From Striking Out Over 80 Times, To A $4M Seed Round: How Travel Startup Journy Raised Capital
It might sound irresistible to be sought after like that, but Susan, who is Journy’s founder and CEO, didn’t go for it.
“I think that’s something that entrepreneurs need to be very diligent about saying no to — letting an individual VC preempt your process,” Susan told me when we spoke for the How I Raised It podcast. Instead, you want to introduce several VCs to your company at the same time. “So there’s a sense of competition for it.”
But before Journy had investors like Caviar founder Jason Wang and others lining up, it went through its share ups and downs.
The company, which provides a custom travel plan and starts at $25 per day, has raised almost $4 million. “We did a pre-seed round of about $600,000. Then we did an extension of that of $335,000,” Susan says. “We just raised our full seed round of $3.15 million.”
Highlights from Susan’s funding journey (couldn’t resist!) follow.
Striking out, 80 investors at a time
Susan, who started her career at Boston Consulting Group before getting into startups, sought funding for the company when the product launched in June 2016.
“I went out and I tried to raise a round, ran a process, and had one of our lead investors from our pre-seed round — who was very well connected — introduce me to 80 or so investors who I had conversations with,” she says. “We just struck out every time.”
One problem: VCs were burned out on travel startups.
“There were a lot of travel darlings back in the day — like Hipmunk and HotelTonight — where at scale, the consumer unit economics didn’t pan out and customer acquisitions increasingly became expensive,” Susan recalls.
“And so there wasn’t a lot in our favor being a consumer startup.”
Journy was also lacking the data to build a compelling case for investors. “We didn’t have the proof points,” she says. “We had customers who were coming back and booking with us again and again,” Susan says. At that point in time, they even had a customer who used the service 18 times in six months.
“But it still wasn’t enough.”
With fundraising from institutional VCs going nowhere, she turned towards angel investors. Thanks to a connection from her co-founder, they raised money from Andrew Zimmern, host of Bizarre Foods on the Travel Channel.
Rather than labeling this money an extension of their pre-seed, they just added more investors to the previous round documentation. Later when Journy started making money, they found new investors for the extension.
“Our early investors were okay with that because frankly, they were shocked we were still around,” Susan says.
Risk and serendipity
Susan, who worked her way up to being the youngest vice president at Fab.com in its heyday, kept at it.
She landed an opportunity to be filmed on Apple’s Planet of the Apps (though the episode didn’t ultimately air) and had to fly to the set in LA. One of her investors invited her to a party a day ahead of filming.
With a depleting bank account and no new funding, getting to the party turned into a stressful situation.
“I fly out there early and I remember realizing, holy crap, I have $50 in my bank account and I don’t know where I’m staying tonight because the show paid for my hotel for the next day, but not for today.”
But it was at that party that she met one of the founders of 500 Startups, which opened the doors to its Series A program.
That helped Susan experiment with the business model and optimize pricing. In one month, they ran between 70 and 90 experiments to see what would unlock growth.
“The thing that we hit on was tiering our pricing and splitting up our pricing model from a flat rate of $25 per day to $25 and $50 per day,” she says.
Offering a higher price point, “illustrated the value proposition to the customer in a much more clear way.” Between implementing the pricing change and going out later to raise money, Susan says the business grew 5x and the “unit economics became super healthy.”
Journy has a 55 percent gross margin on trip planning fees alone. “And so because we’re able to make money just off of that, we actually don’t care if the traveler books any activities with us. We just care if they have a good time,” she says.
Proft, margin and data FTW
Armed with those metrics, the next attempt at a seed round went a lot smoother.
Even though her initial conversation with the 80 investors didn’t leave Susan with a solid answer about which growth metrics would be most compelling for investors, she says $100,000 MRR was the number in her head.
“We hit pretty much close to that,” Susan says, noting that revenue was around $80,000 to $90,000 per month when she went out for funding again.
“We posted a $35,000 net income for the quarter … we also proved that we can be profitable. So it was many, many things at the same time.”
Susan kept in touch with some of those investors who had turned her down. She picked up the phone and gave them a verbal update on the business from time to time.
A few were really excited to meet, which helped her prioritize who to connect with, she says.
“I went out to SF from New York. I had two days of meetings on Thursday and Friday — nine meetings in total — and ended up getting a term sheet on Monday from one firm that ultimately ended up leading our round, Menlo Ventures,” she says.
Unlike other investors who hadn’t even downloaded the app, one of Menlo’s principals had used Journy a few times and understood the potential.
“It just felt like the right fit,” Susan says.
Author: Nathan Beckord, CFA
Nathan Beckord is the CEO of Foundersuite.com a venture-backed company that makes the leading Investor CRM and Investor Updater tools for startups raising capital. Since launching the CRM in 2016, users have raised over $1Bln in seed and venture capital.
Prior to starting Foundersuite, Beckord spent ten years working with startups as interim CFO, Business Developer, and Advisor. Beckord has an MBA in Entrepreneurship, a BSC in Finance, and is a Chartered Financial Analyst (CFA). In his free time, he enjoys sailing, traveling, and climbing.