If You Can’t Raise $100,000, Ask for $1 Million
In my first post this year, “The Start-Up Vortex of Doom,“ I
wrote about how I scrounged for cash in 2013, trying to build a company
and keep the team motivated. We often came perilously close to running
out of money. At one point, I lent the company, Posse, money from my
personal savings to make payroll. Other times, I raised $50,000 or
$100,000 — enough to stay alive for a couple of months but not enough to
plan for the future. Those were not easy times.
At my lowest point, one of our directors,
Bill Tai, wrote a long email telling me his own vortex of doom story. He
founded a company called iAsiaWorks and raised one of the largest
rounds of investment financing that year — and then the Asian economic
crisis hit. Asian currencies fell as much as 80 percent against the
dollar, wiping out much of the capital he had just raised. Revenue
collapsed, and he ended up laying off most of his staff and shutting
several offices.
Many people would have given up at this
point. But after 18 months, with $2 million left in the bank and a model
that wasn’t working, Mr. Tai recruited a new management team and bid
$42 million to acquire an Internet business in Hong Kong from AT&T.
He won and raised $85 million to finance the purchase and build data
centers in Asia. The company continued to grow and was eventually listed
on Nasdaq. He signed off his email to me by saying, “Think BIG and
drive it hard.”
I was baffled: Here I was, running a company
that was surviving hand-to-mouth, struggling to raise small amounts each
month just to stay alive. Raising $85 million to buy out another
business and get listed on a stock exchange seemed like fantasy, not at
all relevant to my situation.
But as I thought more deeply, I decided Mr.
Tai was right: I would never escape my vortex by focusing on day-to-day
issues. I had to think bigger. I was also tired of scrounging for money,
supporting a business that was growing so slowly. For the sake of my
own career, it was time to make a bigger play.
Within a month, I figured out what I needed.
Posse is a recommendation app that helps people find commercial places
near them that they might like to visit. We do it well, and we’ve built
one of the largest networks of shop owners and shoppers. But in its
current form, Posse would always be a “nice to have” app rather than a
vital utility that people would need every day. I assessed the market
and looked at what other companies were offering. What if we started
acquiring or merging with businesses that needed access to a network
like ours? If we combined our scale with other services, what could we
achieve? The answer was obvious: We could become the Amazon of offline
shopping.
This time, when I began our investment road
show, I felt more confident. I was pitching a transformative business
with a path to success.
Still, breaking out of my old habits remained
a challenge. One of our investment bankers helped by introducing us to
several clients. After one of the pitches, the banker pulled me aside
and said, “You have to focus on selling the dream. These guys don’t care
if you can turn their $100,000 into $1 million — they spend that on
their Christmas party.” Even though I thought I was creating a big
vision, I was directing my presentation toward conservative assumptions,
showing how the company would survive in a worst-case scenario.
After that, I focused every meeting on
Posse’s enormous potential. At first, I felt a combination of nerves and
excitement. I do believe my message, and with every presentation, my
passion for ensuring that every investor engaged with it increased. By
the end of my road show of meetings, I was enjoying a 100 percent
success rate.
If you’re reading this, thinking that it
doesn’t apply to you and your business, I would urge you to set aside
your assumptions for a moment. It’s not easy to do — the daily grind of
business commands the attention of any entrepreneur. Perhaps, like me,
you already believe you’re chasing a big opportunity. I now realize that
I placed a lid on what I believed was possible for our business. By
acknowledging the lid and stepping beyond, I discovered a bigger
opportunity, one with the potential to change my life and that of our
company.
I’m happy to report that last week we closed our round successfully. I’ve written about my adjustment of pitching techniques and body language
when selling Posse to these new investors. This did raise my
confidence, but another factor was a shift in my own perspective. I was
thinking and planning on a larger scale than I had previously.
In the past, I had raised most of our money
from angel investors, and most of that came from speaking at pitch
competitions. This time, I approached professional investors and
brokerage firms. We hope to take the company public one day, and I’d
like to involve these people now so they will help us when we get to
that stage.
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