StrictlyVC: July 31, 2017

Happy Monday, everyone! We’re in beautiful, balmy Washington, D.C. at the moment, at the start of a workation with the family. Our friend Semil Shah of the seed-stage firm Haystack nicely offered to help us out for a few weeks, so we can spend more time away from our laptop, and he can delve deeper into the psyche of some of his fellow investors and the many founders who interest him.

Toward that end, over the next few weeks, we’ll be running a series of “how I started” type interviews that Semil is conducting, chats we hope are instructive for those of you who could use an inside look at how things come together in startup world.

We also have great news to announce about our upcoming event on September 27, Wednesday night, at the Autodesk Gallery in downtown San Francisco. Our latest addition to the agenda: 21-year-old founder Alex Rogrigues, whose recently-out-of-stealth self-driving truck company, Embark, is not only taking on Uber and Alphabet as they duke it out with each other, but just two weeks ago it signed a deal with Peterbilt to develop a new group of test trucks. To hear more about how Rodrigues plans to compete with some of the richest companies in the world, grab a seat (before we run out).

With much thanks to our partners BoltBallou PR, and Rosebud Communications, for their support in the evening. More soon . . .

Top News in the A.M.

Discovery Communications is acquiring Scripps Networks Interactive for $14.6 billion in cash and stock. The deal represents a 34 percent premium over the price where Scripps’s shares were trading on Friday. The deal combines two of cable TV’s bigger brands in an era where cord cutting has hit impacted all the major players across the board. TechCrunch has more here.

Charter Communications is saying it has “no interest” in merging with Sprint, following a Friday WSJ report that Sprint had proposed a deal. That’s apparently not stopping SoftBank, which currently controls a majority stake in Sprint. According to Bloomberg, its billionaire chairman, Masayoshi Son, is now mustering an offer from SoftBank to buy Charter outright. More here.

That was fast. Just days after Flipkart’s much-rumored acquisition of Snapdeal appeared to be complete, the deal has officially died, says TechCrunch.

Sponsored By . . .

eero changed the world of home WiFi with a powerful idea: that a system of wireless access points placed throughout the home could deliver WiFi so good, you’d never think about it again. Now, the 2nd generation of eero is available — providing hyper-fast, super-stable WiFi in all corners of all types of homes. For StrictlyVC readers: use code StrictlyVC at checkout and select overnight shipping for free!

Pillow CEO Sean Conway: How I Raised My Series A

By Semil Shah

Sean Conway is co-founder and CEO of Pillow, a startup that provides a suite of management services to both residents and building owners who are looking to earn extra income through the short-term rental economy. Before co-founding Pillow, Conway launched Notehall, a study materials marketplace acquired by Chegg in 2011.

As a founder, how do you define what a Series A means?

For me personally, Series A is an incredible milestone because it’s validation that your vision for should exist, and it gives you confidence by having the means to get there.

From a business standpoint, Series A provides the capital to find and surround yourself with a team that can focus on critical pieces of the business model – to execute and excellerate the vision at hand.  Prior, each team member pulled the weight of two to four jobs, which spread us thin.

Additionally, Series A provides social capital. Your VC becomes a partner for public and industry validation if you choose to publicize your raise. Your new board member is unlike any advisor you’ve likely had because they have skin in the game to accelerate you forward.

What are your thoughts on when to announce a Series A, once you’ve closed it?

I highly recommend founders delay their funding announcement three to six months until they put the capital to work to build the team and product. The positives include more invitations to speak at conferences, with press and introductions that you don’t want to pass on.

How many months did it take to raise the round?

It took six months in total. In those first couple of months, we collected data, created a deck, and created a list of prospective investors who we’d like to work with.  Over months three and four, we pitched six to 12 VCs each week. We lined these meetings up back to back and we had a term sheet by the end of the four month. We were ecstatic for about 48 hours, then [the realization hits that your] bank account balance is giving you anxiety because it’s lower than ever and you need to get funds wired — pronto. We went through due diligence in months five and six, which involved a lot of speaking with emailing lawyers. At the end of the sixth month, the round was closed. It was a europhic moment for us, and overall, it’s an incredible process that I would advise other founders to cherish, because a very limited number of entrepreneurs have the opportunity to experience it.

How many VC meetings did it take to get the round raised?

We pitched 25 different firms; that led to five partner meetings.  The most pitch meetings I scheduled in one day was six, and that was two too many.  I’d recommend beginning with two pitches a day in the first week and increasing to three or four meetings maximum in the second and third weeks.

What was the round size? What was your initial target?

We modeled out various amount of capital but targeted $8 million initially and wound up with $13 million. I recommend modeling out three different capital raises with three different scenarios; below target, at target, and above target.  From here you can better understand all scenarios and which milestones you’ll hit depending on performance.

Looking back now, what were the biggest mistakes you made in raising Series A and why? 

I think there was a large opportunity to include strategics in our Series A, and we only pitched VCs.  I also

wish I would have called entrepreneurs that had taken funding from investors, especially the main partner, and asked them how their partner meetings functioned.  I assumed our meeting would be six to eight partners around the table but it turned out to be the entire firm (24 to 28 people) in a room – both sitting and standing – and it was intimidating.   Although I knew my company and pitch forward and backwards, the setting was unexpected and threw me off course during the pitch.

How was raising Series A different than raising seed and notes? Any advice to other founders going through the process?

Metrics, metrics, metrics. You have a good understanding of your unit economics, CAC and LTV, financial forecast, assumptions, and expansion costs. Series A is also much different because you’ll find this new investor is one you’ll work with more closely than most investors in the past.  Rather than searching around on AngelList and setting up coffee meetings, getting the right meetings with VCs requires credible introductions from current investors, other entrepreneurs, and even your legal team. Be sure to provide VCs a blurb and shortened deck that provokes curiosity but leaves them asking questions and wanting more.

Any closing advice?

Prepare. Pitch three to five of your current investors before running your process. Preserve your seed funds until you understand 70 percent of your unit economics. Last, this better be more than a hobby because sh*t is about to get real. It’s also a lot of fun.

New Fundings

The Big Willow, a four-year-old, Wilton, Cn.-based startup that makes business-to-business software for marketers, has raised an undisclosed amount of funding from Connecticut Innovations and Stonehenge Growth CapitalMore here.

Carwow, a seven-year-old, London-based platform that connects car buyers with car dealers, has closed $39 million in Series C funding led by new investor Vitruvian Partners, with participation from earlier backers Accel Partnersand Balderton Capital. TechCrunch has more here.

DotC United Group, a two-year-old, Shanghai-based mobile application developer, has raised $350 million in Series B funding led by Zeus Entertainment. More here.

FanAI, a year-old, Santa Monica, Ca.-based AI-driven audience monetization platform that’s focused on e-sports, has raised an undisclosed amount of funding led by Courtside Ventures, with participation from Greycroft Partners, BDS CapitalCRCM VenturesSterling.VCLoot VenturesExpansion VCQB1 VenturesRosecliff Ventures and DraftKings founderJason RobinsMore here.

Reddit, the 12-year-old, San Francisco-based online discussion platform that has long billed itself as the “front page of the internet,” has raised $200 million in new venture funding at a post-money valuation of $1.8 billion, it says. The round — the company’s biggest — includes Andreessen HorowitzSequoia Capital, Y Combinator President Sam Altman and SV Angel’s Ron Conway. It also includes money from the hedge fund Coatue, the investment firm Vy Capital and the mutual fund giant Fidelity. Recode has more here.

Shopex, a 15-year-old, Shanghai-based e-commerce software and services company, has raised $105 million in Series D funding led by Joy Capital, with participation from K2VCNew Alliance CapitalTianxing CapitalGopher Asset Management and CBC Capital. China Money Network has more here.

SimplyCook, a four-year-old, London-based subscription-based service that sells home recipe kits, has raised £2 million ($2.6 million) in fresh funding. Investors in the round are Maxfield CapitalEpisode 1 Ventures500 Startups, and a handful of unnamed U.K.-based angels. TechCrunch has more here.

New Funds

SAIF Partners, one of India’s most active tech investment firms, has closed its sixth fund with $350 million, which is the same size as its previous fund. The firm’s portfolio includes the large mobile commerce plaform Paytm and the food delivery service Swiggy. TechCrunch has more here.

Exits

Amazon has acquired GameSparks, a four-year-old, Dublin, Ireland-based “backend as a service” for game developers to build various features like leaderboards into games. According to TechCrunch, GameSparks had raised just $820,000 from a small group of investors that included Enterprise Ireland, a government group. More here.

Soundcloud, the beleaguered music-streaming service, is reportedly nearing a deal to sell a majority of its business to two private equity firms.

People

Valerie Jarrett, who served as Senior Advisor to President Obama, is joining Lyft’s board.

Whisper, one of the few anonymous social sharing apps left standing, just laid off 20 percent of its staff. More here.

Jobs

Felix Capital is right now looking to hire an associate. The job is in London.

Essential Reads

Recode has a lot of detail about why Meg Whitman is no longer in the running to be Uber‘s new CEO. The New York Times also has a deep dive about backstabbing on Uber’s board, and why ousted CEO (and continuing board member) Travis Kalanick may be hoping a new Softbank investment will enable him to regain control of the company.

Elon Musk says it’s going to be “hell,” making Tesla‘s Model 3 quickly enough to satisfy to demand. According to Musk, reservations for the car now exceed 500,000. (Here’s everything you’d want to know about the car, by the way.)

Giphy, the four-year-old search engine for GIFs, is about to start testingsponsored GIFs.

Snap‘s lock-up period ended today for some insiders, and they are selling.

Detours

Men, stop eating sugar. (Women, you’re fine.)

RIP, Sam Shepard.

Retail Therapy

Death Wish cold brew coffee. If it doesn’t kill you, something else will.



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