Eager for capital, we started meeting with potential investors, from Angels to VCs, early on in inploi’s life. “It’s a great idea! We really think you’re on to something! It’s a huge market! But come back when you are able to demonstrate some traction: when you have the product built. When you have some users,” became a familiar refrain from the umpteenth ‘early stage/seed’ investor we had met with. Avoiding despondence our reply was, “Sure! We’ll be back to see you soon. You’ll see our ability to execute. [you’d better bring your chequebook…]!” Once back on the street we’d wonder what all of these funds were getting at, calling themselves seed stage investors? Wasn’t the point to provide capital to get us off the ground?!
Each ‘not now’ (or outright rejection) steeled our resolve and drove us to work harder. We were going to make inploi happen, one way or another. This was a good idea that needed to be realised. If it wasn’t us, it would be somebody else. It had to be us.
To do so, however, we needed to overcome the hurdle of raising external capital. We’d been working on our start-up full-time for six months, and our ability to live in London, one of the most expensive cities in the world, without an income, was wearing thin. Savings were being exhausted and lines of credit from friends & family were running thin. A few writing assignments on the side was just about covering my monthly rent. We soldiered on, our biggest daily expense the coffee we bought in order to work from and meet in cafes across the city. With each day we worked, inploi moved further along.
In hindsight, I can appreciate why many of the investors we spoke to put us off initially. And in fact I am grateful they did.
It is a very good thing that we did not raise funds immediately, for two reasons. Firstly, operating a company on just about no money taught us a huge amount. It forced us to be frugal, to ‘bootstrap’. It gave us an intimate understanding of what we were doing. There was no budget for a lawyer, so I wrote contracts and registered companies and trademarks. There was no money for a UI designer or market analyst, so Alex learned front-end design and developed a growth strategy. We were forced to wear the hats of accountants, designers, marketers, financial modellers, market researchers, lawyers, copywriters, negotiators, and just about everything in between. Public transport costs added up, so we bought bicycles, exploring the city we’d be operating in at street level. We found people (and ferreted out friends) who could help us out for little or no payment. We got our hands dirty handling every aspect of raising a company from the ground. And we learned. Sure, we had the advantage of some relevant experience and excellent, broad training, but in no other circumstances would we have had to deal with them so concurrently, at the coal face.
Secondly, being unfunded allowed us to fail fast, and perhaps more importantly, to fail cheaply. A lot changed in those first few months. Our proposed business model changed. The way we made money changed. The way our apps would function changed. What our apps did changed. In Silicon Valley parlance, wepivoted a number of times, in response to our experiences in the field and the things we learned from our would-be users. Had we been funded whilst making these mistakes, we would likely have followed them too far — we’d have spent money on a UI for an app that we wouldn’t have used; have coded functionality that would be discarded. We may have hired people we didn’t need. Unfunded, the only real cost was our time. And that got us closer to being investment ready.
We spent ages putting together a pitch deck, a comprehensive business plan, and a detailed model, finally deciding we were ready to attract some risk capital. We contacted everyone we had engaged along the journey, including a long list of friends and family (no ‘fools!’), tracking our engagement with them and their status in a detailed ‘pipeline’ sheet — from an initial email announcing our funding round (along with an executive summary), through gathering expressions of interest to receiving term sheets (we sent everyone who was interested a simple sheet, with a fixed valuation and terms) and finally getting the money in the bank. We managed to close a substantial round within a month. The journey to getting there developed a leanness to our operations that we will maintain as we grow. It allowed us to refine our business and product without expending funds on unnecessary tangents. We received investment when we were ready for it, in time to execute on a well thought out, refined plan.
We’re now approaching our launch in July, and will soon be looking to raise a round to scale inploi across the country, and beyond. When we return to the market to raise it, we’ll have a brilliant product, a broad base of users, revenue and, crucially, some ‘traction’.
The fundraising trail is time consuming, exhausting, and stressful. Do not despair — in the tension between being funded, and broke there is a huge amount to learn!
About the author: Matt de la Hey is co-founder & CEO of inploi, the on-demand jobs network based out of London. Like us on facebook and follow us on twitter:@mattdlhey / @inploime
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