How we almost didn’t raise $800K in the worst investment market in years

[physcab]

I'm curious to hear more details about your "tipping point". What sort of metrics seem to put investors at ease? Was it a specific revenue goal, a more polished plan of action, a certain user-growth model, or all of the above? My limited experience from working at a consumer internet startup has taught me that once you hit about a million users, everything else seems to fall into place a lot easier. Of course that varies widely depending on the business, so I'm just interested in hearing other data points.

[rrwhite]

Our key metrics really didn't change over the course of the fundraising process. We had be live for over a year and sign up growth as pretty stable. The only "metric" that changed was the current revenue/mo numbers. But it really wasn't a change in metrics that changed our fortunes. It was really just social proof and finding the right story that resonated.

[arisey]

Thanks for sharing your behind the scene story. Having "social proof" from early investors and managing "a herding situation" to enable others chipping in seem to be critical components during a fund raising process.

As a B2B Saas provider, do you feel that enterprises are open to pay monthly subscription fee via credit cards? We are dealing B2B business, mostly w/banks & pharms. Managing invoices are challenging, and everyone is trying to drag on their feet when paying invoices. Monthly subscription fee would be much easier to manage. Thanks for your insight in advance.

[wavesplash]

Consider only offering enterprises a yearly pre-pay option if they want invoicing. That reduces your paperwork and lets you put the cash to work. Once you're only dealing with yearly invoices, the collections challenge is simpler.

If the product is SaaS you have the ultimate power to resolve non-payment: stop service.

Just send a polite note to their accounts payable team or whomever is your main contact say "We really love you as a customer, but our invoice is overdue and forcing an automatic stop of service on XXX, XXXX (30 days from today). We really don't wish to loose your firm as a customer. Please contact us as soon as possible so we can avoid a service interruption" Make sure the subject says something like "30 days notice: Automatic Stop of Service on XXXX for non-payment" They should jump to action. If not, remind them again in 2 weeks, then if no action stop the service.

If your service is important to them, you'll be impressed at how quickly things get paid.

[rrwhite]

Happy to answer any questions about this that people may have.

[jranck]

This is very informative, kudos to you guys for sharing. How did you guys set your goals as far as how much to raise and the amount of equity you were willing to give up? What did having the extra investment mean for you guys starting out?

[scottkrager]

Are you glad you ended up raising that much?

[dools]

If you already had $10k/month in revenue why did you raise funds at all? Seems like you had traction, growth and revenue.

[vessenes]

I liked the network graph, I'm always curious about how much referrals matter, thanks for keeping track of it! In your case referrals mattered a lot. You didn't diagram out the influence lines, i.e. who encouraged whom, but I'd guess that would further reinforce the referral strategy.

[rrwhite]

That's a good point. Harder to track and visualize but it would have been interesting. You can roughly assume that anyone in the "invested" column influenced people further down the tree from them.

[gsiener]

Glad to see more posts like this coming out of the woodwork. Our CEO (at Profitably) just published a really detailed account of our fundraising, required reading for entrepreneurs that are raising! http://profitab.ly/h49ues

[benmccann]

Why didn't you just link to http://blog.profitably.com/post/4064020554/a-tale-of-two-fin... instead of http://5z8.info/uniqueinvestmentopportunity_h8e8mk_facebook-... ?

[perlgeek]

YC companies seem to have that social proof by a first investor from the start (ie when they are accepted).

[r00k]

What was your burn rate at this point?

[rrwhite]

Our actual burn rate was pretty low (~$10K/mo) but it was also unsustainable. No one was being paid and we were just finding enough money to keep a roof over our head. Our "true" burn to keep going would have been much higher than that.