I’ve been seeing a lot of posts lately on how to raise money from venture capitalists for your startup. I used to gobble that stuff up, reading any and every post I could to try to glean any insight I could into the process. Now that I’ve been through the process and have the benefit of hindsight I’ve concluded there’s no universally-applicable advice other than this: your mileage may vary.
Fundraising is a crazy experience, and every founder who’s tried will love to tell you just how crazy it was for them. Your story always feels like the worst possible case until you hear someone else’s. For instance, another founder I knew was raising around the same time we were. They had a product, revenue and had just graduated from an accelerator. I felt like we had no chance compared to where they were at. They didn’t get funded and the company is gone. We did, and we’re here.
I’ve been asked a lot, “How did you pull it off?” We had three things working for us: the right people, a ripe market and a good “story.” My approach to pitching was to hone in on those three things and ignore everything else.
The Right People
When I left Twilio, I really wanted to get into consumer web stuff. IFTTT was the perfect hybrid between dev tools and consumer services. Except I repeatedly found myself drawn back to building dev tools. My co-founder Frank is the same way. Everywhere we go, we build tools because it’s what we love to do.
Between the two cofounders, we also had the right talent mix. My background as a developer, product manager and evangelist and Frank as a Lead Engineer on a popular API. We had the skills and track record. Selling the team was always the easiest part of pitching.
A Ripe Market
APIs are blowing up. App developers (especially mobile) are building and relying on more APIs (even if they don’t call them that) than ever. The trend is clear. Existing API tools are all focused on API providers. App developers need tools too.
The most common question I got was “How big a market is it?” How many apps can you imagine not talking to a remote web service in the future? That’s how big it is. This was also easy to pitch.
A Good Story
Investors hear from good teams, with good ideas in good markets all the time. That was the minimum bar for getting in the door (being relatively well-connected also accelerated the process). But I think what made the biggest difference was the story we told about getting from where we are now to becoming a huge business.
I tried to paint as vivid a picture as possible. Like any good story it had a beginning, middle and end. I explained how product development and marketing would progress and dovetail with each other over time. What the target audience was for each phase. How each phase set the stage for the next one. What we learned from working at a company that went through the process already. After the first few meetings I proactively addressed concerns before they were asked.
Knowing our story inside and out gave me a lot of confidence. The more people I told, the more confident I got that we were on to something. Paul Graham covers this in ‘How to Convince Investors’:
Investors are not always that good at judging technology, but they’re good at judging confidence. If you try to act like something you’re not, you’ll just end up in an uncanny valley. You’ll depart from sincere, but never arrive at convincing.
Raising money was not fun. It was stressful and time-consuming. I feel incredibly fortunate to have had it work out. We ended up with great investors and never felt like we had to “sell out.”
It’s still early for Runscope. We are finding our way and we’re a long way from successful. So far I’m happy with how it’s going. We’re on track to meet our goals, we have a great team (what I’m the most proud of) and we’re having a lot of fun.