After raising seed capital, David Hassell waited 4 years — a lifetime in the venture world — to raise a Series A. Here are the reasons why.
Serial entrepreneur David Hassell had already started two companies before launching the employee management platform 15Five.
For his first venture, David founded an ad tech company in New York, a business that was “all about chasing the money.” His second business, an adventure travel company for kitesurfers in Brazil, swung entirely the other way: it focused on passion but wasn’t a moneymaker.
Wanting to strike a happy balance, David structured 15Five to be profitable as well as purpose-driven. 15Five blends positive psychology with proven employee development methods to boost performance company-wide, making it easier for managers to streamline feedback and develop their teams.
For better or worse, David was ahead of the curve. Employee development platforms are a hot market now, but that wasn’t the case when 15Five first launched in 2011. “There was no market demand for what we were doing. We were very mission-driven, versus market-focused,” David says.
Following the mission led 15Five to raise $42.6 million over eight years — and being intentional about timing is a big part of how David did it.
Leverage the time to build
David wasn’t too concerned about the demand level in the early days. He saw it as an opportunity to get the product right — before customers flock to the platform. Plus, they weren’t trying to keep pace with competitors threatening to steal 15Five’s thunder.
“When you’re in a market where maybe you’re really early or other people don’t see the opportunity, you have that luxury,” David says. “There’s no reason to go fast if there’s no pressure.”
David and his team bootstrapped 15Five for as long as they could, working nights and weekends until they’d built a product that people were willing to pay for.
Once they reached that level, they raised a $200,000 friends and family round that was used to hire an engineer and get a design agency to help with the product.
“Before I was willing to go to my friends and family and have them take a high-risk endeavor with me, I wanted to get to a point where there were some good proof points,” David says.
“I think it’s really important to not get so focused on, These people have the money and my job is to get the money. I think that’s a very one-sided mindset versus thinking, If I’m going to bring on investors, I’m essentially going into partner partnership with these people. I’m taking on a commitment to producing a return for these investors.”
Know your ‘why’ — why you’re raising
Fifteen months after raising that initial friends and family round, 15Five raised $1.3 million in an angel round, with investments from Jason Calacanis, David Sacks of Craft Ventures, and Dave Morin of Slow Ventures, among others.
They were ready to launch their product but didn’t have the metrics or roadmap so they’d need for a larger round. An angel round made sense.
“Angels are investing typically for different reasons than professional investors — they’re willing to take bigger risks. It’s more about who you are and what you’re trying to build,” David says. “They’re not necessarily looking at a lot of the metrics that you probably don’t even have yet, but that that’ll be the case when you get to a Series A.”
Following their angel round, in 2014, 15Five actually chose to do another seed round rather than launching their Series A — another decision that came back to timing. The company was gaining traction, but it didn’t have the right team in place (yet) or the kind of exponential growth necessary for a VC round.
“You better be ready when you raise a Series A to put fuel on what you’ve already built,” David says. “It’s not a great thing to do if you still have a lot of things to figure out customer acquisition or sales. You really want to do everything you can to get a model in place that works, that you’re ready to scale.”
Hit the gas pedal when you’re ready to scale
This time, it was the right time: they had a solid team in place and had hit their sales numbers for three or four quarters in a row.
“We had found ourselves as one of a small number of players in an emerging category that had broken away from the pack,” David says. “Everybody else had raised somewhere between $10 million and $50 million, and we’d raised $3.7 million at that point. We were holding our own, but we realized there was a big opportunity. It was time to double down and invest.”
Eight months later, 15Five raised their $30.7 million Series B. Again, there was a lot of strategy with timing.
“I felt like we needed to move faster if we were going to create a market leadership position for the company,” David says. “It just made sense. In eight months we were able to double the valuation, fund the company, and accelerate things to a point now where we’ve gone from essentially one product team to 10 different product squads, all working on amazing things.”
From 15Five’s fundraising journey over the last eight years, David’s learned that it’s all in the timing.
“Be careful not to buy into the standard narrative if it’s not a fit for your company because I think that you can raise too much money, and you can raise it too fast,” David says. “When venture really works, it’s because you have a rocket ship that needs fuel. The fuel isn’t going to create the rocket ship.”
Nathan Beckord is the CEO of Foundersuite.com, a software platform that has helped entrepreneurs raise over $2 billion in seed and venture capital since 2016. This article is based on an episode of Foundersuite’s How I Raised It podcast, a behind-the-scenes look at how startup founders have raised capital.