How I raised $5.4m in 3 weeks to save my business

In January 2017, my company was screwed. We were down to just three weeks left of cash in the bank and the million dollar deal we had just signed to secure the company's future backed out. I was in full on house on fire panic mode. But in just three weeks, I was able to turn things around and raise $5.4 million and I ultimately went on to sell that business for $110 million. In this video, I'll show you exactly how I did it. If you're new here, my name is Micaiah. I'm a serial entrepreneur and I make videos just like this to help inspiring entrepreneurs reach the life of their dreams. Let's get right into it. So with just three weeks of cash left, I knew I had to get money fast. So I started with small investors and this is actually the typical way I would recommend anyone start around if they're thinking about raising capital. Start with smaller investors that can make quick decisions and write smaller checks because it one, secures the future of the business and two, builds momentum in your fundraising round. So I spent one day just going through everyone I know who could write a check or know someone who might be able to write a check, whether it's a 25K check or $250,000 check. And I put them on a list and I started setting up meetings. Now, my typical process is I try to set between 10 and 20 meetings a week. But in this case, I didn't have months to go buy a standard process and raise venture capital money. I needed money fast. So I was doing 20 meetings a week, which is about four meetings a day. getting from meeting to meeting, taking notes on what went well, doing follow up emails. Four meetings is about the most you can do per day and still do them well. Now my goal for these 20 meetings was very simple. Early on, I knew my pitch was going to suck and no one was going to invest. So I needed to get the meetings out of the way to start improving and innovating on my pitch so that one day someone would actually write me a check. Now, of course, along the way, I'm still trying to raise money. I do need to save my business. So I'm using these meetings to both get feedback, but also try to secure some early checks. And the way you do this with small investors is you use FOMO to drive their commitments. So what I mean by this is if I'm talking to someone who can write a 25k check or a 250k check, I'll say, listen, we just kicked off fundraising. It's going really well. We're having a lot of meetings. We both know people get squeezed out in these rounds and I don't want that to happen to you. I really like working with you. So let's get you in now. before these VCs come in, that way we can secure your spot. This is a real thing. If you haven't fundraised before or if you're not used to this process, it might seem crazy that like investors would kick each other out. But when deals get hot, investors get kicked out. And so you're signaling, hey, this might be a hot deal and it will probably trigger some memories in their brain saying, oh yeah, I do remember that other deal where I got kicked out by this big investor. You know, that deal went on to sell for a billion dollars plus. I don't want that to happen again. Let me commit. So you're using this FOMO to drive in early checks. And this is how we got the first couple hundred thousand dollars in my round. We were going to different investors that could write like 100K checks, 250K checks. So early on, we were able to get about $500,000 in commitments into the round. One note on commitments, it's incredibly, incredibly important that you get commitments in writing. A handshake or a verbal, yes, this sounds interesting or whatever, is not a commitment. You need to get a... I, so-and-so investor, will be investing X amount at Y valuation in this company. And you get that in email. It's called an email handshake and it's critically important. If you do not get that, you do not have a commitment to the round. So once I had some money coming in and committed to the round, step two was to go and secure a lead investor. Now a lead investor is not always the biggest check in the round, but they typically are one of the larger checks, if not the largest. And more importantly, they set the terms and sort of the precedence for your round. A lead investor will typically do a lot more due diligence so that when they're done with their diligence, they can say, we definitely want to invest in this company. This is what we think the company is worth. And they'll set the valuation and so on. And so to secure my lead investor, I use the momentum I built in step one with the small investors to push large investors over the edge. And the way you do this is you bring up, hey, just started fundraising. We're a week into the process. We've already got $500,000 in commitments. These are some of the investors that are coming in. You know, we think this thing's going to fill up pretty fast. So we'd love to help you get to either a yes or a no. So you can decide if you want to be a part of this round. Now you're not being pushy. You're not making up FOMO. You're just letting them know straight out. Hey, listen, this round might fill up. And I like our engagement so far. I like our discussion. I like the way it's going. So if you want to be a part of this round. we need to get to a yes or a no. Now one of the best ways to also get lead investors to start leaning in is to have your friends who know these lead investors leak information. So what I would do is I would have my friends email a lead investor. They wouldn't lie but they would say, hey so and so, how's it going? I heard you're meeting with Micaiah this week or I heard you just met with Micaiah. I know a few other big investors are also meeting with them. Let me know if there's anything I can do to help. And so my friend is actually offering to help the lead investor. win me over, put in a good word, things like that. But what they're also doing is letting the lead investor know, hey, Micaiah is serious. He's meeting with other large investors. And generally speaking, there's only going to be one large investor in the round. So by leaking this information that I'm meeting with other large investors, it's going to drive them to make a decision. And you're not trying to trick them. You're not trying to like stir up this false sense of FOMO. But what you are trying to do is get an investor to a yes or no. This is critically important. because investors love to sit in the maybe column. So we're really pushing them to either make a decision or pass. The maybes will kill your round. And ultimately, what you're looking to do here is build a sense of mystique around your business so that other investors are all wondering who else are you meeting with? Who else might bid on this round? Generally speaking, the more they think someone is bidding on your round or the more investors they think are in the round, the more likely they are to bid up or even bid in the first place. I give you a term sheet for funding. So once this mystique is all going on, hopefully you start getting term sheets, people are interested in your business. In our case, we got a term sheet from 8VC, an awesome venture capital firm started by Joe Lonsdale, the founder of Palantir and a bunch of other really successful businesses. And that term sheet was pretty simple. It was an offer to invest $1.1 million at an $11 million valuation. But, and this is the critical point, they were doing a $2.2 million round. So what that meant is that they were going to put in $1.1 million at the round. but we had to go find the other $1.1 million. And this brings me to step three. So most people think once they get a term sheet, that's it. Party's over, we're done here, we've got our term sheet, we've got our investors. That is not how it actually works in real life. What really happens is the term sheet usually has two sort of categories of funding. The first is how much the lead investor is putting in. In this case, like I said, APC was putting in $1.1 million. The second $1.1 million, I'm on the hook to go find. And so this is where the party really starts. I can go out to all the other investors I've been talking with and say, hey, listen, 8VC is leading the round. We've signed a term sheet with them. They're putting in 1.1 million. We have a little bit of room left in the round. Would you be interested in participating? And you want to do this like really rapid fashion. In our case, we had both 8VC leading the round and one of the early investors that we managed to secure in the sort of early smaller check stage was SV Angel. two of the best investors in Silicon Valley. So we knew we could get a lot of other investor interest into this round. So I went out to every investor I knew and I said, listen, eight VC's leading the round, SV Angel's participating. Would you like to join the round? We have a little bit of allocation left. I didn't give the exact amount because different investors can come in and take different slices. So I said, listen, we're still figuring out allocations, but I need to know, are you interested or not? And naturally what happened and what happens in all these rounds is when they see a serious lead investor, when they see serious other investors, FOMO starts to really creep in and they think it's a hot deal. So all of a sudden we started getting more interest than I could imagine. Now, listen, I have to give a caveat here. Not every fundraising round is going to be this easy and we haven't always had it this easy. But when you have a hot round, you capitalize on that and get the most out of it. So in our case, we went to all these investors. A lot of them said yes. And we started getting more and more interest. And all of a sudden that $1.1 million just wasn't enough. There wasn't enough room in the round for all the investor interest. So I had two choices. Either try to squeeze everyone down on allocation so those $500,000 checks that want to come in turn into $50,000 checks. Or what I ended up doing is you can open a second round. And this is something a lot of people don't understand. When you see these rounds on like TechCrunch and Crunchbase and things like that, you might think that a, in our case, $5.4 million round is one round. It was actually three rounds that all happened within a couple weeks. It was the first initial small round, which was about a $10 million valuation. Then ABC led around at an $11 million valuation. And then later we ended up raising it close to a $20 million valuation. And the reason for that is twofold. One, as investor checks come in, they've de-risked your business. So your business is naturally worth more. But also as more and more interest comes in, you can raise the price of your round because people want to get in. And it almost creates a sense of mystique and FOMO. And so in our case, this $1.1 million allocation that 8VC had given us quickly swelled to like three, four million bucks, and we knew we couldn't fit it all. And so along that journey, we had met another investor that we really, really liked and wanted to get in the round. And that was Battery Ventures. We met the partner there, Roger Lee, who was leading their West Coast SaaS practice at the time. And we just thought, man, Battery Ventures is a great investor. It would be awesome to get them in this round too. And so I went to Battery and I said, listen, 8VC is already leading this one round. Would you be interested in taking a large part of the allocation of this first round, but also helping us put some allocation in the second round that we want to open up for other investors? We talked it over with them, did some back and forth negotiating, and they said yes. Battery participating in that second round was key because then when I went back to all the other investors and I said, listen, you didn't get into the $11 million valuation, but I've got this one at close to $20 million in valuation. Would you like to participate in that? they might balk at that valuation initially by saying, listen, Battery is co-leading this. So Battery is putting their stamp on this price, on this valuation. Let me know if you're in or out. And by having another brand name that I could associate with this higher valuation, investors just said, you know what? Sounds good. If Battery is doing it, I'm in. So really, in just a matter of three weeks, we are able to go from sort of these microchecks of $250K, $500K to real institutional venture capital firms leading an $11 million round. And then ultimately parlaying that to an $20 million round led by Battery Ventures. And these three things combined in a very systematic methodical process helped us raise $5.4 million in just three weeks. And sure, maybe raising $5.4 million doesn't sound like a lot of money in these days in venture capital firms, but remember this was in 2017 and at the time it was a pretty big seed round. Now, if you're just starting out I understand raising $5.4 million and, you know, lead investors, multiple investors, multiple valuations can be a bit overwhelming. And in fact, for you, if you're just starting out, you probably want to think more about angel investors. Now, a classic question that comes up is how do you actually find angel investors? Where can you find them? What if you don't have a network of angel investors? Well, good news for you. I just made a video. I'll put the link right here on how to find angel investors and how to pitch them. I'll show you the exact step-by-step process that I used. to raise over a million dollars from angel investors before I got into all these more complicated rounds. So click the link over there and I'll see you in that video.

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I’m a serial entrepreneur on a mission to teach 1,000,000 people the skills to build a startup and achieve the life of their dreams.

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