Lessons learned from a first time founder raising $500k

It has taken me 6 months, 150+ meetings, and a ton of rejections, but as a first time founder, I’ve finally raised $500k. Here’s my story.

Many people told me as I started my fundraising journey it would be “so easy” for me given my background and connections (I worked at Uber for 4.5 years from 2014–2018). Let me tell you, it wasn’t easy. In fact, it was one of the hardest things I’ve done professionally.

I’ll share what happened and lessons learned if I were to go back and do it all over again.

Mylance Overview

I incorporated Mylance in January 2020 right before COVID. While COVID was horrible for a ton of businesses, it was great for ours. Lots of people were in a transition phase and looking for their next thing. Further, after getting laid off, folks weren’t running back to full-time work, and wanted to explore working for themselves. And here we were!

June 2020 through September 2020 were great learning and growth months for us as a company. We grew revenue quickly to ~$14k per month, and we were getting amazing customer feedback.

I knew I wanted this to be a big business. The market for independent workers was already enormous ($1.4 Trillion in gross revenue brought in from 59 million freelances in the US in 2020) and growing. Further, the life of a freelancer is still really difficult with much of the infrastructure and solutions adapted for them yet to be built. A “one stop shop” solution for freelancers is going to exist, and I want Mylance to be the best one, and help the most people.

Deciding to Fundraise

I had formed a small team of advisors and we talked through getting some investor feedback given I was likely going to need money to scale this business. We had been running at breakeven to date (which was awesome!) and I was ready to hire some engineers, build out a marketing plan, and get this show on the road.

So, I made a deck. I researched “deck best practices” and talked to a bunch of friends in the VC world for feedback. I spent a ton of time on this deck. I did some networking and set up a few meetings. I didn’t have my pitch down yet, the deck still needed work, and I didn’t have great answers to all of the questions. I got turned down a few times in October / November 2020 from early stage VC and angel investors.

I’d been rejected before in my professional career, but not this many times this quickly. Going into this process I knew it was coming and thus was as prepared as I could be, but it was still tough. Running your business and pitching it week in and week out is tiring enough. Getting turned down time after time on top of that is brutal — there’s no way around it.

One thing that did help me was hearing and reading the stories of previous founders getting rejected. A friend told me he got rejected by literally 400 VCs. I read the story of the Peloton founder and the thousands of times he was turned down in his early days of the company.

I would pitch an Angel investor. I would pitch a VC firm. I changed the deck. I changed my pitch. I took their feedback and worked on the deck some more. I got more comfortable. I started to anticipate what questions they’d ask and I had better answers. And this brings me to my first learning.

Learning #1: decide who you want to raise from.

Do you want to raise an Angel round or a VC round? The profile of your investor matters a lot for how you go through the process. In the beginning, I wasn’t sure. I pitched both, which means my pitch wasn’t tailored to either. That hurt me, and definitely something I’d do differently next time.

The first check I got was from an old friend. We worked together at Kaiser Associates (before my Uber days). He enjoys Angel investing and told me he’d set aside a check for me, he was just figuring out how much. He told me on the phone “there’s no one I’d rather bet on in the world than you.” He didn’t ask for my pitch. He didn’t ask for the deck. He asked me how big of a check he should write.

Now I know not everyone has a friend like this, but the money is a side note. What that conversation gave me was confidence. It brought me back to focusing on me, on what I had done in the past at Uber, and what I was doing with Mylance. Building a business is hard. Almost nobody does it flawlessly, and within 6 months, I had meaningful revenue, a product people were willing to pay for, and more than that, a product people loved. I should be proud of that, and I needed to go into these pitches with a lot more confidence.

Learning #2: go in with confidence.

If you don’t believe in yourself and what you’re building, nobody will. I’d much rather go in with a ton of confidence and a shitty deck than the other way around. Your deck gets you in the door. Your confidence and conviction close the deal.

I also started to learn who I wanted to raise from. I was learning if I kept pitching VCs, I would be able to close one. But, as I ran the numbers and dove into my business more, I calculated I only needed to raise $500k, and thus I didn’t NEED a VC. Further, most VCs were being stingy about valuations, and I wasn’t budging. Let’s talk about valuations for a second.

Learning #3: valuations are completely made up for private companies.

Don’t let anyone tell you otherwise. Let’s look an extreme example: if Elon Musk was raising a pre-seed round from VCs (yes I realize he’d never do that at this point), he could value the company at basically anything he wanted and VCs would be lining up to write him a check given the proven track record and the potential of what he’d build.

One VC might offer him a valuation of $100M. Maybe another at $200M. It’s impossible to accurately value an early stage company. Any VC is guessing at the potential for how big it could be, and what the return on their capital might be within a certain likelihood, margin of error, and risk profile.

In this same example, if you took Elon Musk in disguise, with the exact same idea, conviction, explanation, etc., he might be able to raise at a $12M or $15M cap.

And a first time founder without a great background, network, or storytelling ability might, for the exact same idea as the above example, raise a SAFE at a $5M cap. Maybe.

Valuations are a function of the founder, the story, their background, the market, FOMO, momentum, growth, and a ton of other factors. At the end of the day, valuations are not scientific in the private market, and it’s important to just accept this reality, and learn to play the game.

What’s even crazier is the valuation you raise at is crucial because it

  1. Determines how much of the company you’re giving away and
  2. Sets the stage for your next raise. If your valuation is too high and you can’t live up to it, you may have to raise a flat or down round and give away more of the company anyways.

What I’ve learned is the valuation you get is determined by:

  1. Your relationship with the VC
  2. Your story / track record
  3. To the extent you can create urgency or a bidding war
  4. Business traction (if you’ve started selling)

In my experience, #1 and #3 matter a hell of a lot more than #4 on that list. In fact, you might be better off before you have traction metrics to be able to tell a different story that lets the VC imaginations run wild.

Mylance’s Valuation

I set the valuation for Mylance by talking to various other founders, seeing what other people were raising at for their progress, and deciding how much of the business I was willing to give away. The thought of giving away 20% of the business at this early stage made no sense to me, and I wasn’t willing to do that.

I heard of pre-product founders raising at $14M or $16M. I also heard of pre-seed founders raising at $6M or $8M. I decided given my track record at Uber, the fact that we had a product and meaningful revenue, and we had been in business for ~10 months and knew our customer well, we would set a valuation cap of $10M for our SAFE. It felt fair on the investor side given the ranges I was hearing about, and by raising $500k, I wasn’t giving away the entire company.

Some told me that was too high for where I was. That’s fine — I started to think that if everyone said yes to my valuation, I wasn’t asking for high enough. It’s a negotiation. If they say yes to your first offer, you could’ve gotten more. And I wasn’t giving away more than I wanted to.

I got told from a VC they’d fill the entire round at a $6–7M Cap. Tempting, but I wasn’t budging. I was going to get $10M.

Learning #4: nobody wants to be the first one in.

In fact, they all want to follow. I often got asked who was leading my round. Given I was raising from Angels, I didn’t really have a “lead.” This turned off a lot of people, which honestly was pretty frustrating. Can’t you have enough conviction to decide for yourself? Apparently not for most.

The next few months were a total grind. I had no less than 100 meetings over the months from November 2020 to February 2021, and I started to get some commitments, but it was a total slog.

Once I decided I was raising from Angels, I went to people that I knew. Friends, family, folks from my network that knew me and knew what I was capable of. That’s where my initial success came from.

Once I got some initial commitments from folks in my network, it got easier. I networked within the people I knew, and eventually got in front of some high net worth individuals. I even got invited on a golf trip and left that trip with $75k in commitments! It just goes to show, it’s not necessarily about your deck or your pitch. It’s who you know and how you present yourself.

Learning #5: it’s who you know and how you present yourself.

Find someone who believes in you, and ask them for introductions. Network network network. Yes it takes some time, but it will pay off, and is way better than any kind of cold outreach.

As the round started to fill up, I continued to have conversations with investors. But these conversations were now quite different: given I had 70% of the round filled, I was more choosing who I wanted to invest. And this changed everything. I had a call with an institution who writes small checks, and after some back and forth via email, they told me they needed to have a partner meeting to decide. I told them by then the round might be filled and they’d miss out (which was true!). They committed the next day (before the partner meeting!)

Learning #6: FOMO is everything. I’m sure you’ve seen this if you’ve read any fundraising best practices, but it’s true. People want to get in on a “hot deal” and don’t want to miss out. If you can make your deal feel like a hot deal, you’re in great shape. This might mean imposing deadlines and sharing that others are interested or already committed, and that you may not have room for them. I didn’t feel comfortable outright lying to anyone, but plenty of other founders do. I wouldn’t lie, but you can make it seem as “hot” as possible.

The best way to do this is to pack all of your fundraising into a few weeks by doing a lot of prep work. You’ll read about this strategy from many other founders, and while I didn’t do this, I wish I had, and certainly will next time.

Learning #7: do a ton of prep work. This means making a list of target investors. Who would you love to raise from? This of course makes you decide if you want Angels or VCs. This list should be quite long: even the best fundraisers get told “no” the majority of the time.

If you’re raising from VC, rank your list from Tier 1 to Tier 3. Further, write down for each entry on the list if you have a connection or introduction there. The more introductions you can get, the better. Write down which investors are lead investors and which never lead so you don’t waste your time.

Ideally, you start meeting with the Tier 3 investors and get some lead offers there. You’ll also get feedback from them that will improve your pitch, and you’ll get more comfortable as you go. You can then set up meetings with Tier 2 and Tier 1 investors, ideally with an offer or two already in hand to be able to great some FOMO.

Learning #8: don’t take the rejections personally. Without a doubt, you’re going to get turned down. And you might get turned down hundreds of times. Don’t take these rejections personally. There are a million reasons why that one investor isn’t a fit for you or your business. Further, if you do a good job taking feedback, iterating, building your confidence, and finding the right investors to talk to, there’s a good chance you’ll get to a “yes.” So, you can think of it that every “no” gets you that much closer to a yes. Or that every “no” is worth a certain amount of money to you, since eventually you’ll get a “yes” and you have to get through those rejections to get to that “yes.”

As for my story, I eventually scraped together enough Angels and one institution to get to the $500k number. I used an AngelList syndicate to pull together the funds so I wouldn’t have to chase down wires and individual signatures. This had pros and cons but overall I think I’d recommend it.

Pros:

  • One line-item on the cap table
  • Didn’t have to chase down individual signatures or wires
  • I set up the syndicate so that I was running it and it took no management fees or carry on the deal, so it worked nearly the same as an investor having a direct spot on the cap table

Cons:

  • AngelList takes a $8,000 fee for setting everything up (although I think I’ll save this in legal fees down the line)
  • AngelList was pretty slow to approve those who didn’t already have accounts, and would even reject those that didn’t have direct start-up or start-up investing experience

Once I got to $450k raised, I reached out to 50 early Mylance customers and asked if they were interested in the round. I got 13 replies! So I spun up a Wefunder campaign so non-accredited investors could get involved.

It’s incredibly exciting and validating that a bunch of our early customers want to bet on us, and I had to find a way to let them get involved. Our Wefunder is actually still live, although the allocation on there is really small and we will be closing it in the next week or so.

Once we close the Wefunder, we will be official DONE with this round of fundraising. It’s been a journey, and not one I’m looking forward to repeating, although I have a bunch of lessons learned, and will be prepared going in next time. Further, I’m extremely excited to get back to building the business I love, helping customers, and adding as much value as I possibly can.

Until next time!

Bradley Jacobs Founder and CEO, Mylance Sign up for Mylance today: https://mylance.co/

Early Uber Operator and Launcher. Passionate about enabling a fulfilling work-life. Founder and CEO at Mylance