
Raising a Very Unusual Round of Funding and Open-Sourcing Our Docs - rchaudhary
https://sparktoro.com/blog/raised-a-very-unusual-round-of-funding-were-open-sourcing-our-docs/
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cabinguy
I don't personally know Rand, but I've been following his former company (and
his personal twitter) for a long time. He seems to be a genuinely thoughtful,
great guy with really good intentions...however, this post felt like a little
bit of a humble-brag (nothing wrong with that).

It's great that he is sharing his documents, however, the chances of anyone
who hasn't already raised $20M+ from VCs (and/or created popular videos for
10+ years) ever following in these footsteps are slim-to-none.

If you really don't want to raise money from outsiders, just don't raise
money. Many people launch businesses with very little money. Some of us win,
some of us lose. If you're in a position to raise capital from 30 "somewhat"
high-profile entrepreneurs/investors, congratulations! You should probably do
it!

But if you're not in that position, do it like Rand did from the beginning.
Work your butt off and make things happen. Then someday (hopefully), you can
post your own humble-brag on your blog.

~~~
randfish
Super fair criticism of the post and process/structure. My only pushback might
be that you can raise $25k or $50k with this structure (doesn't have to be
$1.3mm) and you can use these docs with 2 or 3 investors if 30+ isn't the
right match. I agree that anytime you announce you've raised a bunch of money,
it's bragging. But I don't know a way to a) make that transparent and b)
inspire other folks to consider alternative fundraising options without a post
like this.

~~~
sampl
Good to hear.

> If you really don't want to raise money from outsiders, just don't raise
> money.

This sounds like it’s perpetuating a false binary between VC and
bootstrapping. This probably works in VC‘s favor, but not individual founders’
(on average).

PS - Basecamp is another ex of a tech co that raised money from non-VC
investor(s) (Bezos) who got dividends—not a payday on an exit.

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cabinguy
I don't know how not raising money from VCs works in VCs favor, but I'm open
to listening.

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sampl
I meant to say that the “VC or bust” myth works in favor of VCs (since anyone
in need of any money at all will feel like they have to work with VC terms)

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hugs
His rationale and deal structure sound very similar to Indie.vc's investment
in my company (Tapster Robotics).

With Indie.vc, I have the option to distribute profits back to the investor as
a viable, realistic option between "Be the next Google" and "Spend all the
money and die".

I hope more start-ups pursue deal structures with these kinds of options.
Building a business to millions or tens of millions in revenue should not be
considered a failure. (But it would be perceived a failure in traditional VC
deals.)

~~~
zapita
I would be very interested to hear more about your experience with Indie.vc.
Especially a summary of the pros and cons that you've seen, pitfalls to avoid,
etc. Have you by any chance published a writeup on the subject? If not, I'll
be the first to read it, and to thank you for it!

~~~
hugs
I haven't published a writeup yet, but I probably should!

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a13n
This is truly inspiring.

We're bootstrapped and profitable. Unfortunately we incorporated as a Delaware
C Corp because we didn't know we wouldn't raise.

If non-VC were more normalized, like Rand thinks maybe it should be, it
probably would have saved us a bunch of money and hassle from the get go. I
also think the expected return as a founder is probably better if you don't
shoot for the extremely unlikely event of building a billion dollar company in
5-7 years.

I'm rooting for you Rand! Btw I finally moved our blog over to a subfolder
like you suggested. Keep up the awesome work, can't wait to try SparkToro.

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pmiller2
Why does being a Delaware C corp inhibit your ability to raise VC money?

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zrail
I think they're saying they _won 't_ be raising, which means being a Delaware
C corp is a liability rather than an asset.

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hugs
Why is it a liability?

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iampims
C corps require more red-tape around day to day actions, and as a result are
generally more expensive to operate.

~~~
hugs
What red tape? If it's basic accounting issues, that's true of any business.
If it's c-corp specific paperwork, that takes an hour of my time once a year
to submit the annual report to Delaware.

~~~
staticautomatic
The regulatory stuff is just a pain in the ass compared to an LLC. It's mostly
that simple.

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erlend_sh
This sounds like the type of investment round that would be a much better fit
for most open source companies. The way Discourse got started was very
similar, except for it being a Delaware C Corp rather than LLC.

I wish there was a crowdfunding platform that made investments like these more
accessible to the general public, similar to Republic.co but without that need
for an exit to get a return on your investment.

~~~
zrail
As I understand it there’s nothing stopping a company from setting up a
Regulation CF round on one of the crowd funding platforms like MicroVentures
or SeedInvest. MicroVentures in particular seems to do deals like this for
movie productions, which have a similar structure but also probable Hollywood
style accounting.

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cwkoss
Joe Wallin is a nice guy, and was very helpful to a previous business I worked
at. Recommend reaching out to him for anyone incorporating a startup based in
Seattle.

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hkmurakami
I like #3. It increases alignment of investors with the fonuders.

I do wonder what the top line valuation was for the round, aka what ownership
stake does this $1.3M represent. I think that's a key clause esp when the
company might pursure a lower growth but more sustainable option. If they have
models it'd be interesting to discuss them for sure.

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indescions_2018
~70% participation rate in $1M angel round for serial founder with strong
network doesn't strike me as an extreme outlier. Nor the "ask" set of 40+.

Bootstrapping the first company as a nobody may be the more interesting tale
here ;)

But thanks for sharing, rand! Am also currently researching Carta, CapShares,
TrueEquity, etc. and this is insightful.

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bananatron
Really happy to see this kind of transparency - it's a seemingly rare thing in
the industry right now.

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zrail
I appreciate the legal docs a lot. LLC agreements are fascinating to me, and
this one seems particularly interesting.

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jkuria
Congrats Rand. Great to see you succeeding.

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feel_the_need
Are you guys hiring front-end / full-stack devs?

~~~
randfish
(Rand from SparkToro here) Honored that you'd think of us, but no plans to
hire in the near term. We're gonna be super-conservative and try to get a
product to market before we consider hiring.

~~~
simonebrunozzi
Hi Rand, thanks for sharing this post, and thanks for the transparency!

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stealthmodeclan
It seems to make fun of people who raise money for their startups. Maximizing
returns is not part of VC funded startup, tho it eventually happens on
acquisition or IPO, hyper growth is.

Not everyone can raise a seed round this way. Most founders from modest
background really can't raise 1m from their friend circle.

The kind of surity i see around this is only possible if you've already tested
water or if you've access to some advantage.

I guess it's a product like similarweb and collects data from ISP dns
resolvers, browser extensions and wifi points. Some consultants are selling
this as a package now and only thing you've to add is your marketing and face
to it.

