Dec. 2, 2020

How the seed round was raised. By Drew Moffit

How the seed round was raised. By Drew Moffit

Drew Moffitt, Exited Founder turned Corporate Venture Builder, Mentor at Techstars and a Fledgling Angel, talks about how he raised his seed round for Tailbus and how that company got to an acquisition. We've also talked about how a startup founder can raise a series A round instead of the acquisition.


Drew's LinkedIn: https://www.linkedin.com/in/drewpmoffitt/

Venture Sails: www.venturesails.co

Fill out this form to get connected to investors and mentors: https://form.typeform.com/to/vT8gVQDG

Transcript

And today's guest speaker will have drew moffit, exit, founder, and currently mentor at tech stores and also an angel investor. And in this episode, we'll talk was usually about fundraising how to approach it in his past companies.

And how he sees it now in the dynamic world. So sure let's kick it off by giving us some background on yourself and on tail bus.

Yeah, no, thank you very much for having me.

Um, as you mentioned, 2 times outer, I have 1 really fun story about how it blew up a 2nd business. I was able to quickly grow from kind of 0T and a half 1M ultimately sold that with us.

And then I spent 3 years building for corporate back Ventures for really large companies, including forward forward and.

Now,

I do continue to do some large corporate digital transformation,

corporate innovation type work,

as you mentioned on a mentor at TechStars outside that I mentor and advise other startups around strategy,

growth,

fundraising,

marketing,

those type of things.

And I've started to dabble starting a little over a year ago now, made 8 angel investments.

Nice that's real going by the way. Congrats on the, we'll get deeper. We'll go deeper into that development for forward and how that actually works because I'm personally curious.

Have no idea of how how that's done so 1st of all, let's start with your background on your company specifically, and 1 of them was acquired, and the other didn't really work out.

So let's talk about the 1 that failed. 1st, because I personally love discuss and failure says everyone knows. So, let's talk about the failed company. What happened there.

Yeah, I think I think failures are 1 of the best type of lessons, you don't really learn how to do anything you think about us walking for example, or riding a bike. It's a painful experience falling down.

And the same is true when you're doing your 1st business or just doing a business, and you're.

You need to get those kind of scars and become comfortable with failing because there's a lot that can be learned from failing.

So 1st company is called forever, not it wasn't relationship, betting app that let you place an anonymous bet on the relationship status of your Facebook friends or celebrities.

This was Pre kind of crypto currency. So you were just playing with a virtual token virtual game chip. Very can just send a poker chips.

It went viral, I helped launch that business. We raised half 1M dollars very quickly when we went viral. So, just kind of the money the money kind of showed up, which was.

Very nice pleasant experience. Um, and then.

We had gotten probably upwards in about 50 place placements in the press, all kind of organic earned media. We made the decision to launch this right around valentine's day.

So, there was natural kind of everyone's talking about love and here's an app that lets you predict Kenya. kanya. If they're going to break up soon.

I got on Good morning. America was in business, Insider, Sirius XM as well as a number of other big name placements. Unfortunately, Apple kind of operates.

What they describe as security apps app store, and we're actually seeing this fight now, breaking out between an epic over fortnight and payments and apple's apps are.

So, there's definitely a strong regulatory component that Apple is not running a private app store.

They're actually running a public utility, because it's basically only 2 places that you can you can list your mobile apps either the app store Android Playstore.

And as a result, they they tend to have pretty, we just don't like your app. So you'll get, you'll get removed.

It's not super known activity,

but they believe that our app was violating their mean kind of harassment policy guidelines,

which is 1 dot 1 dot 1 developer SDK design guidelines there,

and they have 1,

right?

After that, as that says, well, if you're engaged and political satire comedy or something like that.

Then it's a lab,

and it isn't a clear line in the sand,

because they banned us,

but they didn't advance TMC and we all know that there's a lot of nasty stuff that on Twitter and Twitter still exist on us.

So, it's unfortunately just 1 of those things where, if you get on the wrong side of the coin, you have no, of course. No recourse and that destroyed the business.

Because business was built mobile 1st, and centered around 2013 and 14 timeframe or it's building up business. And at that point, something like 15B dollars had gone through the app store.

And I think about 10% of that had gone through the Playstore.
So, just pivoting to Android, you know, it basically the, the amount of monetization just wasn't there. Ended up returning the money to investors and moving up.

Nice nice. I mean, you still return mine to investors, so that's great. It all happened in about 4 to 6 week, period of time. So you want to raise money.

Now, we're back, that's sleeping on accounts going on Good Morning America the next morning. Nice. That's what's that?

And then I had nothing, my app was bad, buddy, and I was back to sleep. You got to catch perfect that's the story of life, in a nutshell. So let's talk about the successful company that what happened there.

Can you tell us a little more about the company that 60 and you have exit.

Yeah, so took a lot from that learning experience of doing for it or not 1 of which was try to fail as fast as possible.

Try to get to market as fast as possible, try and start, like, getting the ideas out there, trying to learn seeing the way that consumers respond and then kind of developing and building what the market what the users are telling you.

So, tell us what time it's just complete Sprint. I was a solo founder this time around. Which is a very lonely experience so I would not recommend that for anyone.

And quickly within, like, 60 days was already making our 1st revenue, just kind of went from idea to 1st revenue 6 months, or doing half a 1M dollar round rate. And I kind of got to this.

And I completely bootstrapped this and done this very, very small amount of money. And I started realizing that this was a space that was just under funded. If you look at Silicon Valley pretty much no 1 has invested in the bussing space.

There was a bad signaling entries tomorrow. It's gotten into a bus bussing startup.

Probably, I think around 2 down 14 to 15, maybe 16 timeframe.

I built tell us in the 2015, 2016 timeframe.

Um, and Andrea had had lost everything in this investment and very kind of spectacular, very quick fashion.

The business, I believe it's called leap. There are some pretty main press around it that kind of drag Andreasen through the mud and that unfortunately signaled that to other VCs. Not really touching space.

So, I realized kind of at that point, like, I had built this business, but I was.

Unable to really hire and scale a full team. I had about 10 part time contractors working in various capacity for me.

And the business was actually making money are slightly profitable, but it wasn't profitable enough to actually live in New York City as, and you need to reinvest that money to continue to fuel growth.

Um, and at this time I had asked, I'm just kind of crossed past with the founder of rally. Which is the largest competitor in this space?

And he was really impressed with how quickly we've been able to grow the business. And how what a loyal customer basically had and he agreed to actually buy the business.

And they had subsequently, like, within about 6 months after that, and raised a lot of money for Mercedes Benz, they've gone through the TechStars mobility programs with Ford.

So they've done really well afterwards and it was the right kind of decision and. I think kind of my advice for that specific things. So, 1st, off.

If you're trying to build a venture back startup, do some research before you even build it that at least this is a space that we are at least interested that.

So, you know, there's potential to go out there and find a fundraising of institutional capital. And then the secondary piece of that is, you know, don't ever have too much of an attachment.

To the business understand often founders are so attached to it. It's like that. Maybe it's sort of like parents sending their kids to college. Like, you need to be okay with letting that that that child leave, you.

Um, so I read my advice to someone else building a business.

That's actually a great advice and personally, 100% agree with that. There are multiple businesses and it's only just 1 of you. So definitely at full that advice. Now, let's talk about boundaries for both of those. So, 1st, business, the.

The main business you've mentioned that you've raised 500000 dollars really easily.

Uh, how exactly do you approach that? So how do you approach the fundraising for a business that was already going viral?

So, yeah, so we had had some conversations we launched the business in February. Officially. We've been in closed data before that. We got all the press around valentine's day.

And prior to that, we had a couple of conversations, and with various investors.

And a lot of those people just kind of came back to the table and 1 or 2 people just came out of the woodwork and was like, here we are. This is crazy. You just I just saw your own business.

You know, 1 of whom was like a friend, he was introducing me it was this.

Colleague from college, who introducing me to someone so that is like, the ideal situation to be fundraising and because it's just all happens at once.

But the unfortunate reality is that as someone who's fundraising,
and this is more the case with with us as a solo founder,
I was all sorry,
I was having to run new business and fundraise and fundraising itself is a full time business, and running the startup early in any stage really is a full time job so.

Those you really, it's good to have 2 Co founders at least when you're really safe. So you can have someone that's really dedicated to fundraising process.

And that was just indoor, not constantly and that was slug fest and just kind of discovering that. Wow.

Like, all the PCs have already passed in the space and, like, there wasn't really opportunity for outside capital, be excited about that business.

I would say the founders advice to a founder I've watched and I invested in a startup and it's just very tenacious female founder and she just.

Hustled for 51020000 dollar checks and just continuously doing that. And I.

That is, as you do, have to have, you just have to be doing that full time for other Co founder was running the tech stack and running running the business. And she was just meeting after meeting at the meeting after meeting. That is the way that you're going to traditionally succeed.

You're rarely going to be in a situation like forever not where.

You know, everything just magically kind of falls together for that moment and the investors are rushing in the door that's for. And 100% fund reading should be a full time job for, like, 2 or 3 month period for you.

So that's that's really fair. 100% true.

So, let's talk about tell bus.

Just to recap, so you didn't raise any money from PCs or angel investors for that project, right?

Yeah, which at the end of the actually worked out quite well for me, given the fact I was the holder, all the capital, you know, the business was structured there was a traditional Delaware C Corp.

To take outside capital, but I never invested so I ended up being the sole beneficiary. Nice. That's really cool. That's.

1 of the benefits of not raising money and get into an exit of any so still still a nice moves to a nice move. But for the other business, you didn't may manage to raise money.

And investors actually came to you, but do you actually make any outreach to investors and how do you structure that? So do you try to reach out to specific.

Subset of investors who you target investors, investing dating apps or something like that. Or do you just, you know, spray and pray.

Yeah, it was a lot of just spray and pray. It was the 1st time trying to fundraise. It was going and thinking about anyone who had ever cross pass with. Let me send them an email. Let me see if they know anyone.

Let me tell them what I'm doing at that time, the tech kind of ecosystem, meet up space, meet ups happening. Your, it was more kind of my close knit group.

So there was actually kind of people floating around that orbits doing things like that. We I actually want to pitch competition at the time.

There's a meet, say Co working space that was sort of down by some real estate developers, not venture backs.

We were called Alley I think, at the time was called, they hosted pitch nights and they had surprises. So, I ended up actually winning that competition, but we're doing a number of those type of things.

My Co, founder was a Columbia Business school so she did a pitch competition around CBS.

An entrepreneurship there, so all of those just hitting the pavement both through your basically contacts in your phone and you're linked in as well as.

You know, physically trying to garner people's attention. You just have to try at every point and that that's why.

When you're doing it, it's really to your point, a 3, 4 month process often maybe even longer and it's really a full time job that 1 person is doing.

Figuring out how to get another meeting at another meeting. You just have to have tens and tens of notes just to typically see the 1st, CBS is to get you to the finish line.

Got it, so, let's move on to the more current situation and talk about those companies that you've built for corporations. So how exactly does that work.

Yeah, so it's a little bit of when when I was doing this, it was a little bit of a combination of. Venture studio and kind of McKenzie.

So, we would, I would go in at least small team of typically, 2 to 3 people in addition to myself and we basically would just have a 1 line mandate. We'd have.

I wouldn't say unlimited resources, but enough resources to really get something moving.

And we were operating on a very quick shot clock, which I think is the best way for a startup to think about it.

So we had 12 weeks initially to go and build a new business and validate that. That there was a business opportunity there.

So potentially for they were looking to validate that there was an opportunity to build an ecosystem, a 3rd party developers around the car, and making the car monetizing. Well, from a connectivity perspective.

So that's your basically your sentence, and then don't run and build me that business. So that became for transportation mobility.

Cloud packet is pretty much shortly after we finish that 1st, 12 weeks Sprint, the board agreed to buy a startup called autonomic. And then they announced that CS 2018.

I did this for a little 1 of the largest financial conglomerates, India called reliance and.

Specifically under reliance capital and similarly, so we just hit the ground. Never even been in the country didn't understand the regulatory space, but it's like, build me an alternative building, a financial services business, and then non urban environment.

So it's really good. I think.

4 founders to think about okay, how do we try to build at such speed that we don't get bogged down in features?

So, a lot of times, like, we were running a let alone management system in Excel, right?
If you were to spin storyboard or design, how we're going to build this business, you probably won't

put Excel or air table or something like that as you're going to actually manage uploads.

Um, but when you're doing it at that speed, you don't have time to go build something else. And it's very good because it allows you to quickly.

Approach the situation, see how the consumer is reacting to it and then iterate builder. So I really strongly recommend all of that with Simon, around, like, no code low code solutions.

So really thinking about how you can build your business without having to write code is a really good way to test any ideas. I think that.

The Co, founder of product fund is a good example that business initially was just an email newsletter.

Um, and he talks a lot about how that just kind of turns the business into something. And if you built what the consumer wanted.

Right that's perfect. Approach personal love it. Big fan of lean startup miles, so definitely recommend following or at least trying to follow that model. So.

Well, let's talk just a little bit more about fundraising and specifically falar and mistakes and fundraising and your previous experiences. So looking back at all your previous companies, pretty much anything you were involved in. What do you think was the major mistake you've done there.

Yeah, I think channel bus would be the best example of this. I was so gung H*. I'm just running and building the idea.

I didn't even think of looking to see if this was a space that patients are interested in investing.

So, that would be my kind of primary advice to someone that's thinking about and, like, my personal mistake.

It's like, make sure this is an area that vc's are writing about and blog for tweeting about, or something that they're going to ultimately be interested in funding.

Because if you're not in that space that you're going to often have kind of a, a problem getting that 1st set of cash in the door, you can see this a little bit with.

And those guys they talk about, I think it was like.
4 years where they just really struggled to bring any real meaningful cash in the door. And from a fundraising perspective, and Fred Wilson has talked about how he.

You know, he has the, the, the cereal box is office of here's the cereal box that they were selling because initially everybody would be to make money and they were originally selling, like, serial boxes and like, toilet paper.

If you if you know the story, and he famously called them their business disgusting and.

They're like these weren't thinking that is a problem, because it's not a problem that they encounter in their day to day life as Fred Wilson. Who's someone who's very wealthy key is never going to think of letting someone stay in this beautiful New York apartment.

And when he goes to San Francisco about statements, someone else's apartment.
So whereas, like, for example, that makes a lot of sense when the tagline was your personal driver.

Well, as someone who is like, Friday, Wilson.

Or any other type of BC out there,

they probably have their own drive,

especially if you're in New York City and that concept resonates with their minds very well where it's like,

air going to be and letting someone's saying their nice house does not.

Right. That's very accurate again. So now that we've touched on to failures, let's talk about successes and good moves. So, again, looking back at your experience, what do you think was the best move that you've done from the fundraising point of view?

Me personally, I would say.

Yeah, I mean, do you want to skip that question?

If you want, just keep that question. Sure.

I feel like just because the answer isn't that genuine for forever? Not just like the money ran in the door, but then, like, we were yeah.

You know what I mean? He 100%. I'll cut that. Let me actually make sure that I do this point to. More of it real quick. All right. Let's skip that part. And.
So, yeah, let's let's move on to you more coming to do.
Current dates 2020. what do you do now?

Yeah, so just kind of through my network people approach me to continue to do digital strategy, like corporate innovation type work for TV and public tech companies.

But, you know, where my passion lies obviously, with that work.

But I have a soft spot in my heart for startups,

so being a mentor TechStars is really rewarding activity for me and additionally,

I mentor and advise a number other early stage companies,

specifically around growth strategy,

fundraising,

marketing type activities.

It's really, how do you quickly take idea execute on that idea and turn that into something that is scaling growing ultimately raising it's next.

So, also you mentioned that you were doing some angel investments, would you investing what stage and what field you usually invest in.

So, I'm personally kind of all over the place and I think.

About 14 or so months of being an angel investor I've made 8 investments, which is a pretty decent cadence. You know, I'm not the fastest out there from any or most deals for per time period, but.

I've been invested in things like relativity space, which is actually 3 D, printing rockets. That's quite later stage.

Although the rocket has, he had to take off so there's, there's still opportunity to wash that literally explode in front of you as well as, as well, as very early stage companies like preceed rounds for a company called LANCE.

I was speaking to that founder.

She was just being an exclamation fundraiser and a Tomo, which is disrupting the credit card space and the credit scores, and that's also a seed round type investment.

Also another great female found there and cadences another 1. I'm really excited. That was a big, uh, seed round lesson as well also in the financial services space, but that's centered around private market.

So, in addition to real estate startups and some legal startups, so it's really kind of industry and sector agnostic.

Perfect that clarify things. So that's for my listeners who might be a good fit for you. I'll make sure to leave a link to drew's LinkedIn and description of the episodes. So if you think you're good enough. Definitely reach out to Drew.

And on this note, we're moving on to the last question of today's episode, which is a call to action. So drew, what's the 1 thing you want the listener to you? As soon as the episode is over?

You know, the most important thing often, when you're thinking about fundraising is who your kind of social network is. So, if you're here in New York City, where I live.

Um,

you know,

I Co,

host with another person at a meet up that's hosted on sailboat called venture sales specifically caters to founders and investors the websites venture sales go

there sign up to get invited into the group.
We host sailing events during the summer and happy hours during the off season.

It's a great way to meet a really good quality group of people. Especially if you're like, an early stage founder or and or angel investor family, office, DC.

Nice. That's really cool. I'll make sure to leave a link to the description of the episode. I think a decent chunk of my research are based in New York. So hopefully some of them are.

Fans of sailing, and my conversations can be as usually go to the description of this episode only of your links there and.

Yeah, all the advice mentioned in this episode, and as usually have a good day.