This is the second part of the story of our seed-funding round. Find the first part about the funding setup in my last article. The third and latest part will be published in the next blog post.
We started approaching the business angelss from our lead list. The process was:
- Define first wave of contacts.
- Send first emails and ask, if there is any interest for investing into remerge.
- If there is interest, we send out our Deal Memo, which describes our strengths and the risks plus we request a follow up call
- If the follow up call is positive, we send the contracts for investment
The first wave should give a good indication, if our pitch and terms work. Luckily for us, we got really good feedback. So we could approach business angels from the second wave with the same pitch and terms.
One week after we kicked off the process, I was sitting in the train on a Saturday and got a call from Pawel from Point Nine Capital. He kindly asked, if they could also be on board.
Now this was of course a surprise for us and I requested 24 hours of thinking time. You need to know, that we were working with Point Nine Capital in the past at madvertise times and have a good relationship to them.
In the beginning I was not sure, if it was a really good opportunity. An institutional investor would mean that we would create a more complex shareholder agreement now. We would need to update the deal terms for the Angels. It was also against our strategy: We planned to raise only few capital first in order to finish the product and create a few positive cases. We wanted to approach institutional investors later at a hopefully larger valuation.
We were thinking then about merging the Angel and the Seed round into one financing round. The advantages were:
- Time-efficiency: We would only have to do one round instead of two . We would win the time to focus on growing the company.
- Risk-free: It’s only a hypothesis to raise at a higher valuation after having finished the product. Market conditions could change, finishing the product might need more time than expected. By raising more money now, we are eliminating those risks.
- Future strength: An institutional investor can back a business also in the future with money, which is always a good feeling
- Lead-Investor commitment: We expected positive market feedback, if Point Nine Capital joins the remerge crew. We would be able to close the other Angels faster and easier.
We finally agreed relatively fast with Point Nine Capital regarding the deal terms and capped the financing round to $1M. Setting up the contracts was fortunately a really fair and smooth process with Point Nine Capital. With the capping we created an artificial shortage for the business angels. We also used this to limit the dilution.
Closing and collecting the signatures of all parties was indeed not easy. Nobody wanted to be the first one and everybody wanted to wait till the end. Luckily the demand after 3 weeks was so high, that the investors knew they needed to move fast in order to be part of this adventure.
After 5 weeks of intense emailing, phone calls and a 4-hour notary meeting the financing was done. One day later we started full-focused work on the product and positioning of remerge.
- How We Raised $1M Seed Money in 5 weeks in Berlin – Part 1: Preparation & Setup
- How We Raised $1M Seed Money in 5 weeks in Berlin – Part 3: 9 Recommendations