Seed Round, Part 1

Act 2: Launch

Brad McGinity, Chris Humphres, Scot Catlin and I were all in. We’d committed to a year with no salary. We cobbled together a whopping $25,000 of our own money and tucked it at Square 1. We were four knuckleheads with a powerpoint deck and a dream. Chris and Scot were doing what engineers do… they were coding our first prototype to prove that we could pull ecommerce data across our hub, standardize it and push it into an email platform. Brad and I were doing what business people do… calling everyone we could think of looking for our first client.

And then an unexpected thing happened.

I was catching up with Bruce Boehm for a coffee in the spring of 2011. Bruce had been a successful venture capitalist at USVP in Silicon Valley, and had circuitously landed in Chapel Hill where he’d joined UNC Kenan-Flagler as an adjunct professor to teach Entrepreneurship. While I hadn’t taken Bruce’s class, he and I had met several times along the way and this was the first get together since I’d left Bronto and jumped with both feet into the new venture called Windsor Circle.

I described what we were doing, and that I was working on a problem that I knew intimately… and that we had a team of four committed to a year without a salary… and that we had incorporated as a Delaware C-Corp (investor ready)… and that we’d already set aside an option pool for eventual employees (good for securing future talent).

And then an unexpected thing happened.

Bruce said that he’d be interested in investing. It kind of took me aback because I wasn’t really in fundraising mode. We figured that would come later when we’d won some customers and proven our technology. I came to learn over time that Bruce is a decisive (fearless?) person. He sets the chessboard up, makes a firm decision, and then makes the move. There were times in the journey when that decisiveness played in our favor. There were times when it didn’t. But in this moment, that brilliant analytic mind and quick decision making led to a pre-product, pre-revenue seed round.

Testing the Fundraising Capability of the CEO

I’m going to use the next post to describe how the round came together, but it’s worth noting here that Bruce did an amazing and intelligent thing as he proffered the terms. He stated that he would keep the terms simple (because they would get messy as we progressed through multiple rounds of fundraising), he set a valuation that was reasonable given our progress, and then he committed to a minority part of the total amount required to close the round.

I didn’t understand at first why he was leading the round and setting the terms if he wasn’t taking a leading position in terms of actual dollars. What he was doing was testing the fundraising capability of the CEO (me). He’d given me the tools needed… I had a term sheet and a commitment. I had a market-based valuation that was fair and acceptable to anyone that would get involved. I had a straight-forward set of terms.

Now it was on me to see if I could get others to join in! (Spoiler alert… we pulled it off).

You’ll Always Be Fundraising

Somewhere along this part of the journey, before we consummated the round, Bruce said to me, “note that once you take this investment you’ll always be fundraising.” This turned out to be very true. I know that there are exceptions, but people and firms who are in venture capital are in the game of putting money to work, and as long as the risk-adjusted reward is proving itself out, there will be pressure to grow as fast as possible. I’m not complaining… we knew what we were getting into. And I don’t fault those deploying venture dollars… they have a model that works for them and entrepreneurs who opt into that model have to pick up both ends of the stick.

But Bruce was right (as he often is). A huge portion of my 7 year journey was spent pitching investors, through good times and tough times. I was, indeed, always fundraising.