As a start-up founder, you have no shortage of voices to listen to. Most of those voices — especially those from venture capital or other startups — tend to give you some unique advice when it comes to fundraising: Basically, raise as much as you can as quickly as possible. This isn’t necessarily “bad” advice, but given the funding environment we’re in, it may not be the most realistic.
My co-founder and I started Reclaim.ai almost four years ago, and our path to raising capital was far from conventional. We realized early on that we tended to build the best (and pitch the best) using a more incremental approach – raising modest amounts of capital as we grew rather than using a pitch deck and multiple increase rounds. By doing this, we not only got a more sustainable business that had less risk of entry territory of a zombie unicornit also allowed us to build faster and we had less distractions and more control.
I’ve written about this before and since then we’ve continued to follow that mantra as Reclaim has evolved. We recently raised another $3.2 million to enable our next phase of growth, bringing our total funding over the past two years to nearly $10 million. We did all this without giving up a single board seat, and Reclaim employees still own more than two-thirds of the company’s equity.
Raise capital by all means, but be aware that if you raise too much, you could relinquish control at a very early and sensitive stage.
Here are three lessons we learned from this journey:
Faith goes beyond a pitch deck
Our most recent round of funding came from a mix of new and existing investors. In fact, the round was fueled by a few key insiders who believed so strongly in what we were doing that they went ahead and brought other angels and companies to the table. In the end, we didn’t have to pitch and outreach much.
To do this, we first identified the people in our cap table who seemed most likely to be interested in expanding ownership based on their profile and relationship. Second, we used an instrument called a SAFE to speed up the process and reduce due diligence pain. Finally, we’ve emphasized lightweight growth stats rather than a full deck to keep the focus on a few key points.