How NOT To Get Investment For Your Startup
A story of rejection, betrayal and a female virtual assistant.
And to take you on this ride?
I introduce myself (Tom, cofounder of AskTina.io) as your guide for this journey.
Other characters include (but not limited to): James Bradley (cofounder) and of course, Tina herself.
It’s a stunningly humid evening in Soho, Hong Kong, two days after Tina’s v1 launch.
Her Product Hunt listing reached a meagre 68 up-votes, though around 20 Slack Teams have integrated her and two of these have upgraded to the $197 monthly subscription (unlimited amounts of admin tasks outsourced through Tina Monday-Friday 24 hours a day).
Only a third of the way through my first strawberry daiquiri, I antisocially connect to WIFI and begin the habitual, smart phone facilitated dopamine hunt through:
- Slack
- Skype
An email notifying me of the Linkedin message shown above attracts my attention:
To put this message in perspective…
Over 4 years of starting startups/online businesses I have never been approached by or considered approaching an investor.
A mixture of fear and $ signs scroll into my subconscious as I continue socialising.
2 hours (and numerous margarita’s later), it seems like a fantastic idea to respond.
Fortunately enough, as I checked in the morning, we had managed to schedule a call for later that week.
Though unfortunately like most of the investors we have spoken to over the past 3 months since that fateful response…
“More traction please”
Translated: you’re not good enough.
The rest of this post will cycle through a series of emotions that I believe accurately depicts the fundraising process for all early stage startups.
Delusion
Remember when that girl/boy said she liked you on the playground?
Though he/she was far below your league, you still began to develop a bullish confidence.
Exactly the same thing happened here:
Now one investor is interested, surely all of them will be?
So I dropped an email to the two startup investors I had in my network:
Tim Jackson (Lean Investments)
Safe to say that we did not get an immediate response.
Though this could have been due to our extraordinarily high valuation (£6.0m), for what was a little more than a basic MVP, with £600 MRR.
I don’t blame them.
Next…
John Spindler (Capital Enterprise)
Here we go…
My second conversation with a REAL life investor.
It quickly became apparent that we were not clear on the future business model.
- Were we to use employees or freelancers?
- Could we actually automate admins tasks?
- If so, how long until we did and what effect would this have on our margin?
John said that we should spend some time working on this and then maybe we could further discussions.
With my two first degree investor connections exhausted, it was time to widen our net…
Julian Bewley (Angel Investor)
Yes Tom, you launched a company 3 weeks ago and are now talking to VC firms?
(I hadn’t yet clarified the difference between angel/seed/VC funding yet)
Regardless…
Julian was awesome.
I provided a product demo, he was excited and said that he would circulate the deck to his network as he currently was not in a position to invest.
(Bear in mind, this is an early version of Tina’s deck, it has since matured. Drop her an email on: tina@asktina.io if you would like her to send it over.)
Ben Tompkins (Eden Ventures)
Still riding on the deluded notion that our bare bones startup would be able to pull in £300k seed investment from strangers, I reached out to my network to request introductions:
And…
George very kindly provided a soft intro to Ben Tompkins of Eden Ventures, which I was then able to leverage on the outreach mail:
I jumped on a call with Ben, who was immensely helpful and provided invaluable feedback, regardless of the fact that his firm provide much later stage investments.
With my second degree connection drying up, it’s time to resort to the marmite of online marketing: cold email…
Anna Bofetta (Balderton Capital)
Ok, let’s work on some psychology here…
1. “Saw your email address…” TRANSLATED:
I’m not currently spamming all London investors, was just researching…
2. “…the current seed round we are raising…” TRANSLATED:
We are raising money, this is happening with or without you.
3. Requesting a micro commitment:
“Let me know if you would like me to send out some further details for your review”
Won’t go too deep into this one, but when a person takes a small action, they are more likely to take further actions.
Therefore, if you are trying to influence someone’s behaviour, it is sometimes a good idea to request a micro commitment first.
4. Positivity: “Have an awesome day”
5. Signing off email Twitter profile with 10k Followers for social proof
With that sort of psychology at play, how could Anna resist but jump on a call?
Which is exactly what happened, she sharply assessed the business model and offered testing services for further versions of Tina.
We now recruited the biggest tech investor in Europe ($2.3bn under management) into our testing team… progress.
Anger
Moshe Bar (Atlantic VC)
One of those select few investment companies that received my cold email was Atlantic VC, run by a pretty serious bro called: Moshe Bar:
As you can see from his Wikipedia page, he has had some (extremely) large exits and writes Linux text books for fun.
However, it seems that Moshe was not a fan of our “make money first” business model, and suggested that we take the Google/Facebook approach:
Build something, give it away for free, find users then monetise.
I disputed this.
Which resulted in the call quickly ending with Moshe’s sign off:
“Have a nice life”
As Florence says:
“It’s always darkest before the dawn”
Apathy
Stephen Fishburn
Once you are effectively told by a VERY successful entrepreneur/investor that you are wrong and that you have invested your time and energy into the wrong thing during the past month…
It doesn’t have an amazing effect on team morale.
Which is why we turned to our awesome advisor for input:
I met Stephen after cold emailing him to invite him to work with a previous business, we got on VERY WELL and he then proceeded to give awesome advice and assurance during this dark time.
Philip Wilkinson
One of London’s top angel investors educates early stage startup founders on the fundraising process, I went through the informative course and then dropped him an email:
I then decided to head to a full day Startup Grind conference in London to do some “networking”.
Now, maybe I need to work on my “networking” skills as I met quite a lot of people, though surprise! None of them wanted to give us any money.
Furthermore, I didn’t actually get to meet Mr Wilkinson.
Chris (Innovation Nest)
I was also working in Poland at this time so decided to reach out to some Polish VC’s:
OK sure, I’ll come to the saasmeetup.
Again, met a lot of people, but for some reason, none of these people wanted to give money to a stranger.
So let’s recap…
At around this point, I had struggled through around 20 conversations with different accelerators, investors and VC’s, with NO commitment to fundraising.
Why keep going?
As despite the fact that Tina may actually not receive funding, there were still many advantages to the campaign:
- Expanding our network
- Could potentially educate others about the process in the future
- I enjoy talking to intelligent people
Moving forward…
Optimism
And then things started to brighten up.
I was moving into the final stages of the process for a New York based accelerator (more on that later).
And started getting emails from people like:
Ignite London
I had spoke to Martin back in the early days of this campaign, we had a good connection and thought that the UK based accelerator would be a solid option.
Neil Raymond
Hint: when requesting investment from someone, don’t reveal the fact you haven’t invested ALL of your own capital in the same product because you think you will “get a better return” elsewhere.
A disproportionate amount of my net worth is tied up in the notoriously volatile, digital currency: Bitcoin.
That said, we seem to finally be making some progress:
“You’re clearly a smart guy…”
Though of course, Neil was unable to invest as I had just shared a different, more profitable investment strategy… than my own business.
Confidence
Lean Investments (again)
Casually checking my inbox during an unproductive afternoon and receive a mail from Tim of Lean Investments enquiring as to whether we were still fundraising…
YES
Out of the blue (it’s almost been 2 months since I sent the original deck above), I am invited for the famous “walk in the park” with the founding partner of Lean Investments.
Fast forward one week, it’s 8am on a fresh summer morning in Kensington Gardens and I’m walking with Tim around the pond.
It becomes immediately evident that Tim is a very intelligent guy. He focusses almost exclusively on the “virtual assistant” and my experience with outsourcing companies.
He finishes by saying:
“I am not in a place to invest right now, but if anyone is going to crack this virtual assistant thing, you are well place.
Get back in touch in a few months”
And then…
Almost as if they were aware of the above statement by Tim, we receive this mail from an awesome accelerator over in New York.
Starta Accelerator
The Starta Accelerator specialises in taking European startups over to the states an integrates them into the US market.
I initially accepted this offer to move to New York and receive $20k for 7% of Tina.
However, after further discussions with friends/advisors and James, we decided that we have a very good chance of building out Tina v2 without funding, gaining early traction and then raising money at a greater valuation later this year.
Next?
We have a strong team, have turned down an investment at a $280k valuation and have a solid character/brand forming:
Tina v2 is under construction, we are forming a loyal customer base and we have no requirement to raise funds for the next three months.
Though when we do…
We have a story to tell.
(If you know anyone who is on a similar journey or is about to embark upon one, feel free to use the share buttons below to send this story their way… who knows what effect it could have)
