startup and the lessons learned. Thanks to our awesome users, we got the vote of confidence for our very first round of funding. Here’s some things I learned from the process:
- Bootstrap it for a while: At Dasheroo, we kept our day jobs for the first several months, working nights & weekends for free. Then working full time for very reduced pay. We squeezed a dime outta every nickel in the process. Why is this a good plan? First, it instills a sense of financial responsibility in everyone. Second, it should allow you to show some progress, prior to asking for money which just about anyone who will give you money will want to see. At Dasheroo, we have investors that love what they call our ‘blue collar’ approach, meaning the ability to get a lot done with a little, and roll with ‘surprises’ in the form of macro economic issues or potential pivots.
- Put skin in the game: Similar to above, if you and your founders can invest even a little of your own money it gives investors a lot more confidence in your conviction. At Dasheroo, each of the 4 co-founders invested, as did our parents. Talk about pressure!
- Make sure you need it: And really want It. This is my 3rd start-up. For the first 2, we raised just over $1MM total for each. That’s great. It vastly reduces ‘dilution’ but may also mean slower growth depending on your business. A lot of founders grapple with this dilemma, fearing the dilution quandary and the pressure by taking ‘VC money’. So unless you feel very strongly about your near-term ability to execute, think twice! At Dasheroo, we see a large window of opportunity to own a big chunk of the global business dashboard market, so we jumped on the opportunity to grow fast.
- Develop a great story: I know, duh! But seriously, you need a concise and compelling pitch deck, and you need to rehearse it like crazy. We were fortunate to raise the first $2MM of our round without a pitch deck, but that doesn’t mean I didn’t have a ‘pitch’, it just wasn’t in the form of slides. But I needed a pitch deck for the last $1MM, and spent several weeks on it prior to having it be ready for prime time. Need some examples? Check out SlideShare, they have tons of actual pitch decks from companies like Square and LinkedIn.
- Don’t B.S.: Investors can smell it a mile away, and you will lose respect immediately. No one expects you to know everything, and if you get stumped during a pitch…well, you probably will freak out a little bit! So prepare all you can, make sure you hit the big notes and also prepare that you may get asked a question or two you can’t answer completely. Cop to it and stop the panic jig.
- Focus on metrics: Especially if this is your first rodeo, your potential investors want to be comfortable that you understand the metrics that will drive your business. So even if you don’t have all the metrics you’d like early on, and/or the metrics aren’t as strong as you’d like them to be, your understanding of your KPIs is key to establishing trust.
- Don’t take money from a-holes: Just like the adage “Don’t hire assholes”, why take money from folks you don’t feel good about? Please do not underestimate this suggestion. At Dasheroo, we are fortunate that our lead investors, Cloud Apps Capital Partners, are not just brilliant folks, they understand our business freemium model as well as anyone and they are like family. A very functional, business-focused family ☺
- Don’t blow it all in one place! You may feel extreme pressure to ‘put that money to work’ ASAP. And sure, your investors want to see rapid progress. But keep your head on your shoulders and keep some $ in the tank for opportunities that you may not have anticipated or problems like economic downturns or just plain screw-ups you make. Bottom line, have a solid financial plan, and it usually makes sense to spend the biggest % of your early stage funding on hiring exceptional people. At Dasheroo, less than 10% of our series A will be spent on conventional marketing, and about 80% is budgeted for hiring awesome folks.
- Don’t give up! Hey, we were very fortunate for our first outside investment (thank you Cloud Apps) to be significant. But that didn’t mean we didn’t get a lot of passes after that. We did. Even when we were within $250,000 of our $3,000,000 goal. I almost closed the round early, and then within 72 hours had 2 initial meetings with 2 incredibly influential investors who each came in at $250,000. I never would have imagined that, but we hung in there, and it happened.
Alright, for sure there is not ‘one’ formula for raising money for your startup. And we’ve all seen those crazy exciting exits like SnapChat and Instagram. But for most of us, it’ll be a bit more of a long haul. So hopefully the learnings above are helpful to you. Have some other ideas? Disagree with me? Let me know!