How I Closed Our $1.5M Seed Round As a First-Time Founder
by Jason -- November 19, 2015
This past June, Bento officially announced our seed round of $1.5M. In the following, I’ll discuss what worked, what didn’t work, dissect the round, and offer advice if you’re planning on going through the process. It wasn’t easy.
10 Weeks of 100% Rejection
As part of the LAUNCH Incubator, we raised a pre-launch round of $250K in February. The money was intended to only last 3–4 months. So, by June, we needed to have more money in the bank.
We launched on-stage at the LAUNCH Festival, opened our delivery doors and began actively raising our seed round. Investors were immediately interested. However, what I expected to be a four-week process ended up being 10 weeks of 100% rejection.
New Relationships Fail
When we closed our round and I took a step back to look at the results, I was shocked. I wasted a lot of time reaching out to new investors (outbound).
If I had only focused on people with previous relationships and waited for people to email me, we would have had the exact same results. Damn.
Mark Suster was right, people invest in lines, not dots.
While it didn’t help in this round, it’s best to have a long-term approach. I’ve started relationships for the future. I’ve put the initial dots on the graph and over time will build lines through monthly updates on our progress (more on this in a future piece).
It’s very likely that our Series A investor will come from someone in this pool.
How To Reach Out To Investors
With outbound, my process was to research a firm or individual investor and decide whether they were a good fit for Bento. If they were, I crafted a personalized email and found a mutual connection for an introduction.
Here’s an email template:
We’re raising our next round and I was looking to connect with JIM over at XYZ Ventures. Would you be able to intro us?
I realize they tend to focus on Series A deals and we’re not quite there, but I wanted to get the conversation started early (put the dot on the graph). Their love of nimble, scrappy startups certainly describes us well. Plus their long-run mantra jives really well with the kind of folks we’re looking to partner with. Finally, their consumer experience is impressive and would be a huge value-add for us.
More on Bento below…
Bento is the only food delivery app that allows you to customize healthy Asian lunches and dinners. Our food is prepared by our own chefs. Customers use our iOS & Android app to choose 1 main dish & 4 sides to build their customized Bento. We deliver in 10–20 minutes in San Francisco.
Long-term vision: Working with franchisees to offer customers any ethnic cuisine and have it delivered in less than 15 minutes.
1-minute pitch video: https://youtu.be/Vuh6yWq1O1w
Latest deck: DROPBOX LINK TO DECK
Traction: We launched 6 months ago and now have $700k+ in annualized run-rate. Growing at an average of 49% M/M.
Key Investors: Jason Calacanis, Slow Ventures (Dave Morin), 500 Mobile Collective (Edith Yeung), FundersClub, Ryan Allis, Adriaan Ligtenberg, Scott and Cyan Banister, & Brad Feld.
Previously Raised: $XXX
Currently Raising: $XXX (40% remaining)
Tip: Don’t have a mutual connection? Reach out to a portfolio company, ask for their advice and explain what you’re doing. Expect nothing from these meetings other than a good conversation. If they like what you’re doing, they’ll offer to intro you to their investors. (h/t @andrewfarah)
This was an extremely effective approach for getting a meeting or email response. However it was time consuming — on average each introduction took 30 minutes for the initial contact.
Of the 38 people I attempted to contact I received a response from 35 of them. Half of those resulted in meetings (and then rejection) and the other half rejected directly through email.
How we got our first “YES!” — Weekly updates, constant pings
After showing double-digit week-over-week growth, for 10 straight weeks and sending weekly updates along the way; we got our first “yes.” Within one hour of the first “yes,” we got our second one. May 19th was a good day.
In a previous life, I was in sales. Dealing with rejection, following-up with people, and straddling the line between persistent and annoying was my job. So I’m very comfortable sending multiple emails with no response.
Ultimately I believe this made me a successful sales-person and made us successful in raising the round.
For our first big “Yes” here are weekly email updates #7 and #8. After #8 is when we got the “Yes”. Most of these updates received no response!
— — — — -
Weekly email update #7
— — — — -
Hope you had a great weekend! Here’s a quick update on last week —
1) We had another great week! The number of Bentos sold grew 11% W/W.
2) Revenue grew 14% W/W. We had our first $5k last week!
Keep me updated.
— — — — -
Weekly email update #8
— — — — -
Also, here’s an update from last week —
1) Another huge week! Bento sales grew 14% W/W & revenue grew 17%. We did over 500 Bentos and $6k revenue.
2) We start lunch on Tuesday. We’re really excited about adding lunch. We have gotten a LOT of requests for it. I believe this will double us in the next couple of weeks (easily).
Seed Round Analysis
Breakdown by investor type:
In order to get these 21 investors, I spoke with or emailed 114 people (93 people chose not to invest in this round).
How did I know our 21 investors?
- Previous Relationship — People that I knew prior to starting Bento
- Inbound — People who cold-emailed me with interest in investing in Bento
- Outbound — People whom I reached out to, pitching them to invest
On a dollar basis, it’s reversed:
What Worked #1: Previous Relationships
Before Bento I was the CEO of LAUNCH. My previous boss, Jason Calacanis, is one of the top angel investors in the world. He has been Bento’s biggest investor and supporter. But in order to get to that point, I had to put in a lot of hard work for him. It’s the long game — you have to be good and do good work before people believe in you.
What Worked #2: Inbound
I wish I had sage advice on how to get people to email you that they want to invest, but I don’t.
The best advice I can give is to do something interesting and interesting people will notice you.
AngelList is an amazing platform. Nearly 100% of our inbound interest came from them. Make sure to spend time on your profile. It was worth the time investment.
To sum up, there are four things I would say to new Entrepreneurs who want to raise capital:
- It’s really hard. Only the movies make it look easy. Don’t give up.
- Most of the money we raised was through previous relationships. If you don’t have these, the best way to start building them is through an incubator/accelerator. And the best way to get into one is by building a product, that solves a real problem.
- Play the long game. Make new connections, keep them updated monthly.
- The best position to be in is not to need to raise money. So, really ask yourself — can you find a way to be successful without raising money? Don’t forget, it distracts you from actually making progress on your business.
And finally, if you are successful in raising money, watch every penny. What if this was the last money you raised?
And now…a Bento plug
Bento delivers Asian-inspired meals in minutes in San Francisco. Choose your main and four side dishes for your Bento and get the exact meal you want every time.
Get $5 off your first Bento with promo code: LetsEat.
Available on iOS & Android.
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