Seed Fundraising in 2013 after Y Combinator

Raising our seed was totally different from raising our series A, which I did 12 months later. Our fundraising history might look ok from the outside, but I messed up a lot. Even though our situation was atypical because of Y Combinator, hopefully some can learn from what I wish I hadn’t done for our seed, and what I’d do again. This is the story of how, when Apptimize was 6 months old, composed of consultants and 2 unpaid employees (me and my cofounder), and had zero revenue, I raised $2M in convertible notes.

I. How we started
II. What to talk about
III.  The week of demo day
IV. Who to talk with first
V. Closing the deal
VI. Mistakes with VC’s
VII. What I pitched

I. How we started

The first money into Apptimize was $50K that I put in before we incorporated. We wanted to pay our consultants: my friends around the Bay and people from hacker news. When we got into Y Combinator ~2 months later, they gave us ~$100K.

During Y Combinator, my MIT and trading friends were the first people who gave us money, not because they knew anything about what we were doing but because they knew me and know I’m a smart bet. Our founder friends also introduced us to a ton of investors.

The majority of the money we raised was through introductions through friends, such as Adi who introduced us to a bunch of amazing investors including Merus. One of our investors and friends Tom was the one who introduced us to Google Ventures during Y Combinator. He also led our Angellist syndicate. Friends were invaluable in helping us raise our seed because of the connections and advice they gave. Looking back over my notes, I’m struck afresh by how right they were about everything.

II. What to talk about

When talking with investors, I had 2 areas of discussion: topics that would lead to closing the investment, and topics that would not. Everything was either a selling point, or not. Non-selling points were barriers to go around so that we could go back to talking about Apptimize’s unique advantages. I visualized the conversation as a ride to the mobile monetization bank. I was talking with someone who, like me, believed that putting money and other resources into mobile monetization was a great idea, and I was taking them with me on this journey. If we started detouring into topics that weren’t going to lead to an investment decision, I figured out how to get us back to the freeway towards the goal. Before the end of the conversation, they had to believe that riding with me was equivalent to going to the mobile monetization bank by seeing enough signs that Apptimize would take them there.

Questions like “How much are you raising?” “What are the terms?” “How much are you going to charge your customers?” “How many people are you going to hire?” “Will some competitor do this?” were in the category of “not selling points.” There was little chance of any answer causing them to decide to invest, so the point of the answer is just to say something normal that allowed me to transition to talking about something that will improve the investment decision. The worst type of answer is the type that risks lingering over something that isn’t going to improve the investment decision, because this would waste time. Wasting time is the deadliest sin.

My strategy for these distractions was to answer in a way that didn’t invite more questioning, and transition back to the path to a decision. For example, I didn’t want the amount I was raising to be a topic of conversation because it wasn’t likely to affect the decision, so I gave a normal answer. For our fundraising environment, this was ~$1.5M. I kept all the non-selling point answers short so I didn’t derail and detour into irrelevant weirdness; non selling points were not things I had time to talk about. I didn’t want to linger at the stop signs or create unnecessary stop signs because nothing is happening there. I wanted to just check it off and pass go.

III. The week of demo day

During Y Combinator, PG made ominous remarks to me and my batch mates about how I would have no problem fundraising. It was nice that PG was so confident, but I was unsure. Preparing for demo day, PG told me, “Say in your presentation how successful you were in algorithmic trading. That’s frightening.”

A week before demo day, Tom introduced us to Google Ventures and they were the first institutional money we got for our seed. After 1 meeting, the next day MG emailed to say they were investing.

“We’re getting money!” I showed Geoff the email on my computer while jumping up and down.
“An email is not money in the bank,” he said.

In between demo day rehearsals, banking this money became my #1 goal. Google Ventures’ legal team said, “This was the fastest turnaround we’ve seen.” I kept on top of everything and made sure I got whatever docs they needed within minutes because I was optimizing for getting the money ASAP. Waiting for the wires to hit, I refreshed our bank account every hour. The few weeks I was raising, every morning when I woke up, I’d open the banking app to check for the money.

Going into demo day, with $500K+ committed but little of it banked, I was paranoid because a million things could happen- another financial crisis could destroy the global monetary system and wipe out all our would-be investors, even Google! However, I decided to always talk as though we were definitely getting all the money so that I was in a position of power while raising. In private I was preparing for the worst and called everyone I knew to ask them to invest. Until we had banked the whole $2M, I was still calling people.

We obsessed over our demo day deck. Rehearsing, I paced the Computer History Museum for hours. We kept changing our pitch up until the last moment. Asking PG to listen to an updated pitch, he exclaimed, “No, I don’t have time for this.” We slunk away as he grumbled, “You’re already doing well with investors.” We’d deviated significantly from the PG approved pitch, but we had our plan and felt good.

Demo day happened.

On demo day, after my pitch I stood at a table while investors crowded around. I did some handshake deals and enjoyed myself. Demo day was really successful for us, and we raised all the money on the most founder favorable terms possible. In the week following demo day, I had more than 25 investor meetings. Jeremy said, “Maybe you should be more selective who you meet with because we’re closing money as fast as you can take the meetings.”

I was still paranoid and almost didn’t go to burning man because the money hadn’t been banked yet.
My friend said, “You’re leaving me hanging here.”
“I can’t think about burning man right now. This raise is my #1 priority and I need help with that.”
He instantly connected me to a ton of investors. He’s amazing.

IV. Who to talk with first

Because we did well on demo day, we were connected with about 100 investors. How did I decide who to meet with in what order? I first figured out if they wanted to go where Apptimize was going. If they weren’t clearly into mobile, I put off the meeting. I also figured out how much they tended to invest. If I couldn’t figure out if it was >$50K, I would put off the meeting. The common theme behind all this was optimizing for my time. If I met with the bigger, more interested investors first, I’d have all the money sooner.

V. Closing the deal

From my experience, there are 2 main types of decision makers: fast and slow. Signs of fast decision makers include talking fast, irritability if you wander off topic, and indifference towards details. Signs of slow decision makers include lists of detailed questions, talking carefully, and wanting more of your time. Slow decision makers might be the first investors I started talking with for my series A, but they were the last ones I talked with for my seed.

Fast decision makers were my targets because my seed was about getting the money as fast as possible and moving on with life. I wanted people who could decide fast, in 1 meeting. When I met most investors, it was clear to me they were fast decision makers and had already largely decided to invest in Apptimize the instant we met. My goal was to go in there, verify their instinct was correct by being badass and answering what they wanted to know, and then getting the money.

I was constantly preparing for the moment when they investor has decided whether Apptimize was the path to the bank. The instant I sensed they’d decided, I asked for the money. This was usually 30 to 45 minutes into the meeting. It was different for different people. I didn’t try to change anyone’s mind, because changing someone’s mind (and keeping it changed) wasn’t an efficient use of my time. I just wanted to get them to decide anything, and then to get them to tell me their decision.
When I sensed they’d decided, I’d say, “Are you interested in investing?”
“Yes.”
“How much do you normally invest?”
If they didn’t have 1 number, and said something like, “A range,” or “It depends,” or “I have to run this by whoever,” I would assume they decided not to invest and figure out how to leave for my next meeting.
If they gave me a number, I’d say, “Great, I’ll send you over the docs tonight via Clerky,” and figure out how to leave for my next meeting. Easy. Despite my worries, no one ever backed out.

VI. Mistakes with VC’s

As soon as we started Y Combinator, VC’s asked mutual friends to introduce us. I was torn on whether to take the meetings because during YC you’re supposed to focus on building, not fundraising. Plus there was overall an antagonistic vibe towards VC’s. It was weird because on one hand they’re mocked as herd animals that string you along, waste your time, and pass your information to competitors. On the other hand, they’re everywhere and clearly an important part of the ecosystem.

I hated the idea that someone might waste my time, so I was often suspicious and impatient with VC’s. This was unproductive because I should’ve been either not meeting at all or figuring out what I was looking for in a long term partner. I didn’t understand anything about how venture capital worked, how VC’s are incentivized, or what they cared about. If I went into it thinking this was going to be a waste of time, it did not go well. In addition to naiveté, it was a culture clash because in algorithmic trading everyone is incredibly secretive. I’d often say, “I can’t answer that.” Thus the VC meetings only went well when it was through a warm intro or if I felt a personal connection because I became less guarded.

After we raised $2M, I should’ve stopped raising but we had VC’s who wanted to do our series A. We didn’t need the money then and I was clueless what a series A and having someone on our board really meant.
PG said, “Nancy, don’t get addicted to fundraising.”
“How did you know I’d be good at it?”
“Duh, I’ve seen more than 550 startups. Try to do the A now if you can, but stop if it gets hard.”

It took a few weeks for me to realize it was getting hard, but looking back I could’ve realized it faster if I’d known how VC’s work. This experience is what led me to realize that raising seed money is like consumer sales, whereas raising a series A is like enterprise sales. This is not to trivialize the seed- I lost 5 pounds in 1 week going to all those meetings.

After we raised our $2M, I had 40 more VC meetings over the next month that were largely a waste of time because they did not result in much additional money. We were debating whether we should just do our series A at that moment because we had verbal offers, but in retrospect we should’ve stopped, I shouldn’t’ve been so cagey, and I should’ve learned enterprise sales and how VC’s worked. I didn’t fully understand everything I’d messed up here until after our Series A, and that’s another post.

VII. What I pitched

Above I describe avoiding the non-selling points. What were my selling points? What did we actually talk about during the meetings?

My team is the first thing I explain when I introduce Apptimize to anyone. I confess my team is the best team in Silicon Valley (and thus the world) and that getting to choose exactly who I want to work with is one of the main reasons I started my own company. It’s one of my favorite things about being CEO. It’s why I’m dedicated to building the best team in the world and why the best people want to work at Apptimize. Seriously, check out apptimize.com/team and message me if you want to join us.

The next thing I’d do was show our kick ass demo. Every single person told me they were amazed. Their jaws dropped. They called over their partners to come over to look at it. They’d never seen anything like it, no one they knew had seen anything like it, and there was more magical technology where that came from.

I’d always talk about the vision. Apptimize is about reinventing mobile development. Making and maintaining native apps is totally broken and Apptimize shows people a better way. Anyone who develops on mobile can tell you all the things they hate about it because there are barriers like the app store approval process, the release cycle, the app being installed on a device that doesn’t always have internet, every minor change needing to be put on the roadmap, the difficulty in rolling back a suboptimal change, the mounting challenges in dealing with the fragmentation and variety of mobile users, the opacity in figuring out what’s working and what’s not. Is this how people are going to be making apps in 10 years? Are today’s apps anything like what apps will be in 5 years? Of course not, of course not. Apps will be better and smarter than they are right now. Mobile development will be faster and easier. Apptimize is 10x better than anything else out there and we’re going to be the drivers of that change. Apptimize allows people to innovate 100x more effectively.

The reason I started Apptimize is because we’re enabling mobile teams to innovate more intelligently and efficiently. We enable an effective process for continuous innovation. Right now I see the pain app developers deal with. I see so many apps that flounder despite a lot of work and creativity. It hurts because it’s such a waste of life. Apptimize is fixing this. It’s a no brainer. Do you want to invest?