From Warm Intro to $107M: Qwil’s Step-By-Step Fundraising Journey
It’s a near-universal pain point for freelancers: the unpredictable cash flow cycle. It’s common to wait 30-plus days to be paid after completing a job, and sometimes, it’s just too long.
Qwil, says its co-founder and CEO, Johnny Reinsch, was born out of his own experience as an independent contractor with a high-value client that paid him late. “I was about to overdraw my bank account the day before my payment was due,” he says. “I tracked down the finance person and got the money just in time, but I was like, ‘why does it have to work this way?’”
As a self-described “recovering M&A lawyer” and a former exec at bitcoin wallet Xapo, he knew that it didn’t.
Enter Qwil — a fintech company with a mission to “empower freelancers with instant, convenient access to credit.” For businesses, it’s a way to streamline payments to independent contractors; freelancers whose clients use Qwil can elect to get a cash advance.
How does it work, and how did Johnny and his co-founders raise $107 million to make it happen? As he explained in our “How I Raised It” interview, it took an accelerator, a lot of warm intros and a dash of sci-fi nerd serendipity to get the deal done.
What is Qwil, and how does it benefit freelancers?
Once you’ve finished your work for a client and submitted your invoice, we’ll make an advance to you right on the spot. Based on the data we have, we’ll try and estimate when we think you’re going to get paid. You can either wait 30 days for $1,000 or take $990 today. In a nutshell, we make it easy for freelancers to get cash.
There are three basic reasons why freelancers take advances. My favorite one is that they put directly back into their businesses. For instance, an app developer might buy Facebook ads that result in more traffic, more downloads, and ultimately better ROI. If you’re a high-end freelancer working with an agency, you might hire a subcontractor so you can land another big contract
There are two other reasons: unforeseen expenses — that happens all the time. Sometimes you get a black-eye tax bill and you don’t have the cash to pay it. We’re there to help. The other is purely consumptive — some people just want cash now.
Cool. Let’s talk about money. How much have you guys raised and in how many rounds?
We’ve done a seed round and a Series A round — that’s equity. And we’ve done three different debt rounds: one for $2 million, one for $50 million and the most recent for $102 million.
Amazing. Let’s take it chronologically. Tell me about the seed round. How did you get started?
Our first real anchor was from venture capitalist Alireza Masrour at Plug and Play, in what you might call our pre-seed round. He was our early champion. Essentially, once he got conviction, $500K came in the door on top of their $100K check. It was great. They helped us with pitch practice and put us in front of corporates for distribution. There were a lot of great perks that came out of that.
How’d you get connected with Alireza?
A very good friend and former colleague from Xapo used to work for Alireza at Plug and Play. He said Alireza is one of the most helpful guys in the Valley. I met him, we hit it off and then the rest is history. That warm intro is pretty key. I’ve found that some of the best, most impactful relationships you’ll have with investors do come through a warm intro.
What happened next?
I met Sheel Mohnot from 500 Startups, who’s the partner that runs their fintech track. He wanted us to join it, but I was like, ‘dude, we don’t really need to join an accelerator. We understand what we’re doing.’
He was like, ‘I don’t really think you get it. I’ll help you with debt and help you deal with regulatory.’ He knew exactly what concerns I had — we didn’t have enough money to grow because we didn’t have enough money to advance to freelancers. Regulatory was going to become a big issue because we’re flirting with a bunch of highly regulated industries. As soon as he said that, I was like ‘all right, we’ll do it.’
So we joined 500 Startups. Their fintech track in particular is great. It gives a little stamp of approval to VCs. Once we had that standard, we were off to the races.
Then Silicon Valley Bank came out of the woodwork and gave us our first credit line for for $2 million.
Your next round was a Series A, correct?
Yep. Our Series A was a total of $5 million. We did what I like to call the ‘sand hill shuffle,’ which is essentially speed dating to meet potential employees who you can’t fire, which are investors. We met a ton of really great ones. We ultimately landed on Mosaic, a fintech-specific investor based in San Francisco.
They have deep operational experience in our industry. We hit it off from day one. It was that perfect alignment that’s so rare and amazing. When you have it, you jump on it and go all in. So I’ve got these investors now, employees that I can’t fire. But I wouldn’t want to, which is awesome.
How’d you get in touch with Mosaic?
One of our early supporters was Silicon Valley Bank. Ritika in their payments group is good friends with the Mosaic guys and recommended I speak with them, based on her understanding of our business. Another super warm intro.
How many investors did you talk to in each round? What did your funnel look like?
For the seed round, over 100. You’re playing a numbers game, especially in a highly regulated industry. For the Series A, we were able to cut that by a factor — there were tens of folks that I was seriously interested in working with.
Another investor on your term sheet is Cantos. What’s the story there?
That’s a funny story. Cantos is a micro-VC fund run by Ian Rountree, who’s now very good friend. He’s probably one of the most hardest working VCs in the business. He actually reached out to me after 500 Startups, saying ‘hey, I want to be helpful.’ Ultimately we ended up hitting it off.
I’m a pretty big sci-fi nerd. There’s a book series called, the Hyperion Cantos by Dan Simmons, and it’s probably my favorite series. When I first met him, he was just Ian. When he sent me his sig page for his seed-round investment, it said Cantos VC. And I was like, wait, mean like the Hyperion Cantos?
He’s like, ‘yeah, of course.’ So two sci-fi nerds came together over Qwil.
Let’s talk about the debt side. How is it structured?
The interesting thing about debt markets is that they’re highly inefficient. Typically, you draw on an all-asset lien baseline: say, draw $10 million because I think my volume is going to be X. We didn’t structure it that way.
We can underwrite on an advance that’s $5 in the same way that we can underwrite an advance of $5 million. Because we’re that good, our capital has to be really flexible, and the advances themselves are rapid fire.
Route 66 is a VC fund with a pretty substantial credit arm — they did the $102 million. The way their credit line works is, we prove our borrowing base and draw based on every single advance that’s firing off through the system on a daily basis. It’s all settling, going through and turning over on a weekly basis. From a capital efficiency standpoint, it’s much better than the all-asset lien. One of the reasons why I really like Route 66 is that they were able to innovate on the lending model in a way that really no other lender could.
Where does this funding round take you? Do you forecast having to raise multiple rounds, or is this going to get the flywheel in motion?
The flywheel is already spinning around. On the equity side, it put some more firepower behind us. On the operational side, we’re going to be raising debt for the lifetime of our business — that’s just how this business works.
What advice would you give yourself if you were doing this all over again?
Fintech is a highly regulated industry. You can innovate and you can move fast and break some stuff, but there are some things that you just cannot break. There are things you have to treat very delicately. You have to kind of go with the flow of the process and how it works.
Your payments lawyer is probably going to be your best friend, alongside your corporate counsel and your compliance officer. They’re going to be the people that keep you out of jail.
The other thing is, just take the money. Cash is your fuel. I’ve been very lucky, frankly, that I hit it off with all my investors so well. But in the rare case where it’s not a perfect fit, it’s going to help you get to the next level. That’s okay.
Just make sure that you are focusing on the right metrics and that whatever fuel, whatever capital you’re taking in is going to help you get to whatever that next level might be. I guess my advice to myself would be: slow down, be thoughtful, and it’s going to take longer than you think.
Nathan Beckord is the CEO of Foundersuite.com, a software platform that has helped users raise over $1 billion in seed and venture capital since 2016. This Q&A is based on episode of Foundersuite’s How I Raised It podcast, a behind-the-scenes look at how startup founders have raised capital.