How We Raised $250,000 Of Startup Funding In Four Days

Before we get onto the juice of how we raised a quarter of a million dollars for our startup PopJam in four days, I want to stop and say how awesome the internet is. I'm currently writing this in bed, in a cosy rustic room above a converted barn at my parents' place in a beautifully rural area of south west France. It is 6:30am local time and I'm typing on my shiny new laptop over a rather delicate, repeated wireless connection. Very cool. Now, onto funding...

Yes, it did in fact take us four days from asking our first investor for "advice" and receiving a firm yes for a commitment for $250,000 in angel funding. We signed a "vanilla terms" deal about six weeks later and had the cash in the bank a further two weeks after. Were we lucky? Yes. Did we do anything prior to this to make the funding round as straightforward as we could? Yes. Read on to find out how we achieved our funding target.

Getting Hooked On Startups

I realised immediately when trying to write this post that I couldn't decouple my own personal startup story from that of PopJam's funding process. They are too interconnected. It is rather difficult to apply separation-of-concerns to the serendipity, networking, research and just plain hanging out that occurs when attempting to form a startup or achieve funding.

Like Doc Brown in Back To The Future, I have a pivotal date in my personal history where I felt a turning point in my entrepreneurial career. Although I didn't hit my head on a toilet and draw a picture of a flux capacitor, I did go along to a talk given by Paul Graham hosted by the Imperial College Entrepreneurship Society.

Paul had graciously flown out to London to give a presentation to the society, on "what a startup is". The talk was fascinating and he was discussing a semi-new venture he had previously co-founded called Y Combinator. Bear in mind that this was early 2007 so the incubator was only beginning to gain traction. This was my first taste of the Silicon Valley model of startup funding, which introduced me to strange phrases such as "Angel Round", "Series A" and "Term Sheet". Clearly I had a lot to learn.

I made a point of not trying to badger Paul like everybody else at the after talk drinks reception. Instead, I met with everybody else and asked them what they were up to. I chatted with some very interesting people. Although, many were trying to pitch me and I found this off-putting. I was more keen on hearing about the technical details of their implementation or the particular choice of software stack they were using to solve the problem.

Eventually the founders of the Imperial Entrepreneurs suggested a few of us head down to the pub across the road. Paul decided to tag along as well. I was excited because there were only six of us in total and I would get a good chance to talk to Paul, as well as the rest of the guys at the society. It confused me that people were still trying to pitch Paul - even in this rather relaxed environment. I decided that I would just discuss Arc, Paul's Lisp dialect that was still in development. He seemed keen to discuss it and eventually the conversation turned to Chinese Gunboats of all things. When the evening wound down, Paul suggested to me that I stay in touch and that I should consider attending Y Combinator at some point. I was rather chuffed, given that earlier in the evening I didn't even know what a "Startup Incubator" was.

Working at a Startup

The next momentous event in my startup career occured when I joined the YouNoodle entrepreneurial social network. I wrote that I was interested in startups, was proficient in C++ and would be keen to meet new people. I didn't really expect anything to come of it, but I knew that if I wanted to be noticed then I had to get my name out there. In retrospect, this was key. I contacted people that I had met at events and just got to know what they were up to. Just being interested in what people are doing is guaranteed to get you invited to places!

After a week or so I had an email from Kieran O'Neill, who I was aware of because he had built the first flash video site at 15 and sold it four years later at 19 for $1million. He asked me if I fancied meeting up to discuss startups. I was in two minds, as I had a lot to do that week, but I agreed to go. We caught up for coffee in Soho and he mentioned that he was working on a social network for video gamers (later renamed to Playfire). We got on pretty well and he asked if I wanted to meet the other guys as his office was only around the corner.

A few blocks down and we arrived at Greek Street. Little did I know how important this particular road would become to my entrepreneurial endeavours. Upon entering the office, I saw a few guys huddled over laptops and 24" monitors working on websites. I was definitely in good company! I already knew Sumon Sadhu, as the founder of the Imperial Entrepreneurs society. He was working on his startup SnapTalent, which was about to enter a YCombinator phase. This was my first proper introduction to the nuts and bolts of startup life and I was definitely keen to find out more.

Meeting Co-Founders

I ended up doing some contracting work for PlayFire, originally as a back-ender and later as a CSS front-ender. One day, Kieran asked if I would help take a TV back to his friend Alex's house. It turns out he meant Alex Tew, the founder of the Million Dollar Homepage, who I was well aware of after my foray into BuyMeToTheStars from my PhD days (that is another blog post, I'm afraid!). I thought it would be cool to meet the guy who managed to make $1million in four months.

Later on I bumped into Alex again when the Playfire guys went out to lunch with the founders of Bebo; Michael, Xochi and Paul Birch. The dinner was a hoot - we were trying to think of crazy startup ideas the whole time. This was around the era when Facebook apps were just beginning to be in vogue and so the discussion was geared mostly to cool social games with a healthy viral mechanic. I left buzzing with many ideas that I just wanted to go and implement.

I spent a lot of time with Kieran (we ultimately ended up becoming flatmates) and the rest of the Playfire guys over the next few months, attending many networking events and startup meetups. One bit of advice here is to always attend an event, even if you are absolutely knackered and want to crash out. You never know who you will meet. After a bit of practice you will learn which events are worth attending and which are not. One such event took place at the top floor of the "Gherkin" (i.e. 30 St Mary's Axe), with a beautiful view over London. It was swimming with angel investors, VCs and startup lawyers. This was my first proper taste of high-finance networking. I chatted to a lot of interesting people about their ideas - but also enjoyed the amazing 360 degree panorama of the London skyline at dusk.

After I finished at Playfire, I realised that I needed to get my Python/Django/jQuery skills up to scratch so I decided the best way to learn would be to build a full-on web app myself. Thus was born Webownr, written in Django 0.96, a social network for webmasters and affiliate networkers. It was a pretty slick looking site with lots of AJAX, fancy jQuery and many features. It took me four months of evenings and weekends to build. However, I did very little market research, did not attempt to find a product/market fit, or even get particularly many users. I learned the hard way that this was not the way to build a startup.

Webownr was mostly an exercise in extensive coding, learning version control and Linux sys admin more intimately. It ultimately didn't pan out - primarily because I had no idea how to market the idea and my PhD was beginning to get rather busy again after some results showed promise. However, this was about the time that Alex got in touch asking if I'd like to go for a drink and discuss startup ideas.

PopJam Is Born

The drink culminated in a handshake agreement to begin working on something. We spent many days at Alex's swanky Soho flat brainstorming ideas for apps. Alex was drawn to the idea of "content curation", in the vein of Tumblr and Pownce. We decided that the mechanics of Twitter, such as retweeting and following would work extremely well with those of Tumblr. PopJam was born, allowing users to post links, videos and pictures. They could easily share them with friends, follow other users and re-share content curated by other users.

It wasn't too hard to get an initial beta-testing userbase. We asked all of our startup friends to give it a go and provide feedback. It was also the sort of service that friends and family would use. Alex had a strong network and this definitely aided us in gaining initial traction. We also deliberately asked every investor that we knew to try it out, but with no hint of funding being discussed. It received a mixed reception - people either got it or they didn't. There was definitely something missing.

Paul Carr is infamous in the startup world as the author of the Guardian column, NSFW, and the partial autobiography Bringing Nothing To The Party. He is also credited (by us!) with turning PopJam into a "repository for teh funneh". Essentially, Paul suggested we concentrate only on humourous posts as 90% of what was being posted was in that vein. We quickly re-branded the site and told everybody about our new "twitter for jokes" website. The take-up was much stronger as we had a much better story to tell. This certainly helped us when it came to chatting with investors. In a way, this was our first pivot.

Finally...The Funding Process

Now that you've laboured through my startup life story, I'm finally going to tell you about how we achieved funding for PopJam. Although, in some sense I already have. I spent many evenings with startup guys just discussing ideas. I hung around with investors, not because I wanted their cash, but because they were cool people and were keen to help out. We streamlined our product idea by pivoting quickly. Thus we were in a very strong position when we began looking to raise capital.

The actual mechanics of the funding were simple - we emailed a few investors (that we knew as friends) and asked for advice on how to proceed with PopJam. We had an idea that we wanted to raise between £100,000 and £200,000 for our first angel round, so we settled on approximately £150,000 (~$250,000 at the time). One of our close friend investors decided to offer us half of the cash investment on the spot, as he had been an active user of the site and knew us both extremely well. This was on a Friday after a hard working week. Alex and I were pretty elated and decided to go celebrate with a beer from the local pub! We therefore "only" needed to find the other half of the money in order to close the round. It turned out that after the weekend our lead investor had decided to fund the remaining half and so by Monday we had a pretty firm "yes" for our entire angel round.

In addition to our primary investor, Alex's flatmates (who are both successful entrepreneurs and investors) also put in some money. We were both happy with the end "vanilla terms" and equity exchange. The money eventually allowed us to hire our first employee, a contractor, pay ourselves a small salary and roll out PopJam and SockAndAwe.

Summary

I don't want to give the impression that raising quarter of a million dollars was easy. It certainly wasn't. However I do want to leave the impression that although the funding process itself was relatively short, the actual work was done via the networking, startup events and general hanging out in the scene. The main issue is trust. Once an investor trusts the team and can see a clear path to revenue and profit, the funding is straightforward.

However, there is a fine balance between spending every evening at a piss-up tech event and huddling over the laptop for another Red Bull fueled coding session. Experience and time will help you determine how much of one to do versus the other.

I'd love to hear some "war stories" of your fund raising experiences in the comments, so please add them if you are able to share!