
How we raised a $1.1M seed round without customers, revenue or even a product. - johns
http://john-sheehan.com/post/58453831272/how-runscope-raised-a-1-1m-seed-round-without
======
jandrewrogers
I raised a $1.1M seed round a few years ago without customers, revenue, or
product. This is not unusual for a seed stage. What many entrepreneurs miss is
the lens through which investments are made at each stage. That lens evolves
over time.

Roughly:

(Seed) They are investing in your potential.

(A) They are investing in your market's potential.

(B) They are investing in your execution potential.

At the seed stage it is often not obvious that the market exists or that you
can find it, nor is it obvious that you can execute a product once you
establish the existence of a good market. Instead, they are making a guess on
that later stuff and investing in your ability to take the company far enough
that things like market and execution become clearer.

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TheBiv
Congratulations to the author and he does do a good job of negating the horse
I'm about to beat to death, within the article itself.

Unfortunately, most people will just read the title of the post; which I wish
the author would have spoken more about how awesome their domain knowledge is
(or whatever factor he felt really led to their funding) as _most_ can't just
walk up with just a story and land this type of money.

The catch-22 about the title is that it gives people hope, when they should
not have any hope, if they think they can replicate his funding story easily.

~~~
johns
That was kind of the point though, there is no funding story that's
repeatable. Maybe didn't emphasize that enough.

~~~
TheBiv
I appreciate the reply! I guess my only _sad face_ was bc I used to run a tech
accelerator and I have seen how pervasive the title of your post actually is.
That is, people just think that with an idea and a team then the money will
come pouring in.

I think it would be good to have a follow on post with something that spoke to
a) what key domain knowledge gave you a leg up b) what terms you got that let
the investors feeling confident you would deliver without a product at the
moment c) something that is repeatable to other founders.

To me, and I may be misguided, but it read more like a lottery-ticket funding
rather than the hard work that and network that you had which shows your
grind!

Just my two cents! Great read and congratulations again!

~~~
johns
> people just think that with an idea and a team then the money will come
> pouring in.

If anyone thinks this, email me and I'll tell how much it's not the case. It
was really hard. We got rejected A LOT. Like most companies. That said (and
going back to the point I didn't make very well), every company is different.
Don't let one person's experiences box you in.

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7Figures2Commas
The primary problem with these "how we raised..." posts is that the authors
rarely acknowledge that raising money with or without _x_ , _y_ and _z_ is in
most cases largely a function of the current market and economic environment
and less a function of their "story" or fundraising wizardry. In other words,
if you have an idea, decent track record, the financial markets are not
depressed and capital is cheap, you can probably find somebody who will cut
you a check.

Unfortunately, during down cycles, you don't see many "how we failed to raise
money even though we had x, y and z" blog posts, even though plenty of those
stories exist.

~~~
johns
Fair point. Someone still has to put all the pieces together at the right time
though.

~~~
7Figures2Commas
Sure. Don't get me wrong: not everybody can raise money from professional
investors, even when market conditions are working in favor of founders.

But all the attention that gets focused on fundraising (instead of building a
successful, self-sustaining business) is akin to focusing on putting on one's
shoes instead of actually running and completing the marathon.

------
ryanglasgow
This is akin to a new hire getting excited about a compensation package of
salary + 100,000 shares. 100,000 shares, out of how many outstanding? 1
million shares? 10 billion shares? He raised $1.1M, but at what valuation?
After reading the article, I was left wondering if the valuation was low. The
team has not proven that they have reached product/market fit or found a
scalable marketing channel which makes this a risky bet for investors.

~~~
johns
I can't discuss the terms obviously. All I can say is that we felt they were
very fair.

~~~
ryanglasgow
I didn't expect you to discuss the terms, but the amount raised doesn't really
mean anything given there's no context.

~~~
dcraw
It doesn't mean nothing. There's a range of equity that will be given away
during any round. I don't know how high the variance is but it's probably less
than 30% and more than 10%.

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GBKS
All these posts about raising large amounts of money make me wish for follow-
up posts about how the money will be, or was, spent. Without customers,
revenue, or product, how do you figure out how much you need?

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mattm
This post doesn't really say much at all. I think he is leaving out a lot of
information.

~~~
johns
What would you like to know?

~~~
mattm
I think a lot of people never really know the true reasons why something
happens. I find it hard to believe these were only three reasons. Did you ask
the investors why they invested and this is what they said or is it your own
feeling? Plus you don't really go into details on the points so I didn't
really learn anything or find it useful.

~~~
johns
The investors told us it was attractive for the three reasons I listed: team,
market, and plan of attack.

Edit: I left out more specifics for length reasons. May do a follow up post on
more of the details.

~~~
dcraw
I'd love to know more about the plan, and the milestones you set for yourself.
Without a product in market, how did you come up with feasible numbers to
reach for?

Here are a bunch more questions just as fodder:

How much did you have to adapt your pitch based on the investor? Did you have
multiple pitches, geared to things you knew about an investor going in? Or did
you do more of your adaptation on the fly, based on the reaction of the
investor?

How many nos did you get before a yes?

Where would you say you wasted the most time, and you would not pitch that
type of angel, or not pursue that kind of introduction, etc, next time?

Thanks for the post, and looking forward to your follow up(s)!

------
soneca
Good story? This sounds like a business plan with numbers replaced by
envolving words. But a plan nevertheless.

Mentors may say what they want about how founders should hustle to find a
business model and have traction to prove you found, but at the end of the
day, all a investor wants is to believe on a plan (or story).

------
biggfoot
Besides the fact that the author is clearly an 'API-go-to-guy' (ex-Twilio, ex-
IFTTT so I'm sure he knows his stuff!) I wonder if this is also because of the
ecosystem which is OK with betting on the confidence of the founder.

Good stuff!

~~~
johns
Definitely. I don't think we could have done this outside SF. It's a very
friendly environment for dev tools/API companies right now.

------
scottkrager
Neat. I love [http://requestb.in/](http://requestb.in/) which you guys
recently acquired? Can you share more about plans if any for that service?
Thanks!

~~~
johns
No immediate plans other than making sure it's up and running reliably. The
'Request Captures' feature of Runscope does essentially the same thing with
some other niceties added. That's where we hope people end up.

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OldSchool
Worthwhile story and I've always thought that entering a space that already
exists is a better bet than trying to create a market.

Selling to developers can be tough because they aren't shy about telling you
what details you left out that is just obvious and necessary according to
_them_.

Do you envision the "product" initially being willingly customized when a
well-paying customer comes along or do you feel it's already viable for a wide
variety of needs?

What differentiates you from say apiary.io ?

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dnautics
I like how Grace Hopper is making a bug report. Nice touch.

~~~
johns
Thanks :)

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noiv
> How many apps can you imagine not talking to a remote web service in the
> future?

Since server based structures make it very easy for intel agencies to gain
mass access via one contact point, I'd actually suppose the answer to the
question above will increment faster than thought in the post Snowdon era.

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rohanzsta
Like someone else mentioned earlier, can you please elaborate on how you ended
up with 1.1M as the appropriate amount to raise?

How do you estimate how much you should raise without any revenue or
customers?

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jhonovich
How big did you estimate / project the market / potential revenue for your
company to be?

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beefxq
WTF, I wish Ben would print up some money and give them to me. I'll only ask
for 500k.

