In January I selected a dozen investors we wanted to work with and pitched them on our Series A. I quickly discovered expectations for a B2B Series A were $1.5M in annual revenue run rate — we were growing fast, but still only 1/3 of the way there at the time. In fact, if our run rate had been that high we would have been massively profitable.
We also had a market problem. We were pitching VCs on a product they themselves used — but they had a hard time understanding the broader market and even though we had a handful of reference customers for our emerging verticals we hadn’t effectively told the story. I ended up writing “Introducing Mattermark, the Deal Intelligence Company” to help with this.
After modeling out the cap table I was worried — the amount we would be taking was smaller than we’d planned and I would need to start fundraising again in 6 months, and then I would be up against Series B metrics to hit before we were ready for them. I spent a sleepless night debating whether I was making a huge mistake, and concluded that it would be smarter and more wise long-term to take on a bit more debt and hit the next milestones.
I was pretty open with my team about the fact that I was fundraising, so it was a little awkward to suddenly stop giving updates on “our Series A.” We had a lot of plans, we needed to hire engineers to build the improvements our customers were asking for, we needed a way to cover our steadily growing AWS bill, we needed to start experimenting with new markets.
It was at this crucial moment that Boris Wertz of Version One Ventures, one of our earliest customers who agreed to pay for Mattermark when it was still a Google Docs spreadsheet, offered to bridge us on a convertible note. This infusion of cash from a completely new investor who I already considered a friend and mentor gave me confidence, and from there began conversations with investors who would ultimately participate in our current round.
What It’s Like Having 40+ Investors
Like all relationships in life, my relationships with our investors ebb and flow depending on what we can offer each other. Sometimes there is a clear way someone can help and we engage a great deal, other times they’re focused on other things and it doesn’t make sense be in close contact. At any given time I’d say 25% of our investors are passive, 50% are in touch 1x per month, and 25% are in touch 1x per week.
One interesting thing about the new institutional investors who invested in this round was that I found a connection with more than just one member of each team, beyond the partner who ultimately wrote the check. At Version One I immediately clicked with Angela. At Felicis I talked piano and brain waves Renata, Dasha, and Aydin (and they have the best food/chocolate). At Flybridge we met up for drinks in New York and I got to hang out with Matt and Caitlin, and then onto Boston to meet Kate.
Just as with John, Forest and Sheel at NEA and Frank, Marc and Morgan at Andreessen Horowitz before, any worries I had about being a small check in a large portfolio of board seats was quickly set aside. Based on my experience, I think it might be a myth that VC funds don’t take care of their seeds. I’m bragging a bit, but I really do think I am fortunate to have some of the best investors in the world.
Okay, okay — enough investor butt kissing Danielle!
This post is the last post I am going to write about fundraising for a long, long, long time. As you can see from the graph above, we have nearly $2 Million in the bank and have identified a multi-billion dollar market to go after, so my job for the foreseeable future is to put that money to work building the team, setting our strategy, and hitting our next milestones.
Day-to-day I’m focused on taking off the various operational hats I’ve been wearing and delegating them to fantastic additions to our team.
- I’ve hired Bryan Tsao as our Director of Product, and he brings rich experience scaling Kabam from $0 to $360M in revenues at Kabam over the past six years as employee #16
- I’ve hired a VP of Sales (TBA, watch this space!)
- I’ve hired our first UI/UX Designer and I’m hiring our first Frontend Developer so I can stop doing our HTML/CSS and design.
- I’ve hired a full time in-house recruiter so we can level up in the battle for the best engineering, data science and analyst talent in the world.
We’re still following the same advice we got in Y Combinator. Pick one metric and just make it go up consistently. For us, that number is our Net Annualized Revenue Run Rate — and the “net” part is crucial because it is net of refunds, churn, and upsells. Our monthly growth of this metric ranges 10 to 20%, and as you can see thanks to compounding there is a wide range of growth we could experience depending on how consistently we hit the higher end of the range.
In the spirit of Jack Ma, in his letter to Alibaba employees following their IPO filing, we recognize that raising capital “is one important strategy and vehicle for fulfilling our mission. It is a gas station along the road to the future.”
