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4 tips for raising a successful seed round of funding

(Business Finance) After seeking a seed round of funding, one entrepreneur learned some difficult lessons and offers a fresh insight into the process.

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I couldn’t believe what I’d just said.

I don’t think my boss could either, so I repeated “That’s right, we just got a $50,000 check for my new startup and I’ll be leaving in a couple of weeks.” I was on cloud nine. Our funds had just hit the bank and I was on my way to fulfill my entrepreneurial dream, but it wasn’t always this way.

Here’s what I learned through raising a seed round of financing.

1. Have a product and market penetration

In today’s tech landscape if you can’t put together your first product and get some decent validation working out of a garage, dorm room, or basement you are going to have a rough go at raising any good money. When we approached our first investors we already had a product with about 2,500 people using it in our target market and we were growing rapidly every month without much paid advertising. Growth and penetration is so key to raising money. Investors know it’s difficult to do all of this without funding, but that separates the doers from the people that only have an idea.

2. Don’t be afraid to turn people down

Our first “nibble” from an investor was the kind of offer that feels a bit more like an insult, but we didn’t know if we could do better so it was tough to turn it down without a lot of other options out there. We did turn down that offer and we’re glad we did. Our next offer had double the valuation and a lot better investors behind it.

While we were considering this afore mentioned offer I called a board member from my previous company to ask his opinion about that investor. He invited me to his offices to talk about it and ended up writing us check a few weeks later. We didn’t know what a round would look like yet so we agreed on a convertible note for $50k. He liked our idea and started sending me to pitch his friends. They were all kind and told me I could come to them with strategic questions in the future but most said that they weren’t investing at the time.

I reached out to a few investors per week and was networking the best I knew how while working late nights to keep working on our product and marketing efforts. I kept in close contact with the investors that said I could go to them with strategic questions as I continued to reach out to new potential investors. Eventually one of the investors I contacted wrote us another $50k check, but we were still $400k shy of our target seed round. When the new investor came onboard I reached out to those that said I could come back with “strategic questions” to tell them about the exciting news. In short order a few of them wrote me checks as well.

LOOKING BACK: As I look back on this time I have identified a few keys to my success. The first was building good relationships. When I got turned down I maintained as close of a relationship as the potential investor was okay with. That is where most of our money came from. We also had to have good growth, so I couldn’t leave our business behind while raising. When you have a small team you have to continue to grow your business despite the demands on your time to raise money because the people you are raising money from care about your growth.

Once we had 4-5 investors onboard I would get an occasional meeting setup with an angel that wanted to invest in a hot tech startup. Our investors would refer that angel to me, we would talk for 30 minutes, and they would cut me a check in the next few days. These were the good days, but I started to get worried about taking in too much capital and diluting ourselves as founders.

3. Raise money when it wants to be raised

At this point in the fund raising process one of my investors taught me a valuable lesson. As I struggled with whether or not we actually needed more money I gave our lead investor a call to discuss the matter. He laughed a little at my dilemma and said, “Jordan, you raise money when it wants to be raised.” What did he mean? You’re not always going to be the hot company that everybody wants to be involved in. There will be ups and downs. You’re worth more during the up swings. Take the money then, and take as much as you can, within reason.

4. Startups fail because they run out of money

Speaking of taking in as much money as you can I thought I would share this last tidbit on how to think about money as a startup. One day while speaking with one of our investors he mentioned a recent conference he had attended. At the conference a question came up that he gets asked regularly. The question was, “Why do startups fail?” His answer? “Because they run out of money.” I know, it’s super profound! But while it might sound a bit obvious I think there’s a lot to be said for his answer. I firmly believe that most startups can be successful given enough time and resources to pivot and nail a product and market. The problem? One day you’re going to fail if you run out of money. As a founder you have to watch your resources like a hawk and raise as much money as you can. You have to do amazing things regardless of the limited resources, and you need to make sure your company has enough resources. You have to be scrappy.

There are so many other things that go into the process of getting a startup off the ground including achieving product-market fit, building a great team, designing and building product, creating an investor presentation, identifying and understanding your market, growth hacking techniques, and more. Stay tuned as I share what I have learned about these topics through my experiences being a product manager at a small B2B startup that was acquired in December of 2011 by Proofpoint (now a publicly traded company), and starting my own consumer-facing business that is currently disrupting the student housing search.

Most recently Jordan was the Co-founder and CEO at Unbill - a FinTech startup that was acquired by Q2ebanking (QTWO) in January of 2017. Before that, Jordan was an early employee and product manager at NextPage which sold to Proofpoint (PFPT) in December of 2011. Jordan is happily married and has 3 children.

Business Finance

Bankruptcy doesn’t mean what it used to; no longer the end

(FINANCE NEWS) With the way the world works now, bankruptcy doesn’t necessarily mean game over.

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When it’s over, it’s over. Perhaps you heard your best friend utter this phrase after a bad break-up. It’s true, most things that end, end for good. Except in this case, when it comes to the retail business.

We have seen a record number of retailers declare bankruptcy this year. Beloved teen retailers like Wet Seal have closed down their stores and malls have become ghost towns.

Reuters estimates that nineteen major retail chains have already shut down for good. While you may not miss the tight, neon dresses sold at Bebe, closures of all of these retailers result in a tremendous loss of jobs.

And it is not only job losses from the store in your hometown, often it is hundreds of locations across the nation.

For most of these retailers, bankruptcy was the definitive end to the business. After filing, most companies choose to close all locations and liquidate the assets. This is the most common path to take, until now.

Even with the surge of bankruptcy, those behind the business are finding alternative paths to keep the business alive.

Behind the scenes, there are three core groups invested in every business: the company’s creditors, vendors, and landlords. All of these groups have a vested interest in keeping the company alive even if they are in debt.

The most recent trend for bankrupt businesses has been to keep stores open and negotiate debt loans rather than shutting down everything. The truth is that a lot of these businesses still attract customers and have a large cash flow, even if they are technically bankrupt.

For instance, Toys ‘R’ Us manages to take in $800 million each year on average which makes it a viable business. Of course, they are $5 billion in debt, but with an extension and restructuring of their business, they could one day turn a profit. However, this will only happen if they are given the chance to keep their doors open.

There are other options to lending helping hands to bankrupt businesses. After the popular teen retailer Rue21 declared bankruptcy landlords agreed to reduce their rents 20% on average. Though these situations are not ideal, this mentality gives businesses a life beyond bankruptcy and save thousands of jobs in the process.

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Business Finance

Everyone’s favorite online retailer is set to accept Bitcoin by October!!!

(FINANCE NEWS) One big name online retailer is about to hop on the cryptocurrency train and start accepting Bitcoin at check out as soon as October.

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Crypto currently

There’s no denying that cryptocurrency has taken off like wildfire, but will Amazon be jumping on the bitcoin bandwagon?

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According to one top source, Amazon has already started flirting with the idea and could be ready to fully use bitcoin in October.

Kind of a big deal

The news broke via The James Altucher Report, which is run by the former hedge fund manager and venture capitalist James Altucher. Altucher uses his experience in the business realm, where he has cofounded over 20 companies, to offer realistic financial advice and insight.

He communicates via his popular newsletters, blog and podcast. According to Altucher, Amazon is geared up to change their payment options as early as October.

Already Testing the Waters

Last year, Amazon partnered up with Digital Currency Group, a major investor in Bitcoin, to act as an intermediary between them and their clients. Amazon’s role is to handle all transactions, many of which include the popular cryptocurrency.

Major companies like Google, Ebay and Paypal already accept bitcoin so it is just a matter of time until Amazon follows suit. Even Japan and Russia recognize it as legal currency.

Amazon + Bitcoin = AmaCoin?

Don’t think of bitcoin as Amazon’s only option. Some speculate that Amazon may one day create their own currency.

As a company that has already started testing drones as a future delivery method, custom currency does not seem so out of this world.

The blockchain option has been a refreshing alternative to using traditional banks, especially for those who do not have faith in the current banking practices.

There are questions

If Amazon jumps onboard and rolls out a plan to use bitcoin this year, Altucher anticipates a major surge in its value. Since they have yet to announce an official strategy, and because the option of them creating their own currency is still up in the air, it is unknown how Amazon will integrate it into their system.

Will Amazon find a different way to accept bitcoin? Perhaps a brand new way? If Amazon does start using bitcoin they will join many other tech companies that have already anticipated the growth in its value. Amazon isn’t the only company that has started transitioning over. Many other tech companies have already started to become intermediaries to manage digital transactions.

#AmazonBitcoin

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Business Finance

Pirate Bay is mining cryptos using their users’ CPU… those scallywags

(FINANCE NEWS) Cryptocurrency and mining and pirates. It all sounds like something out of a sci-fi novel, but trust us, it’s 100% real.

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Who pirates the pirates?

Well, pirates, naturally. Piracy is a fractal. There is nothing so small that someone won’t strap on an eyepatch, grab a parrot and snag themselves an unlawful piece.

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Such is the swashbuckling tale recently broken on Reddit about Pirate Bay, which is borrowing visitors’ CPU cycles to mine cryptocurrency.

TRANSLATION, PLEASE?

To translate that from Internet to English, “mining” cryptocurrency means volunteering your computer to verify blockchain transactions. We’ve covered blockchain in depth before, but the short version is it’s a particular security protocol that encrypts tokens representing money.

When you join a cryptocurrency exchange, you use that exchange’s blockchain to encrypt your stuff.

Some members of an exchange volunteer their computers to verify that transactions have taken place. Then they’re encrypted, never to be futzed with again. Those members get paid for their trouble with fractions of coins from the exchange.

The volunteers don’t actually do anything. The verification and encryption are automatic. That’s the point of cryptocurrency: no flighty or nefarious humans are involved in the bookkeeping. It’s all about the robots. That said, somebody owns the robots, and robot time is worth money. Therefore, miners.

SIXTEEN COINS – WHAT DO YOU GET?

“Miners,” in common currency dork parlance, are folks who invest in verifying transactions on a large scale, turning those fractions of coins into meaningful profit. It’s a smart way to make consistent money.

One big caveat: you need serious computing power to do it enough to matter.

Lifewire estimates an upfront cost of $3000 to $5000 to get real money out of the process. That said, their estimate also says 50 dollars a day in profit, which means over the course of a year you’re talking 3 to 5 times the money you put in. Ain’t chump change.

YAR

Which brings us to Pirate Bay. Pirate Bay is, as I’m sure the pure and innocent readers of American Genius would have no reason to know, a torrent site where various forms of media may be secured for free by nefarious means.

You’re shocked, I’m sure. Not everybody is, it turns out: as of this article, it’s the 88th most popular website on Earth. 25th in Canada! Canadians, man. They’re tricksy.

So, unsurprisingly, is Pirate Bay.

To state the obvious, swiping media and giving it away is not a working business strategy. Robin Hood did not have a positive P&L ratio. Typically – I’m told, I of course would have no way of knowing this myself – torrent sites support themselves through ad revenue. That wasn’t cutting it for Pirate Bay, plus they just wanted to get rid of the ads for an improved user experience, so they experimented.

Their first scheme was borrowing users’ CPUs while they were on the website, using unused processor cycles to mine cryptocurrency.

BROTHER, CAN YOU SPARE A CRYPTODIME?

The rollout was flawed. In fact the rollout was nonexistent: the only reason anybody even knew it was happening was somebody effed up the miner script and it started taking 100 percent of users’ CPU cycles as long as they were on the page. Oops.

But fair dues, Pirate Bay did exactly what tech folks should do when caught with their digital drawers down.

They fessed up in an official statement that explained their intent, addressed the problem people were complaining about, and invited further input. That’s more than can be said for, say, Uber.

More to the point, if the cryptocurrency mining plan goes forward, Pirate Bay will be providing a service to consumers in exchange for compensation at stated rates. The fact that it all comes in a novel form – the service is peer-to-peer, based on a model of free sharing; the compensation is provided voluntarily by people who aren’t receiving the services; the rates are measured in CPU cycles rather than money – doesn’t change the fact that fundamentally, “service to consumer for compensation” equals “business plan.”

For another time

Whether it’s a workable business plan or not is a question for Future Matt. Present Matt just has a question: if it does work, if Pirate Bay becomes a self-supporting enterprise trading encrypted, peer-to-peer money for an encrypted, peer-to-peer service, what then? At what point does it become more reasonable, and for that matter more ethical, to accept peer-to-peer transaction as a real thing and regulate it accordingly, as opposed to banning it outright?

Ask Piet Heyn. Better yet, order a mojito and run it past Captain Morgan. (It’s better because you get a mojito.) Back in the days of real pirates, when you wanted to rein them in, you just legalized them. If Pirate Bay establishes a legitimate revenue stream, that may well be the smart next step.

#PirateBay

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