How to Raise Seed MoneyLindsey Magnano and her firm ‘Smith Shapourian Mignano’ have helped us get Zypp’s legal in order and equip to raise the capital we need to progress forward. During our first consultation at her office in San Francisco I felt a sense of security as her startup knowledge was vast and energy very genuine. I felt like she would get us on the right track so we didn’t look like fools to investors. Lindsey immediately got the paperwork in order and we were able to raise a successful friends and family round of $110,000. There are many unknowns to fundraising but one thing that is consistent is company structure being the foundation of your startup. Having a sound company structure (ie: silicon valley standard) shows potential investors that the founders are sharp and their money seems to be in good hands; assuming they also like the team, product, etc.
If you’re looking to raise seed or early stage capital, read the article above written by Lindsey where she covers the difference between Convertible Notes vs. SAFE’s, the two ‘main’ investment vehicles that todays startups use to raise money. It’s a quick read and should point you in the right direction, enjoy!
Zypp is Raising a Bridge Round
Hey all, before we get into the weeds of our Bridge Round let’s first dive into what a Bridge Round is and the benefit for a startup to go that route. In an article from MicroVentures they state that a Bridge Round is “a small round of funding to tide a startup over until its next larger round of funding.” The purpose is to increases a startups runway (the amount of time until a company is out of money and or closes shop) while they build more value (samples below) before raising their next significant round. In our case we’ve raised $110k in a friends and family round and the next major round would be a pre-seed round of which the amounts startups raise at this stage is growing larger and larger every year and not surprising to hear about teams raising $500k – $1Mm in a pre-seed round.
A Bridge Round is a small round of funding to tide a startup over until its next larger round of funding
Remember, when raising capital, you either have a true valuation based on a 409A valuation (unlikely for early stage startups) OR you set a value cap; both have a direct effect on how much stake your investors take of the company and if the perceived value matches the risk profile of your startup. At Zypp we aren’t ready to bring in a million dollars of investment as we need to gather more data around product market fit and understand how users and what users want to see on the platform. The caveat to getting data and analysis of a product is that you need an actual product (usually an MVP) and you need people to test the product; all of which cost money.
– Grow the team (adding a key member that was missing before)
How does a startup increase it’s value between rounds?
– Adding notable advisors
– Shipping an MVP (minimal viable product)
– RND gain user insight/data on your MVP
– Lock in partnerships that have monetary or brand value
– Increase Sales or start selling in general
– Increase user base
– Press mentions (organic preferably)
– Win some pitch competitions or startup showcases
Why did we decide to do a Bridge Round?
We’re building more value and gathering data to ensure that when we do execute a pre-seed round we’re already in stride. We currently have an app in the app store (for convenience of private beta users), we have a clear vision of our business model, we’re growing our list of people who want to test the platform and bringing on some key advisors. Our first objective is to build out a web-app which we can take to market quicker while simultaneously beta testing the app with our brand partners. Our brand partners are helping us curate potential integrations that would add value to their workflow and that they wouldn’t mind paying for. We think a bridge round enables us to accomplish all of the above which adds a tremendous amount of value for the company and current investors before entering into our pre-seed round.
Y Combinator Podcast #156: Amber Atherton & Iba MasoodI have a huge affinity for Podcast and get most of my gems for business and entrepreneurship by listening to them. A couple weeks ago I found the Y Combinator Podcast and caught episode #156 with two amazing founders in Amber Atherton who is the CEO of Zyper a platform that connects brands to consumers and Iba Masood, the CEO of Tara AI a platform that helps teams optimize their product development cycle. They were both able to raise significant rounds and below is a snipet from Iba about what helped her close $2.8Mm.
the opportunity, market segment, team they assembled and traction
The podcast focuses on how the two raised capital and there are lots of GEMS in this hour segment of which I’ll outline a few of my favorite below:
– Amber says that planning is key when raising money which includes an excel sheet of your prospective investors
– Writing an investment memo (usually done by investment firms) which helped her help investors answer important questions
– Finding memo’s of other companies like youtube helped her team construct theirs
– Segment time (months) to be head down on your raise and focus on that one thing
As an entrepreneur and or startup it is extremely difficult to stay up to date on labor laws, taxes, accounting, HR requirements and all the other important operational duties that you have. If there’s ONE thing you don’t want to mess up it is definitely your corporate taxes especially if you’ve hired contractors and or people that live out of the state that your company operates from. I’ve been working with Early Growth, a CFO consulting service for over a year and it’s really helped me navigate through the esoteric knowledge of corporate finance and the fact that I only pay when I need to expertise is clutch.
State Income Taxes for Remote Workers: A Blog by Early Growth
2.13.20 L.A. Tech Happy Hour Santa Monica
2.6.20 Pitch a room full of investors
2.13.20 Leaders Who Scale
2.6.20 Harvard in Tech SF: Women in Crypto
2.4.20 VivaTech Tour in NYC: Girls Just Wanna Have Funds
1.30.20 Heading for Extinction and What the NYC Sector Can Do
The conversation around digital privacy has become mainstream and a key indicator of that is when the government joins in. I think user privacy and protection of their data should be at the forefront of every tech company but when selling it is a main revenue driver then it quickly becomes an afterthought. I think we are entering an age within tech where transparency is key to success and realizing that there are other ways to make money other than selling peoples data to the highest bidder and shamelessly placing ads all over sites. NOW, to be fair this is in part because user have become accustom to free software; however I think tech companies can work together and with their patrons to figure out how to best protect user data while creating a great experience and make money.
In regards to privacy, Europe has set the bar with the roll out of GDPR mid 2018 and now California is leading the way in the US with the CCPA bill. Even though this only pertains to users of a given software/platform that live in California, the bill will affect companies all over the states and world. There are more states coming up with policy around user data but I haven’t heard of anything from the federal level yet. The only problem I have is for a small businesses as following policies and adjusting your business to in compliance can be difficult. If you are a startup or small business I would look into how this will affect you as there are some serious fines if you don’t comply.
Zypp: Private Beta Update
So, we are off to a slower start than anticipated due to a some development issues but we are bringing on users to test the app. Right off the bat the onboarding process is proving unsustainable so we had to fix the verification email and I’m learning that explainer screens are more important than I took into account. A lot of tech people, especially in the Bay Area will say get a product out there even if it sucks and I’ve always disagreed with that perspective. It’s also odd as something you also hear in business is you have one shot and there’s never been a time in history when that made more sense then in the age of information.
We have also pivoted a bit in regards to priority of the app. We have concluded that a desktop version would make more sense for enterprise (our target demographic) and to get a ship a sound product quick, gain traction and feedback which will inevitably make our app more complete and superior user experience. That said, we have a lot of demand for people that want to use the app and we are moving forward on a daily basis. We are not accepting individuals at this time as the best feedback we get is from segments of people 10+ that are already interfaced together on a daily basis OR distributed teams.
If you’re an individual and want to join our private beta, please add yourself to the list by CLICKING HERE.
If you are a company or group of 10+ people and want to join our private beta, please reach out to us on instagram OR linkedin.
Otomo App: Raised $60k
“the financial assistant for a new generation of independent workers”
Ambeent.ai: Raised $1Mm
“empowers both end-users and operators to unleash Wi-Fi’s full potential”
Shyft: Raised $15Mm
“transforms the moving and relocation industry by introducing technology, customer service, and lead management solutions.”
Uber and Postmates sue California over gig worker law
If you haven’t noticed by now, this newsletter has covered a lot about policy and raising capital. I haven’t had a chance to read this article; I know – shame on me, but I have been hearing a lot about new policy around the gig economy and seems like starting a company is getting harder and harder. This topic is a slippery slope because it’s really hard to innovate and build ideas as an individual or small company without contractors but for companies like of uber or postmates the impact on society is much more grand for the positive or negative. I think there’s a few elephants in the room around basic economic principles around running a business but we’ll leave that for another conversation.
Unocup: the no-lid foldable paper cup
1st Year Accelerator – v1accelerator
Ran by yourvone.com
Rachel Holt leaves Uber for VC
Rachel Holt: Construct Capital