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Raising a Very Unusual Round of Funding and Open-Sourcing Our Docs
- feel_the_need 8y agoAre you guys hiring front-end / full-stack devs?
- randfish 8y ago(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 8y agoHi Rand, thanks for sharing this post, and thanks for the transparency!
- deleted 8y ago[deleted]
- bananatron 8y agoReally happy to see this kind of transparency - it's a seemingly rare thing in the industry right now.
- a13n 8y agoThis 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.
- randfish 8y agoNice! LMK if I can ever be helpful to you/Canny
- pmiller2 8y agoWhy does being a Delaware C corp inhibit your ability to raise VC money?
- zrail 8y agoI think they're saying they won't be raising, which means being a Delaware C corp is a liability rather than an asset.
- hugs 8y agoWhy is it a liability?
- iampims 8y agoC corps require more red-tape around day to day actions, and as a result are generally more expensive to operate.
- hugs 8y agoWhat 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 8y agoThe regulatory stuff is just a pain in the ass compared to an LLC. It's mostly that simple.
- thomasmeeks 8y agoIn a nutshell, it is more complex & expensive to run a c-corp compared to, for example, a LLC. The way taxes are handled is a meaningful part of the issue.
- stealthmodeclan 8y agoIt 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.
- zrail 8y agoI appreciate the legal docs a lot. LLC agreements are fascinating to me, and this one seems particularly interesting.
- cwkoss 8y agoJoe 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.
- hkmurakami 8y agoI 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.
- cabinguy 8y agoI 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 8y agoSuper 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.
- throwawayqdhd 8y agoRand, this new business sounds EXACTLY like something I would want. Right now, it takes hours to figure out which blogs/bloggers to target in my niche. My only concern would be: is this a one-off use product? Perhaps if there was a sort of simple CRM to track relationships with influencers, it would make me come back more
- sampl 8y agoGood 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.
- indescions_2018 8y ago~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.
- hugs 8y agoHis 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 8y agoI 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 8y agoI haven't published a writeup yet, but I probably should!
- erlend_sh 8y agoThis 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.
- zapita 8y agoI completely agree. I didn't know about how Discourse was started, but would be interested to learn more. Do you have an article or writeup to recommend to learn more?
- zrail 8y agoAs 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.
- jkuria 8y agoCongrats Rand. Great to see you succeeding.