Funding from a Founding Perspective

Back in 2016 we were excited to be part of L-SPARK’s second cohort of startups to go through a six-month program, receiving insights, guidance, and mentorship along the way.

The L-SPARK team brought in pitch coaches and marketing and sales folks to help each company out, and paired us up with entrepreneur mentors.

We were less than 6 months into our beta launch, were still building the product, hadn’t settled on a go-to-market strategy, and were still seeing whether or not students and educators wanted our English-language writing platform, EssayJack.

Partway through our L-SPARK experience, we sat around the table with some of the mentors and had the “what if EssayJack isn’t a good fit for us” conversation, because we weren’t seeking funding at that stage, and so much of the good work that L-SPARK or any accelerator does is to connect founders to funders.

In our case, I was committed to the idea that we would take the risk of developing the product, proving its value propositions, and gaining some traction in the market before going to investors, and when we were ready for that, we’d invite our Friends and Family in as our first investors.

So we weren’t looking for outside investment in 2016. 

Heck, we weren’t even sure that we wanted any investment at all, as people were buying access to our product, so why not just grow based on revenues?

Fast forward to 2017: We had bootstrapped, used grants and loans, ran a lean team, and used revenues to grow our business, and decided to secure Friends and Family investment so that we could build out a full, institutionally-capable platform that is scalable and has the features that our customers asked for.

We won a bunch of awards, were shortlisted for others, continued to grow organically, refined our product offerings, and tested various marketing and sales approaches, all the while running a lean team and seeing continued year-over-year growth.

By 2018, we had lined up our first Angel investor and had come around to the idea that investment was what we really needed to grow at scale. This Angel investor was known to us, so we worked with him to agree on terms and valuation, got the lawyers involved, and were ready to go for what we considered an Angel/SEED round. That particular deal was months in the making.

At the last minute, he decided to add in some additional clauses we hadn’t discussed, which no longer made that investment palatable to us. So we walked away from it.

I’ve since learned that this failed investment story of ours is rather common, and that helps me to feel less bad, but at the time it was a shock. But founders are tenacious and always march onwards! And onwards we marched.

In our case, it meant that in order to support the contracts we had committed to (and planned to hire staff to oversee), we simply had to dig deep and do all the work ourselves. We also knew that we had to build out our product lines so that we had a more robust offering to take to outside investors.

Now we have multiple product lines, selling in five different countries with three different distribution partners on our B2B business, and a robust B2C offering with a number of niche paths to market through partners and various educational groups.

Finally, we’re ready for the kind of investment discussions that our L-SPARK mentors wanted to have with us in 2016. This year we’re starting our official SEED fundraise and closing in March 2020.

For the last quarter, I’ve been narrowing our list of potential investors, soft circling, and refining our pitch and our offering, and taking fundraising much more seriously than ever before.

Through this journey, I’ve learned a few lessons from a founders’ perspective when it comes to fundraising. There’s a lot of good information out there that tells you what investors are looking for, but as a founder, you too can be looking for a few things as well to ensure that you’re seeking “smart money.”

Here are some interesting things that I’ve learned:

  • Know your story. Investors get excited by stories; what is your business’s story? Where are you going with it and why would they want to be part of that adventure?
  • Some investors think that you can’t live without them, can you? Know what you can and cannot live with, and don’t make a square peg fit in a round hole!
  • Find the right investment partners. Don’t be afraid of asking what exits they’ve overseen or been a part of. Do they have experience in your industry and share your vision of your ideal exit?
  • There’s a lot of talk about Silicon Valley investment. Don’t believe the hype. Silicon Valley is definitely the place for some companies, but not all. Know your own business; is Silicon Valley the right place for you? 
  • Narrow the geographical location for your investors. Whether you like it or not, investors want face-to-face time, and proximity can be very helpful. As well, their networks will be close to where they are, so let them help you by being nearby. Are you close to your ideal investors? Should you move?
  • Be coachable and listen. Trust your gut. I wish I had trusted my gut last year way before our investment went sour.
  • Know your metrics. What are you measuring? Why? Be able to explain that to potential investors.
  • Research the right investors before reaching out to pitch to them. Warm introductions are always best, but emails that are succinct and to the point (unlike this wordy blog!!) are appreciated by busy investors. Why should they care about you and/or your business?
  • Keep your finance people in the loop. I’m terrible at this, but we have great bankers we work with (RBC and BDC), and they can help you secure non-dilutive funding or bridging debt or other creative solutions if you keep them apprised of your situation. How do you communicate with your stakeholders? 

In my experience, fundraising is a strange experience, and we’ve yet to close our SEED round (fingers crossed!). But I feel that if you believe in your product and your business, then it’s exciting to get other people to share in your vision and want to change the world. 

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