Recently, real estate software company, BoomTown raised $20.1 million in financing from Adams Street Partners and Susquehanna Growth Equity. They plan to use the investment to innovate and drive the future of real estate.
You may have heard that part of the story, but did you know why they raised it, how they raised it, how they decided to partner on, what type of funding to raise, or what steps to take since they were already profitable.
Chris Rickborn, Chief Operating Officer at BoomTown opened up to us about the process, giving insight into the company’s future.
The road to funding
Rickborn says the rule of thumb is to “raise money when it wants to be raised,” pointing out that when your company is “perfectly profitable,” it can be complex to decide whether or not to take funding, and if so, what kind, and who to partner with.
The first step was to determine that they were ready for funding, “Not because we had offers, but because we took a serious look at where our company was. We were ready. We had more good ideas than we could realize and we had the infrastructure, key people, and momentum in place to be able to put the money to good use.”
Knowing that they were in a position to “really hit the accelerator and hire more engineers, product designers, etc. to build more stuff. and expand our product,” it was determined that the time was right.
How did they determine what type of funding to seek?
“Of course there are the obvious questions of venture capital vs. growth capital,” Rickborn said, pointing out that VC tends to focus on early stage companies, and GC supports profitable and founder-run brands.
“We’d proved ourselves, just wanted to hit the accelerator and take it to the next level. There tends to be a plateau problem at this stage, and you want to partner with someone who will ensure you break that barrier,” Rickborn notes, which is why they went the GC route.
How they picked a partner
Real estate technology is a hot investment right now, so the picking was good for BoomTown who says they generated a lot of interest from various organizations and took in close to 50 calls or visits over the past 24 months.
Rickborn unveiled what it was like at those meetings: “Everyone came to us in Charleston and it was funny to see how surprised by how “West Coast” it felt in the office. The meetings are always interesting because you’re both interviewing each other.”
Important to BoomTown was to find a company whose mission statement supported what they do, as well as their unique culture and values. “The company’s long-term vision was also important,” Rickborn opined. “Some firms make it very clear how soon they want to have an exit of when they expect a big event, and we didn’t want that to be the focus. We wanted someone that wasn’t worried about being in it for the long haul with us.”
Not everyone was a good fit, and Rickborn said within minutes, that was typically clear. “Ten minutes in you could usually tell it was a ‘no’ on the fit, and it became a game of ‘how fast did the phone come out in the meeting.'”
Rickborn says some of them even rushed the deal, urging them to review a term sheet on the spot and close right then and there.
“Some also can have some pretty high expectations of your next move if they do give you a term sheet, too,” he described. “When we met with the company we ended up moving forward with, we had ‘the moment.’ He was easy-going, smart, interested and aware of our industry, and everything seemed to align just right. It wasn’t forced and we were beyond comfortable to move forward-we were really excited.”
How did the green light get lit?
After a long road, Rickborn says, “The timing was right, the company was right, the founder’s desire to let someone in was there, and after some serious interviewing, the capital organization was right.”
Advice for others seeking funding
For other brands seeking funding, Rickborn has some advice:
- Some big firms have “sales people” that will start to build the relationship with you, but they’re not the partner so they’ll burn up your time.
- Being told no is something you can’t take personally. Huge success story companies have been told no a lot. and there are always stories on the investor side of “I have the opportunity to invest in Facebook, or what have you.
- Be strategic in how many “extra curriculars” you schedule around a visit. If you know it’s a “No” in the first 10 minutes of a meeting, you’re really going to start regretting that dinner reservation.