Mike here. This week, we have a Q&A with Bob Moore, a 3x founder/CEO who just raised a $3.3M seed round for his Philly-based startup, Crossbeam. Bob had two exits under his belt before starting Crossbeam, so his fundraising experience was a lot different than first-time founders can expect.
He was able to raise money from investors this time who’d previously said “no” to investing in his past startups – an important lesson that careers are long and you should treat every interaction as an opportunity to build a long-term relationship. He also dropped a quote that I’m going to start using pretty frequently with founders: “it’s important to be intellectually honest about just how much isn’t figured out yet.”
Oversubscribed: This wasn’t your first time raising money. What did you learn (or what surprised you about the process) this time around that you hadn’t learned before?
Bob Moore: I started my first company in 2008 in the wake of the Lehman Brothers collapse. There was no VC money flowing, and we didn’t end up raising any capital until early 2012. Raising this past time, in 2018, the market dynamics were flipped: An enormous universe of funds were actively deploying seed capital and placing a premium on repeat founders.
What’s striking is how much these external macroeconomic factors played a role in my fundraising strategy. It’s actually a little scary — while it may seem like the 2008 experience was much more painful, it forced a certain amount of validation in order to get a seat at the table. In 2018 I’ll be able to move much faster, but I’m pouring fuel on a much less mature and market-tested vision. In a market like we saw in 2018, it’s important not to confuse fundraising interest with product-market fit. We still have a lot of work to do, and it’s important to be intellectually honest about just how much isn’t figured out yet.
Oversubscribed: You had some investors who’d invested in your previous companies invest, but you also got some new investors to participate in the round. How did you think about/select the new investors you wanted to work with, and how (if at all) did you leverage your existing investor relationships to land those investors?
Bob Moore: I’ve been lucky to receive funding from some great investors over the years, but I’ve met far, far more who have said no. How and why they say no, and the extent to which I was able to learn from them in that process and beyond, was a major test of who I wanted around my Boardroom table the next time.
When I set out to raise money for my new company, I deliberately pursued a handful of firms who had passed on my previous businesses. They were the ones that, even after they said no, I continued to learn from them and could tell they would have been helpful around the table.
Interestingly, it turned out that they felt the same way. The benefit of having watched me build and learn with past companies served as an important piece of due diligence for them that worked in my favor, even if they didn’t think my previous ideas passed muster. Life is long in this business, and it’s important to remember that even a hard pass isn’t a total loss.
Oversubscribed: You raised a seed round before launching a product. What do you think a founder needs to be able to demonstrate to raise an institutional seed round pre-launch?
Bob Moore: Landing a seed round requires a healthy duality of de-risking the things you can control and having an enormous upside from the things you can’t. While there’s no hard quantitative model that is used to measure these factors, but you need a critical mass of both.
Some things that help de-risk controllable downside: Founder experience, market research including third-party validation, having key hires lined up or in place, enthusiastic strategic angels, having reference “future customers” available for calls
Some things that help demonstrate upside: a clear vision from a credible founder, an enormous addressable market, a good case for having defensible differentiation in that market, a battle plan for extremely fast and efficient execution
Oversubscribed: Any other advice you’d like to give to pre-seed founders around fundraising or how to operate at the pre-seed stage?
Bob Moore: Lead with your vision. It will outlast all other parts of your business and serve as a steady drumbeat in your pitching narrative to both investors and customers. When answering hard questions or ones you haven’t figured out yet, you can always zoom out to the vision level and elevate the conversation. If an investor believes in that vision, and the fact that you specifically are uniquely positioned to be right about it, you can likely overcome all other objections at the seed stage.