3-part story on how we fundraised US$45M in South East Asia and China, lost it all, killed the round and became profitable in 50 days.
For lessons learned, skip down to the bottom of each section. These lessons draw from our own biases. Draw your own conclusions.
The ordeal of fundraising: 768 investors, 471 prospects, 300 meetings
It was summer of 2015, and we were about three months away from running out of money for Clubvivre. The race was on.
Clubvivre was two years old. We raised around $350,000 from angels, for our online marketplace of private chefs. Our product had resonated well with customers and chefs, and everyone in the F&B industry was surprised we came out of nowhere. We had become the #1 chef platform in Singapore within 12 months.
We were still very early in our revenue buildup and product development. The original plan was to get profitable within 12 months, and then raise money on our own terms. The first year we did $100k. Instead of waiting, we took some funding to accelerate our growth. We hired our team, built out our platform and operations. The next year we grew 500%. Our returns per customer were high, 3–20X.
We were burning a lot of cash though, about $30k a month. To complicate matters, we sat on a time bomb that needed diffusing.
The next year we grew 500%.
One of our angels placed a follow-up investment but did not disburse all the funds. As an existing shareholder, we filed the shares in good faith. This would cost us dearly. For 7 months we tried to secure the much-needed funds, but the delays continued. It turned off several prospective investors and broke our trust. We had no choice but to oust that shareholder. We found buyers and after 3 months of painstakingly facilitating a private share transfer, we restored the integrity of our cap table. We had to make up for lost time and quickly.
I had been in the market trying to raise US$1–4 million pre-Series A for a few months. We were selected as one of the top 100 startups in Asia by e27 and exhibited at the Echelon conference, a helpful boost. But the fundraising wasn’t going as planned:
● I had shortlisted 768 investors, starting within my own network. I then filtered through all 800 users in AngelList Singapore, and added several LinkedIn and Facebook groups in the mix.
● I contacted 471 prospects, 135 expressed interest and we took first meetings with 101. We worked that list further down to 49 investors. We took 300 meetings in total, every day was packed. My co-founder Maria De Vos Kuvshinova, and our CTO Marc Gamet, were looking after the daily operation. Nonetheless my time out fundraising was starting to take its toll on the business.
● We had some moderate success finding investors willing to put in smaller tickets, and had around US$1.5M of follow-on money lined up waiting for a lead to set the terms. But we couldn’t find a good lead.
We were too big for angels and seed groups. Or we were not big enough for investors who wanted to put a lot more money to work. Traditional food and retail investors wanted to franchise us, once we were ready. We were even approached for an accelerated seed-to-IPO strategy on a small-cap stock exchange. We were turned off by the investor’s desire for an aggressive 18–24 month IPO timeline. It’s hard to get your fundamentals right in such a short span of time. We were just not ready to suffer through several years of post-IPO because an investor wanted to quickly flip a company.
When you fundraise, you compete for capital with whomever is seen to have a shinier model. In Food Tech, local meal delivery players were still all the rage, a model we felt was a race to the bottom. Risk capital is in short supply in SEA. Venture capital prefers to import or localize global models with clear benchmarks. They questioned the addressable market, and our ability to sustain quality and unit economics at scale despite our track record.
On-demand chef services are still novel with only a handful of players worldwide. The biggest ones raised ~$50M venture capital, but none had exited yet and a few had closed already.
And that’s when we stumbled on China. Continue to part 2: The Grand China Plan and how we fundraised US$45M.
Lessons Learned: the Ordeal of Fundraising
· Fundraising is sales.
You need to work every stage of your Funding Funnel: prospective investor, qualified investor, contact, interest, meeting. Be extra conservative with your funnel conversion and keep your funnel full. There is no such thing as contacting too many people, especially for your first serious round (post-angel). And it’s totally normal to receive more than a hundred ‘NO’s. Just power on.
· Be clear on your financial roadmap and funding strategy.
If you can, raise when you don’t need the money, so you can raise on your own terms. Be realistic about what you can raise and from whom. Run through your investor hitlist with someone who raised before in this region, to get a reality check. It will save you a lot of time and headache.
· Go beyond your network.
For too long I organically grew our list of investors through our own network. It’s time consuming and requires a lot of goodwill from friends. It was a cautious approach and had the benefit that I could control who I was pitching to. If you are in need for speed though, like we were, make bolder moves. Once I worked through AngelList, we supercharged our funnel!
· Don’t slow down your business while fundraising.
Investors invest in lines, not dots. If your business suffers, you risk jeopardizing your momentum and this could cost you good investors. Cover all the bases and assign operational responsibilities within your management team.
· Be stubborn on your vision, and flexible on the details (Jeff Bezos).
It helps to define several funding scenarios and areas you are not willing to be flexible on. Be confident in pitching all the scenarios. The smallest whiff of doubt can break a deal.