You may have read the news of our seed round in startup related sites like TechCrunch or Gründerszene. We are really happy to have a great team of investors on board, with one of Berlin’s best fund Point Nine Capital going into the lead of this round.
I want to give you a little bit more background about the process of the round – to be honest, in the beginning we didn’t see this big round coming. In the end we only needed 5 weeks from approaching the first investors to signing the shareholder agreement in the notary.
We worked on the fund raising strategy with our advisors when I was still in Los Angeles.
Our situation was:
- Very Early: We didn’t have a prototype at that time. We had a committed team, a vision and a plan. So we needed to find investors, who believe in the story and us.
- Proper Legal Setup: We had already a GmbH and a Shareholder Agreement, where we have defined the founder’s cliff and vesting schedule and the team shares. We all have put a significant amount of money into the GmbH to demonstrate our commitment into this venture.
Our goals were:
- Support: We didn’t want to just have money – we wanted to have people on board, who can also help us in terms of clients, business growth, etc.
- Low dilution: While raising as much money as possible, we didn’t want to have a high dilution in the first rounds. Our goal was a dilution between 15 and 20% in the Angel plus Seed round. As described in my last blog entry, we need the shares for development and execution of the company.
- High Valuation: We wanted to raise the valuation of remerge as high as possible so taking little money in the beginning and more money later after we had a running system seemed legit. With a higher valuation you can raise more money at a lower dilution, which is always good for a company 😉
- Fair Terms: Above all, we wanted to have fair deal terms. I definitely recommend to everybody, who prepares a financing round to read the book Venture Deals by Brad Feld (thanks to Martin for this hint!).
The strategy was:
- Raise about $300k with business angels first.
- Use the money to build the product and show first results.
- Use results to raise seed round with institutional investors.
Our preparation for the investors were:
- Deal Memo: We prepared a 2-page PDF, which described our approach, market, team setup and deal terms.
- Lead List: We created a list of all relevant business angels and how well we know them. The one who had the best connection approached the angel. I was in the lead for coordinating the communication and funnelled the negotiation.
- Contracts: We had the contracts ready for the Business Angels, to be able to close the deals as soon as possible.
- Iterative Pitch: We planned several waves of contacts in order to test our pitch and deal terms.
- Lean Pitch: We had no presentation and no business case. The idea was to give as few information and do as few work for investors as possible. If we would fail with this approach in the first wave, we would update the pitch and terms for the second waves accordingly.
With this setup we started our adventure to raise money for remerge. I was a bit nervous, as it was my first financing round where I was in the lead. But with my team and my advisors in the back and the trust in our plan – and the power of 3 months Californian sun – I was also quite confident.
Why and how we raised $1M instead of $300k, you can read in the next part 🙂
- 5 Founders for Solving App Retargeting: Introducing the remerge Team
- How We Raised $1M Seed Money in 5 weeks in Berlin – Part 2: Closing the Deal