This article was initially published on the Ropig blog on February 15, 2018.
Ropig was ultimately shuttered in 2018, you can hear that story here.
By November 1, 2017, I know one thing for sure: we’re going to run out of money.
We were supposed to have launched by now, but things got a little off track. And while no product is ever done exactly on time, this one had actually gotten pretty close!
My husband and co-founder Chris and I had decided to invest $500k of our own money into our latest project, a developer alert tool we call Ropig, but we knew that if we didn’t put a hard cap on that investment, it could easily turn into a money pit.
So with our launch just out of reach, the numbers were clear: on Jan 31, 2018, our $500k would be gone, and that would be that.
It left us with about three options:
- Break our commitment to ourselves and go beyond our budget? No, we’d set a hard cap for a reason. This business needed to prove its own viability, not turn into a pet project that constantly drained cash with no output.
- Go the true bootstrapper route and just work on it ourselves, for free? No, it would slow down the project too much — and that would mean taking even longer to get to a healthy monthly revenue. (And honestly, we’ve gotten used to working with an amazing team at MeetEdgar, and going it alone doesn’t sound like much fun.)
- Raise money from outside investors? Ding ding ding! It quickly became the obvious choice — the one thing that would allow us to keep going down the path we’d always envisioned and planned for Ropig.
But there was one huge problem with fundraising: I’d always been vehemently against it.
I believed, and still do, that the traditional Silicon Valley model of fundraising is badly broken, and leads to the goal of growth at any cost.
Not exactly how I like to run a business.
So the question became: is it possible to raise money without compromising my own integrity, and the integrity of how I run my companies?
Is there a way to raise money without saying we’ll sacrifice all our morals for the sake of growth?
A way to raise money without committing myself to 80-hour work weeks until we just get acquired and I can finally step off the hamster wheel?
I was about to find out.
In late October, I’d been serendipitously invited to a dinner here in Austin, where I met an investor who was pursuing a new model: a way for startups to raise money while also prioritizing profitability, instead of just growth that burns through cash until they’re acquired.
In December, I approached them with our product.
Ropig was, in many ways, the perfect fit for their portfolio, so even though they didn’t love that we were still pre-revenue, it felt like it could be a slam dunk.
They were open to writing a check for every dollar we needed — another $500k — and the calls we had once or twice a week always ended the same way: they thought they could make the investment, but couldn’t confirm just yet. Every time we scheduled a call, I thought it would finally be the one where I got my answer, and every time, it remained a maybe.
During this time, I made the mistake of not pursuing other funding options. I was overwhelmed by the prospect, and having had little success talking to traditional VCs and seed funds in the past, I had no confidence in my ability to do it again.
In my head, this investor was one inch away from saying yes, so I figured in a worst-case scenario, I’d come up with a few Plan B options and go from there.
But with December coming to a close, I still didn’t have an answer — and I might be stuck in these conversations until my bank account hit zero. So I gave him a deadline: I needed an answer by December 31st.
I got it on December 29th.
It was a no.
With my best prospect gone and $500k to raise by January 31st, the clock was ticking — and that meant I went into action mode.
But when fundraising isn’t your thing, where do you even start looking?
Initially I considered some kind of equity crowdfunding campaign through a platform like WeFunder. If there’s one thing I know, it’s online campaigns and launches, and I had been behind the scenes on successful crowdfunding campaigns before.
But the amount we were trying to raise — half a million dollars — made this option pretty daunting. With public campaigns like these, people are often putting in tiny amounts — closer to $1,000 each — so we’d have to find 500 funders within just one month.
Adding to the problem, Ropig is in a totally different space from the online audience I’ve built up over the years — it’s a tool for software developers, whereas my existing audience is largely creative entrepreneurs — and that means the people most likely to invest would have no interest in or use for the product.
As someone who’s been working for herself for the past 10 years, though, I’ve built a strong network of colleagues over time — many of whom are entrepreneurs that have not only built significant wealth from their businesses, but successfully raised investment capital for them, too.
So after a few calls to get the lay of the land from friends who had raised successful angel rounds, it was time for me to start knocking on doors. (Or in my case, typing up emails.)
Over the last few days of the Christmas holiday, I scrambled to put together the deal structure and investment information for investors.
On January 2nd, 2018, I sent my first pitch email.
In the first two weeks of January, I pitched 250 people over email — there were a few new people I was introduced to, but the 250 was 99% existing connections. (Hey, I’ve been going to conferences for 10 years — I know a LOT of entrepreneurs!)
Setting the minimum investment at $25k, I’d need 20 takers to meet my goal. Believe it or not, though, that list of people I emailed didn’t include everyone I know. (I’ll tell you in a minute how long it took to narrow it down.)
Because Ryan Delk, who became one of my first investors, gave me some advice I would not forget: this is a long-term relationship. Never accept money from anyone you don’t actively want to be in business with over the long haul.
So before sending each email, I asked myself if this was someone I would be genuinely happy to make a part of my new business. And honestly, some contacts, even very “important” ones who seemed likely to invest, did not pass that test! My circle is mostly founders, not investors — and while some of those people have done a little investing anyway, some had never done it at all.
When my January 31st deadline arrived, I had closed $300k. (Another $50k would trickle in after.) I hadn’t met my original $500k goal, but I had come damn close — and most importantly, raised enough for the show to go on.
Here’s how I did it:
Step 1: Figure out your general terms and legal structure
The two most common choices for a seed round are SAFE (Simple Agreement for Future Equity) or convertible note. (Go ahead and Google those if you need to. Before January, I didn’t know any of these terms!)
A convertible note has a hard date by which you need to either raise your next round or repay investors, which didn’t offer me the flexibility I wanted for future fundraising decisions — so that option was out.
Based on some Googling and conversations with other entrepreneurs, I decided to do a SAFE, with no discount and a $5m cap. SAFEs don’t actually require you to set a date when your fundraising round ends, but I set a close date of January 31st anyway — not only for my own sanity, but to help motivate potential investors and keep moving toward our launch.
But here’s one thing I wish I’d known.
While my lawyer had said I could do a SAFE with an LLC — the structure of the company at the time — I didn’t realize that the standard Y Combinator SAFE would have to be modified pretty heavily to make sense for that structure. This didn’t come up until the middle of the round, which meant some quick and extensive research with CPAs and lawyers to determine if I should switch to a C corp, which is more common in Silicon Valley startups.
I ultimately kept the LLC structure — but it would have been a lot smarter to sort all this out BEFORE I started fundraising in the first place!
Step 2: Put together your deck/investor information
Most people use a deck format, but I actually put everything in a Google Doc instead.
Here are the sections my doc included:
- Round details (how much I was raising, what structure, when it closed)
- Overview of the product
- Overview of the founding team
- Go-to-market strategy
- Competitive landscape/market opportunity
- Where we’re at now (in my case, explaining that the product was complete, and that we’d be launching in February)
- The future (what we expected the future of the company to be/how they’ll make their money back)
This was a fairly unconventional choice. I didn’t create a traditional deck, complete with pretty charts and stats that — in my opinion — would sound impressive but not necessarily be all that useful.
Honestly? I have no idea if approaching things this way helped me or hurt me! But also, those templated decks bragging about billion-person market size and making big promises make me want to hurl, so I figured my investors might feel the same way.
Step 3: Pitch (almost) everyone
Like I said, my process was very different from what you often read about pitching angels — especially because I was only pitching people that I knew. That meant the first step was to rack my brain for anyone who might be interested.
Here are a few things I did:
- Looked through my friends on Facebook/people I followed on Twitter
- Looked through the speaker lists of conferences I’d been to in order to jog my memory of speakers/attendees that I had met
- Looked through my phone contacts
- Looked through everyone I had ever emailed from my work account (this one meant I read through 1,236 names, one at a time!)
Emailing one person would often remind me of others to reach out to — maybe mutual friends, or people I had spent time with at the same conference.
I set a deadline for myself: I was going to email my entire list of 250 names by January 15th — and this process was 100% on me. I had a template to work off of, but I sent every individual email myself.
This process was surprisingly exhausting.
It was emotional, and I constantly had to work up my nerve to hit send on the email. I was asking people for a LOT of money — people who may or may not have any interest — and I had to constantly remind myself that I was offering an amazing opportunity, not asking for a favor!
During this period, I also reached out to and was introduced to a few traditional seed or VC funds — but unsurprisingly, none of them panned out.
It’s very unusual to meet a firm and have them write a check upon meeting you — it’s usually more of a long-term relationship, and frankly, that makes sense. Also, not clearly committing to raising a series A within a certain time frame meant I was generally a no-go for traditional VC. (Yes, I could have BSed about that — but I just don’t have it in me.)
Step 4: Follow up like your life depends on it
My follow-up system was to use Boomerang to send emails back to me a few days after I sent them.
This system wasn’t 100% foolproof, and a few fell through the cracks, but in general, it worked well. I didn’t want a completely automated system, as I was also talking to some people via other means, like text, and wanted to make sure I could customize everything before sending if I needed to. This also allowed me to follow up more with people who I thought were likelier to invest, and bother the people who seemed like long shots a lot less.
(By the way, the longshot category generally meant that they had never done a startup investment before. Most people who ultimately said yes had done at least one startup investment before, and were generally already familiar with the process.)
I followed up 3–5 times with each person I pitched — and you wouldn’t believe how many people wrote back on the third email thanking me for following up. Most people give up too soon, but the people you’re reaching out to are busy, and you are not their first priority! And really, even if someone had zero interest in hearing from me, receiving five emails over a few weeks and then never hearing from me again is not that big a deal.
Step 5: Track and close your maybes
If anyone responded with any kind of follow-up question, or any response other than “no,” I added them to a spreadsheet. A better salesperson probably could have converted some of those initial no’s, but I just thanked those people and moved on.
If someone made it to the spreadsheet, I followed up every few days and tried to schedule a phone call. From those initial 250 emails, I ended up with a spreadsheet of 46 people, and my goal was to get a clear yes or no from every single one.
(And for what it’s worth, at the time of posting this, I still have three maybes hanging out on the spreadsheet! Sometimes it’s hard to get a response.)
Out of my final 12 investors, all but two wanted to get on the phone to discuss things further. I ended up doing one casual in-person meeting with someone who happened to live here in Austin, but I never had to travel.
Something that I didn’t expect was the huge outpouring of support I received from the pitches.
So many maybes said they’d like to invest later, and so many initial no’s wrote me lovely messages of support! One of the unexpected upsides of fundraising has been the small army of people I’ve gathered that have actively told me they’d love to help make the product succeed however they can.
Although some people introduced me to new potential investors, I ended up with only investors that I had strong existing relationships with. The shortest relationship was about a year, but I’ve known most of my investors for more than five years. So while I raised $300k in 30 days, the groundwork was many years in the making — and a real testament to the importance of networking!
Step 6: Send paperwork for signature and wire instructions
By this point, you’ve hopefully discussed the details with your lawyer and CPA and have all of your paperwork ready to go. In my case, the paperwork was just a three-page SAFE agreement that myself and the investor each needed to sign.
Once I finally had the LLC thing sorted out, I sent the agreement out to be signed digitally via HelloSign and emailed my bank details for wire instructions.
(These things always feel like there’s supposed to be something more official to mark the occasion than there actually is.)
Step 7: Keep your investors in the loop and get to work!
Your investors are excited about what happens next, so don’t forget about them once the money has landed! I started by sending them an overview of the launch plan, and will send updates as the launch goes on.
While fundraising was a relatively painless experience in the end, it is not something I hope to repeat anytime soon. (And since it introduced me to a few people who were interested in writing larger checks post-revenue, if we end up raising again in the future, those will be the people I go to.) For now, I’m grateful to be 100% focused on our launch, which is scheduled for February 21st.
As a first-timer — and one on a serious deadline — I can see now that there are things I could have done differently.
My pitch could have been better
A friend gave me the feedback that my pitch doc lacked passion, and I think he was right.
To be totally honest, I was scared and uncertain when I started this process. I didn’t know if the product I had worked so hard to create had a future, or was about to die a sad, broke death. I think this lack of confidence sometimes came across, and I wish I had gotten myself in a better headspace before I started.
I doubted myself constantly
Similar to the point above, I was constantly second guessing myself for two very big, very different things — one, raising money at all, and two, not taking the typical VC path.
When you talk to a VC, they obviously believe that their way is the best way — and they can make that argument fairly convincingly. Was I making a huge mistake by not pursuing millions in funding right off the bat? And on the other hand, was this whole thing a waste of time? Should I just go back to bootstrapper land where I belonged? Fundraising is emotionally exhausting, because you’re constantly trying to prove your worth.
I didn’t ask for more from investors
In retrospect, when someone said yes, I probably could have pitched them to invest more — after all, I knew they were interested! This is just a missed opportunity I never pursued.
I didn’t try to create hype or scarcity
While I used my January 31st deadline as a bargaining tool, I never used the typical tactics of acting like we were oversubscribed, or as though investors would lose their spot if they didn’t give me an answer in the next two hours. Since I was pitching people who weren’t professional investors, it was really important to me that they not feel pressured, and feel 100% comfortable with spending their money.
From a marketing point of view, though, I could have done a better job creating excitement and sharing reasons to get involved throughout the process. I had some maybes that probably would have turned into definitelys if I had tried a little harder to paint the picture.
At the end of the day, I’m glad I embarked on a process that gave me experience in a major aspect of business ownership that I hadn’t encountered before.
(And most importantly, it allowed Ropig to live on!)
Will I fundraise for my next company? (Which I hope doesn’t happen for a loooong time!) Maybe, maybe not. As smart as I think it is to leverage other people’s money, I still love the bootstrapper mentality.
Ultimately, though, Ropig was a more expensive product to build than MeetEdgar, which we didn’t raise money for. Some products naturally need more money to get off the ground, while some can be built by a single programmer!
In the future, though, I’ll be less dogmatic about fundraiser vs. bootstrapper — and I’ll certainly have a better view of how many different paths you can take to build an incredible company.