19 June 2020
Startup Flight #3: What I Learned From Raising €1M Funding
Hi there! My name is Charlotte and I’m Co-Founder & CEO of Equalture (a hiring software that leverages gamification to debias hiring for SMBs) and living in the most beautiful city in the world: Rotterdam. Being an entrepreneur for 4 years now and building my second company together with my twin sister, I get a lot of questions from other founders and people thinking about starting their own company.
Since I believe that every single founder experience can be helpful to other founders, I decided to translate these frequently asked questions into a blog series: Startup Flight.
In this third blog: What I learned from raising €1M VC funding.
‘’Just give me 3 months to fix this’’
That’s basically what I said to my Co-Founders last September when we decided that it was time for a big move: raising €1M funding to kickstart Equalture’s international growth.
With zero frame of reference. Yes, we raised funding before, so it wasn’t the first time, but that was from an informal investor. And I’m very happy that this investor is still on board, because every day I realise that we wouldn’t even exist if we wouldn’t have ‘accidentally’ met this person who firmly believed that we could turn 16 messy papers (called our business plan) into a success story. And since he is an entrepreneur as well, he understood the risk he was taking by investing in these 16 messy papers, but also the potential it had. So two conversations were enough to decide to make the jump together.
And so this was my frame of reference. You go to an investor, show them how desperately you’re in love with your entrepreneurial dream, and it’s a done deal. From that perspective, 3 months was at least 120 times more hours spent on fundraising than the last time. Easy!
So we kicked off at the end of September. We created a solid pitch deck, sent it to all the VCs that we knew and we were ready to rumble.
4.5 months and 100% MRR growth later
It took us 4.5 months to get 2 Dutch VCs on board for a total amount of €1,000,000. After 4.5 months of working day and night, trying to keep on track of our own ambitious (some people would call it unrealistic) timeline. But we did it. And what we also did was doubling our MRR in those 4.5 months.
Sounds like a success story, right? Most startups need six to nine months to raise VC funding and lose their hockey stick-growth effect because of the effort put in closing the deal, while we were fast and we were growing rapidly. At least we made it to many media channels with this story.
Although it sounds like a success story, I would definitely do it differently next time. Here’s what I would do differently next time, but also where I’m super proud of.
Lesson I: Don’t sell a forecast. Sell yourself.
Equalture is live for 13 months now. We realised a growth path in 2019 of which we are extremely proud, but it’s not our golden ticket for 2020 and certainly not for 2021.
We had no clue of our customer’s Life Time Value (LTV), and churn rates were irrelevant because most clients were still in the middle of their yearly subscription. So yes, we created a solid (financial) forecast and thought about every step of growing internationally — given the time that we had planned for this in our ambitious (/unrealistic) timeline — but it wasn’t based on years of experience.
It must have been nice to read, but I think that every investor we spoke with immediately multiplied the forecast by 0.75 and didn’t really care about the numbers. They cared about why we put in that numbers. About why we choose this growth strategy. And about why we firmly believed in our plans. Because these why’s show if you’re in it to win it. If your ambitions are medium or through the roof.
So of course we sold the numbers, but moreover we sold the boundless drive that we have, leading us to creating these ambitious numbers. Because it’s not that rockstar business plan that’s your golden ticket. It’s you and your team.
Lesson II: Always wait for one night before sending new documentation.
This is my biggest pitfall from day one of starting Equalture. Over-rushing.
My enthusiasm often tends to result in rushing things. So if I come up with an idea to boost lead generation tonight, I could spend the whole night working out this plan and launch the campaign by tomorrow morning.
When we had just started Equalture, I think that this is a character trait you definitely need to go from nothing to something. You’re an entrepreneur, business developer, customer success manager, product manager, marketer and financial. All at once with only 24 hours in one day. So you need an MVP mindset that allows you to test assumptions as quickly as possible.
From the moment you’re growing your team and becoming a ‘real company’, however, this is one of the most dangerous personality traits for an entrepreneur. Because now you have to think about your team members as well. And about real clients. Who actually paid for the dream your sold them and expect something well-thought in return for that. Rapidity, however, often goes hand in hand with sloppiness and insufficient time to think through your initial thinking.
In case of this funding process, this character trait sometimes led to me sending strategic documents to my investors in the middle of the night without allowing myself to properly reflect on these plans — and therefore also no my co-founders. And once it’s sent, there’s no way back, because you don’t want to create the impression that your plan isn’t bulletproof.
Fortunately I believe a hundred percent in the documents we sent, but you should always aim for a thousand percent. And that means that sometimes time is not something that keeps you from reaching your destination on time, but something that allows you to evaluate different routes to get there.
So if you recognise yourself in this enthusiasm-leading-to-rush-and-sloppiness syndrome, here’s a super practical tip that you can implement right away: Never send an important document to someone without having one night of sleep.
Lesson III: Your team is the fuel that allows you to take the diver’s seat.
This is definitely the most important one, without a doubt. And also a big shout out to the amazing Equalture Crew.
Fundraising is tough. It’s always more intense for an entrepreneur than expected and it always takes more time. And while you’re spending all that time and intensity on closing the deal, your business needs to keep running.
So my team kept it running. And not even running; we switched to the fifth gear! Since I was our Product Owner at that time, my Co-Founder and CTO Jaap basically took over my PO-tasks. And meanwhile, Fleur was not only asked to boost the sales practices, but she also had to deal with marketing on her own. And that’s just the Management Team.
What was maybe even more impressive to experience was that the rest of the team got everything perfectly under control. Our engineers knew what was important from a product perspective to drive in the fifth gear, our business developers found out themselves how to translate founder-led sales into a solid sales engine and our CS team implemented our ‘SaaS with a face’-strategy to prove our investors that our retention rates could be even better than predicted.
And that allowed me to finish this 4.5-months-marathon without worrying about the business. Just because of this amazing group of people.
So that’s my last tip: Align fundraising intensity with year team capabilities.
Do you recognise yourself in this story when you were raising funding? Or are you currently raising funding and in the need for some tips? Just let me know so that we can have a chat and discuss the plans for our next roller coaster.