Ad Jet # 4 Where’s the money Karl?
Hi, my name is Polina and here I am talking about our startup in the field of marketing automation. How we subscribed to all this can be read in the first post.
I was always interested in how startups live, or rather what they live on. The classic model is when you work in a well-paid job and make your product at night, then the product starts to take off and you quit your job and go into your project in full. Someone first saves money and then starts to launch a product, sitting on a financial pillow. And someone just lives on the neck of a parent or partner, and even on the water with breadcrumbs. Our pillow was a previous project, and everything would be fine if we did not close it. So one morning we realized that we need to look for money very quickly and that’s what came of it.
This was not the first attempt to raise money in my life, but before we did it within Russia, so everything was decided by connections and the ability to scratch well with our tongue. It is generally difficult for a startup in Russia, because there is no infrastructure here, and the one that is built around the state and money can be toxic. By toxic money, I mean that you won’t be able to raise money abroad in the next round, and you may also be asked to “return the money”. It sounds funny, but we already went through this in one of our projects, so we decided to take only employees from Russia.
This does not mean that it is impossible in Russia otherwise, but by the examples of other guys — it is possible! Not as big and not as easy as the states, but real money.
What are the investments? Investments depend on the rounds, and where you are looking for them also depends on the project and stage. Let’s figure it out. In general, the search for investment in the sale of oneself and a project according to certain rules.
Idea stage — the stage of the idea, that is, you just want to be given money for an idea, just for you to do something. It seems to me almost unrealistic to attract money at this stage, if before that, for example, you did not create Apple, that is, of course, it is possible, but you have to be either the second Jeff Bezos or have an explosive idea and also find someone who will light up her like you and will give you money. By the way, in the early stages, as a rule, they invest in a person/team, and not in a company, but about that a little later.
At this stage, the check can be anything and not predictable, but I would count on $ 50,000. You can also collect several checks for $ 100,000k +, although investors do not like this.
Pre-seed is the stage when you came up with a project and tested it. That is, you have an MVP — a minimum working product or prototype, proven traction. Ideally, you have not only interested customers who signed up for a free subscription, but also paying customers. Your idea should be scalable. And also the market for your product should be interesting, that is, potentially from a billion dollars.
Where to get money at this stage? There is a beautiful and beloved rule of FFF — the rule of 3F, which states that the first money is attracted from the inner circle — friends, family, and fools. I am not a supporter of such investments, it seems to me that you can stay without family or friends.
You can go to an accelerator or an incubator, we went this way because getting into an accelerator you will either quickly develop your project or kill it just as quickly. Also, you can get connections and investments.
VC / Angel investors are private investors, ideally when you get not only investor money, but also his connections. For example, our ideal investor would be a C-level employee (CEO, CPO, CTO person of the top management of the company) who has worked for 10–15 years in the industry of advertising in social networks, conditional Facebook, because we could get from him not only money, but an understanding of internal processes, and of course communication.
The average check at this stage is about $ 100,000.
Seed stage — when your company has grown and purchases have become constant and predictable, you need more money for even more money. The story with fundraising remains about the same as in the last round. If you raised the first money in a good place or from good people, it will be easier later. Only the sites are changing.
For example, within the framework of the accelerator, one of the most famous YCombinator, to get into it, you need not only an excellent product and a team, but also traction from $ 10,000 per month, but this is so rumors from FB, it happens in different ways.
I would describe the Seed round as when you already have a system and it works, you come to the investor and say — “Let’s get rich together.” And of course, at this stage you are still looking for smart money — that is, not only money but also connections.
The average check at this stage is $ 2 million.
Series A / B / C
If your company has reached these stages, you are already great. Here we are talking about big money and big projects. Investments are attracted from such giants as New Enterprise Associates (NEA), Andreessen Horowitz, Accel Partners, Bessemer Venture Partners, Sequoia Capital, Greycroft Partners, GGV Capital, Da Vinci Capital, and others.
And yet I have nothing to tell you about them, because we are to them, as to the moon on foot.
I approached this process as a sales funnel, now there are 110 contacts/accelerators/incubators on my list with whom we sent information on our project. We talked to about thirty of them, I mean we got feedback, about 20 rejections, and another ten got a dialogue. I’ll write about why we got rejections and what interesting funds and accelerators told us next year. Happy New Year and I hope Santa Claus will bring us a cool investor in the bag.
