A burning moving truck on the way to a pitch meeting in SF.
By: Phillip Bogdanovich
The controlled burn of raising money
I’ve been working with Craig and our rapidly growing team to raise money. By any reasonable metric the raise has gone really well and the company is gaining traction quickly. We have brought on key investment partners who will take the journey of scale with us and aid in avoiding the pitfalls. We have learned to raise responsibly and effectively, limiting the burn and time cost of travel. The lessons of time and cash costs are what I’ll discuss here.
Travel is a time suck; everyone who travels for work knows it. When I started traveling to raise money from Texas I learned very quickly that a 3 hour flight to California was really 6-8 hours of travel time accounting for getting to the airport, getting through security, checking bags, retrieving bags and on and on and… Traveling kills an entire day in almost all cases. While the traveling was necessary for us, I started thinking about how we were traveling and if there was a better way to manage the process. I decided to kill the travel costs, move to California for 4 months and focus solely on the raise which also proved to be hugely beneficial from a networking perspective. Full disclosure I lived in a 19 foot trailer in a parking lot.
A fear of taking control was a huge time waste too. I was afraid to work in the interest of our team schedule, instead opting to be overly accommodating to investors. The logic was simple: I needed the investors money so I did what they asked no matter how inconvenient, impractical or ineffective. There are two instances that really stand out to me: One was a trip to New York and Boston back to back finding out later both investors were fine with zoom. The other was an investor trip from Denver to Los Angeles to Denver to San Francisco in 48 hours. While meeting with the LA, Denver and SF investors in person was critical, all three were far more flexible than I gave them credit for and I could have planned better. I was afraid to push back.
Taking control of my time and travel meant taking control of my schedule. During a meeting a seasoned startup investor and CFO told us that we needed to project confidence and that we were basically making ourselves too available. I was making us too available. Not projecting self confidence made us less attractive, especially in California where startup founders and early execs are most often cheerleaders first. We needed to address this issue immediately because the negative association was burning raise opportunity. We simply could not afford to take meetings knowing that there was a high probability that the outcome would be Cipher not being taken seriously or being considered too early to be relevant.
Creating confidence internally that resonated externally was a critical need. First, we had a long conversation to discuss the disconnect. Everyone inside of Cipher Skin had been a part of other successful startups and had led teams. We all believed that Cipher as a team and Cipher Skin as a product was going to change the world. Why was there a misconception that we were “uncertain”? It turns out the answer came in three parts: 1) We weren’t gelled internally- Even though we all believed in the mission we weren’t working together on a common goal; we were tactically misaligned. 2) We were afraid to talk to investors on our terms. 3) points 1 and 2 resonated in every conversation we had and every piece of content we produced.
Confidence, Messaging, Time Management. Three very different problems that all need to be addressed to streamline the process of raising money, keeping costs controlled, and ensuring the best possible outcome. Our process for addressing these issues as quickly as possible was to find a common thread. We circled up (multiple times) and talked. A lot. We discussed the feedback we were getting and discussed the teams perception of what we were all hearing. We decided that perceived low confidence was the common denominator and began identifying ways to address it. We found that because raising was a new process for some of us it was scary and that was conveyed in meetings. We also discovered that we weren’t all confident in the same go to market plan. After we addressed these issues and determined a path for the company we were all confident in, we rewrote the deck and supporting material to reflect the changes. We also all talked together with advisors and current investors (we had raised some money but not a lot) and all got comfortable together (quickly) on what raising money meant and how that translated to responsibility to investors.
New Deck, New Confidence New Money. The day the new deck was completed and sent to a potential investor we had a win. They committed money before talking to anyone on the team. The idea was clear and so was the go to market. We were conveying the confidence in the product, each other and the process that investors needed to see in order to be comfortable coming in early. We also discovered that a huge weight was lifted internally knowing we had all talked to the same advisors at the same time, gotten the same advice, and most importantly had all talked to the existing investors together to share our roadmap for the next 12-18 months. We were finally working together and in sync. It showed. The money started coming in faster and so did the opportunities.
Investors, especially early stage investors can overcome huge uncertainly. What stops them from investing (besides the obvious wrong time/wrong channel/wrong industry/competing investments) is team misalignment and low clarity on an intended path forward. The specific combination of team misalignment and no roadmap tends to look exactly like what it is- a mismanaged group of people with no direction. That’s not a horse anyone wants to bet on; before pitching make sure the team is crystallized on product vision, company vision, and accepts the risks of startup land. The odds of raising don’t become 100% but you’ll be taken seriously and that’s a great start.