The Road to Funding

The Startup Grind Team
Apr 21 · 16 min read

While much has changed over the past year including going virtual, many startup needs remain the same; the need for mentorship, investor introductions, finding market/product fit, customer acquisition, revenue generation, finding strategic partners, scaling to new countries, and above all fundraising.

It’s Funding Month at Startup Grind and we are thrilled to speak to some of our founders who have raised once, twice, and up to 5 times since their launch. By sharing a similar set of questions with 10 of our most anticipated startups, Fundraising still remains one of the most difficult tasks for startup founders and surprisingly enough, many startups were able to persevere during a pandemic and push through the “NOs” and show up for their teams. Let’s dive into the who, how, when, and what these founders had to do and learn to get the job done and take their disruptive startups to the next level.

1. Flatfile

Flatfile’s vision is to enable seamless data transactions between every organization in the world. With AI-assisted data onboarding, they eliminate repetitive work and make B2B data exchange fast, intuitive, and error-free. Flatfile automatically learns how imported data should be structured and cleaned, enabling customers and teams to spend more time using their data instead of fixing it. Flatfile has transformed over 700 million rows of data for companies like ClickUp, Blackbaud, Benevity, and Toast. To learn more about Flatfile’s products, Portal and Concierge, email hello@flatfile.io or get started for free at flatfile.io.

What are the avenues by which the funding was received?

We raised Flatfile’s $35M Series A much like we did our Seed round. David and I kept in close touch with prospective Series A leads, and explicitly shared the goal criteria that we were tracking against ahead of raising additional capital. Once we had achieved those milestones, we let those investors know that we were open to raising capital. That started a fairly quick (~2 week) pre-emptive fundraise process.

When did you know you were ready to fundraise?

With each fundraising round, we’ve set clear goal criteria against which we measure our readiness to raise. They’ve included things like revenue targets, the launch of a new product, and unit economics measures we were targeting for the business.

What steps did you take?

Once we had achieved our internally agreed upon Series A targets, we led the prospective leads now. Because we had an established and growing relationship with each of them, we were rapidly able to move into diligence with each. By the end of our first week of partner pitches, we had several term sheets to consider.

During the actual fundraising period, we let VCs know that it was time to make a decision. Our objective was to raise quickly and return our focus to building the business. The combination of being direct, pre-existing relationships, and known interest in the market ensured that we weren’t spending a significant amount of time with casually interested investors.

How many times did you raise?

We’ve raised venture capital 3 times now (for a total of close to $45M) over a span of about 18 months. What that required was a highly efficient approach to each fundraise, so that we wouldn’t take our focus away from building Flatfile.

What did you learn each time?

Pre-seed: The importance of crafting a relatable vision is crucial. And making sure your small bits of market evidence align with that vision. Also, finding a partner who is comfortable with broad sweeping changes in the business in rapid succession.

Seed: The importance of being organized. We had a lot of compelling evidence to support our traction but needed to convey it in a way that encouraged prospective investors of our ability to execute.

Series A: Doubling down on organization is a must but in an even more granular way. We had to convey the unit economics of our business clearly, with evidence, to support an intense diligence process. Further, knowing what investors expect from a company at the Series A stage: revenue targets, number of customers, business model definition, etc.

What advice/tips would you give others?

I actually did an interview with SG’s Alex Gordon-Furse on this, which you can find here. Also happy to discuss with any SG founders thinking about fundraising!

2. Tymit

Tymit is reinventing credit by making it flexible, safe and honest, for better financial health and peace of mind. Tymit’s installment-based credit gives customers the power to plan the way they pay, whether they buy in-store or online, offering total control and transparency through the Tymit app.

What are the avenues by which the funding was received?

Angel investors, office hours, and VC Funds.

When did you know you were ready to fundraise?

Our business is capital intensive so we started fundraising off the cuff with a PowerPoint deck.

What steps did you take?

Land the storyline, put together a PowerPoint deck that is representative of that storyline, do your research in terms of VC & Angel investors scouting by looking at their portfolio companies as well as their publications and find points in common, smash pitching meetings highlighting all those very points in the storyline, nail DD meetings by knowing your facts and negotiate valuation firmly.

How many times did you raise?

Twice since inception. Our pre-seed round in 2019 when we raised £2mn and subsequently raised a £5mn seed round in 2020.

What did you learn each time?

Persistence is key, conversations may yield no results for several weeks in a row but there is normally a tipping point where one positive conversation leads to the next, and before you know you are oversubscribed — so don’t lose your temper and keep trying.

What advice/tips would you give others?

Set yourself a six months timeline and spend 2 months to reach out to as many potential investors as possible but always prioritizing warm introductions. Use months 3 and 4 to hone in on those candidates that have shown greater interest and a greater chance of closing. Finally, use months 5 and 6 to make sure you deliver on every piece of info requested by your prospective investors.

3. LifeX Aps

LifeX is a Danish coliving operator with centrally located homes across top European cities. We provide beautiful, fully furnished co-living homes designed with the needs of our members in mind. Our community-minded concept is enabled by technology, so our housing is flexible, seamless, and most importantly, our members feel at home.

What are the avenues by which the funding was received? (Angel investors, office hours, interviews…etc)

We secured our most recent funding round in April 2020. This round was ​organized through ​Founders, a Copenhagen-based VC, Cherry Ventures, a Berlin-based VC fund, and ​V​ækstfonden, Danish Investment fund. Up until now, we have raised a total of €15m in funding from VCs, and well-known angel investors.

When did you know you were ready to fundraise?

We try to only raise as much as we can productively spend in around 18 months, or to reach our next big milestone. In this case, we had reached our goals and were ready to scale with our model to the next milestone, so we felt that the timing was right.

What steps did you take?

We spoke to around 40 different funds, most of them were VCs. We started by creating a big google spreadsheet with all the relevant funds that we wanted to talk to; including who could give us the best intro to the most relevant partner there. We also had a backlog of funds that had reached out to us before we were actively fundraising. We then got intros, sent teaser decks, and had multiple conversations with different partners, before presenting to the entire fund.

How many times did you raise?

This was the 5th round that we closed with LifeX, excluding smaller angel investments.

What did you learn each time?

Timing of the market is incredibly important and can change quickly. So try to close around whenever the investor community is looking favorably at your industry. Covid hit us just as we were about to sign the investment agreement and that had an impact. Be very careful with scaling, don’t do it too fast. Additionally, try to resist having a big team as long as possible, and never compromise when hiring new candidates; it’s better to not hire someone than to hire the wrong person for the role.

What advice/tips would you give others?

Prepare yourself for a lot of “no’s”. It can be a draining process, but remember that you only need one yes to make it all worth it. The process is different for every investment stage (pre-seed, seed, series A/B/C). Try to get as many insights as possible from other entrepreneurs who have recently been through an investment process at the same stage. Be very careful with who you bring on board as an investor as it’s a long-term relationship, with most taking a board seat.

4. CometChat

CometChat empowers businesses to quickly add text chat, voice and video calling/conferencing to their websites and apps across industries ranging from virtual events and telehealth to social communities, online education, marketplaces and more. For over 10 years, our dedicated team has obsessed with building the most robust, easy-to-use, reliable in-app messaging solution on the market. Our chat API and cross-platform SDKs are incredibly secure and highly scalable. That’s why we’re trusted by over 50,000 developers worldwide. Our headquarters are located in Denver, Colorado, and our talented team is spread out globally, united by a shared mission to enable meaningful connections between real people in an increasingly digital world.

What are the avenues by which the funding was received?

Received through a network of angel investors and an accelerator (Techstars) — that got the ball in motion and further introductions were made which we were able to successfully move forward with.

When did you know you were ready to fundraise?

When we got the feeling. We’d be stupid not to raise

What steps did you take?

Fundraising is a continuous process. Even when one is not fundraising when is always speaking to potential investors and developing relationships. When the time was right we reached out to the ones we had the greatest comfort with and began the conversation.

How many times did you raise?

Four times.

What did you learn each time?

Momentum is key. When things move, they move really quickly.

What advice/tips would you give others?

Don’t believe everything you read online. There isn’t a fixed way to raise. Be authentic to your vision, the business, and yourself.

5. RoomPriceGenie

RoomPriceGenie makes high-quality dynamic pricing possible even for smaller hotels. This increases their revenue by 15–20%, is very simple to implement, and helps them to compete with the larger hotels and chains.

What are the avenues by which the funding was received?

Our pre-seed round was led by an early-stage Swiss VC, Wingman Ventures. We are currently raising our seed round and their support and contacts have made it much easier than the first. We are also being helped by Startup Grind, who have been excellent at making good introductions.

When did you know you were ready to fundraise?

We were in the fortunate position of being able to wait for product-market fit and recurring revenue from happy customers. This takes a lot of the risk out for the VC firm.

What steps did you take?

We mainly went through networking. A lot of building relationships and finding mentors that then led to warm introductions. We had to be very well prepared for meetings, on-top of the finances and also demonstrate demand for our product.

How many times did you raise?

This is currently our second raise.

What did you learn each time?

Still learning. I think one big thing is to just be positive and confident. I am naturally inclined to under-sell and I needed to change that.

What advice/tips would you give others?

I would say meet and get advice from people who have done it before. Prepare well. Be confident.

6. Passbase

Passbase is a next-generation identity verification provider that helps companies solve their digital identity challenges in a compliant, privacy-oriented and user-centric way. Its developer-friendly, highly customizable tools allow companies to incorporate robust, user-friendly identity verification into their products and platforms. Flexible pricing and a modular offering mean they can easily scale up their identity-related capabilities if and when they need. With Passbase, companies can navigate today’s complex, ever-evolving digital identity landscape with confidence. By building a trust infrastructure for the internet, Passbase keeps businesses compliant and secure, and end users safe.

What are the avenues by which the funding was received?

Early on, we raised from Angels Investors mostly through the German Founders network & the Xooglers (Ex-Googler) community and a pre-seed fund (Seedcamp). The two subsequent rounds we raised from Venture Capital firms.

When did you know you were ready to fundraise?

In the first round we raised we needed to. At the time I had a $5k bill on my credit card for Passbase.com coming due, had two co-founders living on my floor in San Francisco, and were eating massive amounts of dollar store spaghetti every day. We needed to survive! The later rounds we felt ready to raise once we had evidence that a hypothesis we formed was proven. We take a scientific approach to achieve goals. We form hypotheses (E.g. the market wants a developer-centric IDV product) and we aim to prove or disprove it with data (E.g. we will treat this as true if we are able to acquire 50 customers). We use this framework to set OKRs internally and to frame discussions with potential investors.

What steps did you take?

Early on we attended a ton of “Office Hours” through the Xoogler community in San Francisco to meet different VC firms and test out our pitch.

How many times did you raise?

We raised three times. Pre-Seed, Seed, and a follow-on round.

What did you learn each time?

We learned a lot each time. I can’t do justice to how much we’ve learned in this short of a format.

7. ClimateTrade

ClimateTrade is a revolutionary marketplace that allows responsible companies to achieve carbon neutrality by offsetting their carbon emissions by purchasing peer-to-peer carbon credits directly from mitigation project developers, with complete transparency and traceability through Blockchain Technology.

What are the avenues by which the funding was received?

SEED ROUND: US Investment fund recommended by a partner, private family offices that knew the founder and his track record and background, relationships, and events.

Now looking forward to Series A speaking with more than 40 international Investment funds.

When did you know you were ready to fundraise?
When I had some customers and some initial traction, and the product was ready to go to market.

What steps did you take?

Talk with investors, explain to them about the pipeline of customers, the uniqueness of our solution and the expectations I had for the year.

How many times did you raise?

Once, in 2020 for 1mm €

What did you learn each time?

Many things, you better get money from people that can help you grow and that are aligned with your objectives and want to make money but that really believe in you and in the project.

What advice/tips would you give others?

Do not take money for the money, only money from people that provide something more than money, advice, expertise, contacts, and support.

8. Quicket Solutions

Government agencies across the world are plagued with paper-based workflows and the lack of integrated online payment options. With Covid-19 forcing most government buildings to close or restrict capacity, agencies were forced to accelerate digital transformation initiatives in order to continue to provide services to the public. Quicket Solutions provides an easy-to-deploy cloud-based data-management and payment platform that allows government agencies to automate workflows and streamline revenue collection.

What are the avenues by which the funding was received?

Strategic individual investors and family offices.

When did you know you were ready to fundraise?

Key milestones were achieved including MVP, then first pilot/beta, then early product-market fit confirmation, and most recently increasing revenue and strong customer retention despite conditions created by Covid-19

What steps did you take?

Quicket leveraged its existing network to request the opportunity to pitch individuals. This process continued to open more and more doors until we established a strong enough investor network to put together a financing round. It’s been great to see most of our earliest investors continue to have strong confidence in the Company and participate in subsequent financing rounds.

How many times did you raise?

3 equity rounds.

What did you learn each time?

Most times, the answer is no or ‘let’s get back in touch when a key metric is achieved’ from investors, but you only need one or a few to believe in you in order to scale the company to the next level.

What advice/tips would you give others?

Don’t be discouraged by “no’s” during the process. Always ask for feedback after each meeting and understand why a no was given. Utilize this to continue to refine your pitch.

9. Assemble

Assemble is the #1 flexible talent matching platform. We match organizations small and large with elite independent contracts for flexible hourly, part-time, full-time, and project-based engagements on-demand.

What are the avenues by which the funding was received?

Angels and VCs

When did you know you were ready to fundraise?

When I experienced a problem in the freelance talent market, given the size and competition, I knew I would need to raise money to compete.

What steps did you take?

I reached out to personal connections and asked for them to make warm intros to folks they thought would be a good fit

How many times did you raise?

I created a rolling SAFE so we could take in the capital while also staying focused on building the business

What did you learn each time?

Raising capital sucks. It’s complicated, frustrating, and very emotional

What advice/tips would you give others?

Start with only a little money. It forces discipline and focus. A market with customers yearning for a product or service developed by a great team should require minimal capital.

10. RealKey

RealKey is an innovative provider of digital mortgage technologies that enable bank and non-bank mortgage loan originators (MLOs) to streamline the mortgage processing experience for borrowers. Disrupting the status quo in the mortgage industry, the RealKey Digital Mortgage Platform makes the mortgage process more efficient and empowers MLOs to close more loans, faster, with less effort.

What are the avenues by which the funding was received?

RealKey has received capital from VCs, Private Equity, Angels/Angel Groups, and even from winning events.

When did you know you were ready to fundraise?

When our mentors/advisors said we were.

What steps did you take?

We were fortunate enough to go through an incubator, The Batchery. The program ensured we had our initial ducks in a row before making intros to investors. Our champion in the program was the first to offer to invest. He let us know he felt we were ready, then he priced the company and made the intros.

How many times did you raise?

We were continuously raising, starting at an initial valuation, ramping up as we gained traction.

What did you learn each time?

Each time we presented to new investors, the pitch got tighter and the vision became more clear. Every investor has different questions and a different focus based on their experience and insights.

What advice/tips would you give others?

We learned from the questions being asked and ensured we had a satisfactory answer for each one so that we were not only better prepared for the next pitch, but better prepared as a business. To play chess and win, you need to plan a few steps ahead and hope for the best while knowing things are rarely easy when large rewards are involved. Put in the hard work. Being an entrepreneur is hard. Surround yourself with people smarter than you, but strive to learn and improve.

______

Fundraising is hard and there’s no doubt about it. It is through interviews like this that you will know, you are not alone out there and doing this on your own! Given the right steps such as honing previous relationships, doing your research, leveling your expectations, having the confidence, being authentic, seeking out mentors, placing yourself in the right community, being selective with your investors, asking for constructive feedback, and surrounding yourself with a small and smart circle along with a proper timeline can do wonders.

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Startup Grind

Stories, tips, and learnings from and for startups around…

Startup Grind

Stories, tips, and learnings from and for startups around the world. Welcoming submissions re: startup education, tech trends, product, design, hiring, growth, investing, and more. Interested in submitting? Visit our submission form here: https://airtable.com/shrShpeN89HrzCzOB

The Startup Grind Team

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Stories & strategies curated by the Startup Grind global community. Interested in submitting? Visit our submission form: https://airtable.com/shrShpeN89HrzCzOB

Startup Grind

Stories, tips, and learnings from and for startups around the world. Welcoming submissions re: startup education, tech trends, product, design, hiring, growth, investing, and more. Interested in submitting? Visit our submission form here: https://airtable.com/shrShpeN89HrzCzOB