CEO of Foundersuite.com, which makes software for raising venture capital and managing investors.
When Brian Vallelunga began his company Doppler, he spent two weeks (and about $1,000) bribing potential customers with Chipotle. He was “begging them… like literally on hands and knees” to use his product, he remembers.
Chipotle was a far cry from where Brian eventually found himself; eating a meal prepared by a private chef in one of billionaire entrepreneur and venture capitalist Peter Thiel’s houses.
Brian originally developed his universal secrets manager company Doppler at night while he worked at Uber full time. He identified a flaw in the market, the manual and tedious way in which engineers shared sensitive information, and created his minimum viable product in three weeks.
But raising capital for his company took a bit more time. Brian raised $300,000 on a $5 million valuation through a pre-seed funding round and later made some of his most important connections at Y Combinator.
Some scenes from the fundraising process seemed to come straight from HBO’s Silicon Valley, like when Thiel showed up to their meeting in his pajamas or when a Sequoia Capital investor covertly slid a term sheet over the table at an upscale restaurant.
In an episode of How I Raised it, Brian shares key lessons he learned while raising $2.3 million from big names like Thiel, Sequoia, and others.
1. Create a Long-Term Vision (but Make it Realistic)
Brian attributes Doppler’s money-raising success to a few different factors: imagination, creativity, and a long-term vision. Still, approaching your pitches with creativity doesn’t mean pulling random numbers out of a hat with a magic wand. Your goals actually need to be feasible.
You should tell investors about your company’s major objectives for the next decade. But you should also be able to extrapolate and break that down into smaller, more achievable goals, Brian says. If you can do that, investors are likely to make note of your analytical skills.
“If you go and you say, ‘today I want to build a Facebook,’ that’s a really daunting task here,” Brian explains. “But if you can come and say, ‘Hey, over eight years, I’m going to do these things, which will allow me to give me market share over Facebook, and they’re believable,’ that’s a whole different game.”
2. What’s More Important than Money? Good Partners.
Funding is certainly important. But getting that funding from the right partners is even more crucial, Brian advises.
“If you have a good company, you’re going to raise the amount that you want to raise. It’s the partners that will be on that journey for the seven, eight, 10 years, that really matter,” he says.
Brian found Doppler’s partners by creating a matrix based on the company’s needs. When searching for potential partners, he was able to properly place everyone within the matrix; that way, they could make a valuable contribution within their expertise. That included Aaron Levie from Box, who helped them understand enterprise sales. Peter Thiel offered credibility. Others gave advice on engineering, marketing, and so on.
“We just kind of went down the list and started placing people… where they add value, because… money is actually a consequence of having a good partner,” Brian explains.
On that note, Brian quickly found out that raising money was far from the hardest part of building his company. “Everything else is ginormous,” he says.
“Hiring is really hard. Finding product market fit is hard. Learning how to build a brand is hard.”
That’s why having partners who can add value is so important. It’s also why Brian says that, as founder or CEO, you’re bound to be the dumbest person in the room. After all, your job is to hire people smarter than yourself to execute those specialized tasks that you can’t do yourself.
3. Be Weary of Too Much Dilution
When you start out, you’ll probably own 100% of your company as a single founder, or perhaps a half or third of your company if you have co-founders. That’s a sizable percentage. And although raising capital is how many founders get their start, it’s important to remember something pretty fundamental: With every seed round, you dilute your share a little bit more… and eventually you might get down to 5% ownership, or even less.
“It quickly hits that you don’t have control of your company anymore, and you’re now working for the investors instead of the investors working for you,” Brian warns.
Many founders regret not keeping control of their company, Brian says. That’s why he recommends thinking through seed rounds deliberately, planning the fundraising process in advance, and remembering that any decision you make now can have a major impact in five years.
4. You Don’t Necessarily Need Pre-Seed Funding
When Brian considers what he’d do differently when building up Doppler, he’d probably spend less money on Chipotle.
But more importantly, he says he’d skip the pre-seed funding.
He considers the valuation pretty low — he wishes he had more confidence in himself to know that he could have raised even $2 million at that point. Plus, in the end, Doppler also only used about $100,000 of the $300,000 pre-seed capital.
Brian’s advice for founders today: “You can go straight to your seed round, as long as you’ve done your homework.”
5. Confidence is Key
Many of Brian’s most valuable connections came from YC.
But he applied to YC upwards of five times before he was finally accepted.
At that point, Doppler had just received its pre-seed funding. Brian’s approach changed; he was no longer asking YC to invest in a company that may or may not fail.
Instead, he framed his pitch differently: We’re going to succeed, whether you join us or not. We’d like your partnership along the way.
“Tell them: This is my rocket ship, and I would love for you to join it. But it’s already going up regardless. And regardless of your investment, we’re going to be successful,” Brian says.
Even though Doppler already had completed a pre-seed round, founders don’t necessarily need that type of funding to pitch investors or accelerators with this attitude.
What matters more than money:
Pitch with confidence. Tell your potential investors that you’ll succeed, and they’ll get on board.
Nathan Beckord is the CEO of Foundersuite.com which makes software for raising capital. Foundersuite has helped entrepreneurs raise over $2 billion in seed and venture capital since 2016. This article is based on an episode of Foundersuite’s How I Raised It podcast, a behind-the-scenes look at how startup founders raise money.
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