Why I said no to a traditional fundraise
Jon: What made you want to do your next round in this format?
Raad: We’re a weird company where we do things in strange ways because it creates
an interesting story for us to look back on. When we learned about the RUV it
sounded like a perfect fit. We could create this link in five minutes and raise it
from two hundred and fifty accredited investors. Most of our customers are
accredited because they’re GCs at Big Tech companies. Many of our
supply-side users are lawyers and have high networks.
It felt like a no-brainer....we were just waiting for the right tools to come out. Imagine
if Uber in their early days did an RUV and allowed their users to invest or if Airbnb
allowed their hosts to invest in their company in the early stages. Imagine how
much more powerful their platform would be today.
I liked it from that aspect of empowering our customers and users that actually made
the platform valuable. Without our demand-side and without our supply side, it would
be pretty much worthless. It just felt right to be able to give them an opportunity.
It’s a win-win for both sides. You are going to avoid a lot of churn down the road if
they have a piece of the business. What are the chances that a customer is going
to move to another competitor if they have some skin in the game? There are these
strategic high-level aspects that just made sense from that perspective and then
there was the matter of experimentation and mobilizing it.
It was very much hacked together. We had a Substack with many of our customers
and leads and we sent out this email to gauge the level of interest. They filled out
a google form and if it wasn’t higher than a hundred thousand then we weren’t
going to do it— we would just raise the traditional way. From that first email blast,
we ended up getting two hundred and fifty thousand in interest just from our users.
We had no idea it would blow up like that. It made me wonder how many more
Substacks are out there where people will be willing to put in money like that.
We figured out the evaluation because we weren’t intending to have a lead VC anchor
the round, we just wanted to do it this free-style way. We got some public companies.
We got some private companies.
We ended up coming up with eight or nine ex-multiple off of our annualized run rate.
We were at an $8M run-rate so we ended up putting the terms at an $80M cap,
which in my opinion is pretty conservative compared to a lot of multiples that a lot
of other companies were raising at currently. I also wanted to get a good return for
these early users. It would be a really cool feeling. Somebody invests a thousand
bucks and we turned that into ten thousand bucks and they’d never made an
investment before. All of those things felt right, it felt very empowering…and it
just snowballed from there.
We used this tool called Journey that allowed me to record a pitch, put our deck
there, and put our live financials on a google sheet. Journey is a new tool that
stitches together a bunch of multi-media links into one presentation. I shared
that with a few people and it kept getting shared with more and more people.
At the end of the link, there was a one-click way to invest in our RUV.
I predominantly did that because I wanted to maximize the number of investors
without taking individual meetings with every single person.
It was everything they needed to know in a super transparent way. They could
make their minds up in thirty seconds. It allowed for faster noes, which allows
you to then spend more time with the people that actually are interested in your
business.
Often times when you’re fundraising, you’re going after every single investor.
You could be spending two, or three meetings with somebody that doesn’t work
out. I didn’t want that. I experienced that already. I don’t want to go through a
hundred plus pitch meetings to get to the third one to get a no. I was done with
that. Maybe I'll raise that way again, but as of right now I don’t want to do that.