Learning to move quickly in the ecommerce space
This is what my co-founder, Eric Ingram, has to say about getting started in ecommerce and developing a startup philosophy:
“I stumbled on the opportunity of ecommerce long before starting a career in software development. Like many curious people obsessed with computers in the late 90s, I began hacking websites together for friends. After one particularly entrepreneurial friend asked me to help build a site to sell products online, I was hooked. Ecommerce has changed considerably since then: it’s incredible what we can accomplish with the tools available now, but there’s still a huge amount of room for growth.
“As a founder, being persistent and adaptable to feedback have been key skills. Moreover, you have to remember that time is always of the essence. You have to be willing to make up your mind quickly, and change it just as quickly when new ideas arise, or risk wasting too many cycles going in the wrong direction. In established companies, there’s often a culture of avoiding mistakes by spending more time researching, which often surfaces more doubt and makes it hard to move forward. There is no perfect solution, and it’s unwise to waste time looking for one. This is especially true for smaller startups. For a startup to win in a challenging space, you have to move fast and break things–the important thing is to learn from those mistakes and adapt. This is where resilience and adaptability are such great assets.”
Our fundraising process: Setting a timeline and defining a Zoom strategy
We launched Swell publicly on October 1st, 2020, and started fundraising right away. We knew it was important to formalize a process and a timeline so we aimed to have as many conversations as possible in a short time frame. Our goal was to try and close a round within a few weeks. We had some great introductions to investors in early 2020 which helped spur conversations. After our Product Hunt launch, the inbound from VCs ramped up and we started taking 6, 8, 10 calls per day. Overall, it took about six weeks to find the right lead investor, and another two weeks to close the deal.
DocSend Startup Index Notes:
Swell’s fundraising timeline falls within expectations for Seed-stage companies. 28% of Seed companies in DocSend’s most recent fundraising survey raised their round in 7-12 weeks.
Zoom is a founder’s best friend during these strange times—there’s no way we could have taken this many meetings in person each day. But in order to accommodate so many meetings, we had to adapt a Zoom-specific strategy. We set clear, up-front boundaries for each meeting, including “hard stop in 30 minutes” and stipulating what each call would cover and the specific topics we’d discuss. We also paid close attention to the aesthetics of the call: we made sure we had a good-looking background and that we appeared bright enough on screen.
How we targeted investors
We created a list of about 100 VCs and ranked the ones that we wanted to partner with most. For our top choices, our criteria were clear: we wanted to target firms that had a strong reputation and where we already had an introduction in place. We also studied firms’ portfolio companies and made sure to target investors who were into SaaS and ecommerce, specifically. Our lowest-ranked investors were more generalized firms where we didn’t already have introductions.
DocSend Startup Index Notes:
Swell’s investor targeting strategy is broadly within the scope of an average Seed round: our most recent report on Seed-stage fundraising found that companies contacted nearly 80 investors on average.
Even though we had introductions or inbound contacts with many firms from the beginning, our pitching strategy ended up being a bit counterintuitive. We began by pitching the less well-known investors so that we could quickly iterate on the ideal way to tell our story and nail our narrative that much faster. You have such a short time to get your point across during a pitch meeting, so we realized very early on just how crucial a concise and compelling story would be.
Whenever we didn’t have a contact at a firm, we looked at our network to find an introduction. Meetings that didn’t work out still often ended up being useful. Even when an investor declined to participate, they were mostly helpful in making introductions to others who could be a better fit. From this perspective, most of our meetings added value to the process.
Nailing our narrative
The first call is important—investors make quick judgements about you and the opportunity at hand. So make sure you make a good impression: be compelling but don’t get too into the weeds. Keep the conversation at a high level and don’t give away too much information. Pique investors’ interest. Show enthusiasm and domain expertise but don’t appear overconfident.
When you make it to a partner meeting, make sure you have the narrative down. But also get ready to think on your feet: be prepared to get derailed by questions and have appendix slides that address those concerns. Be deliberate and thorough in your meeting preparations.
At first we didn’t have a narrative that was landing. So we decided to experiment: at every single meeting, we would try something different with our story and learn what landed and what didn’t. At week three, we started to hit our stride and our narrative was working.At first we didn't have a narrative that was landing. So we decided to experiment: at every single meeting, we would try something different with our story and learn what landed and what didn't. Click To Tweet
We found that investors were most interested in how we were different from both monolithic ecommerce platforms and headless ecommerce platforms. In some cases, they didn’t even know that headless ecommerce was different from headless content management systems. Many investors wanted us to drill down on our distribution model in our story. It was helpful that investors wanted to collaborate with us on different elements of our pitch strategy and really help us refine the story.
Nailing our narrative was the most difficult part of the pitch process. We’re building a big platform for a new market that’s still in its infancy. It’s like Tesla accelerating the shift away from gas-powered vehicles (monolithic ecommerce) to electric (Swell). Investors are trying to pattern match, and because we’re breaking new ground we faced unique challenges. The pattern-matching simply didn’t work as quickly or as well at first.
Landing our Lead Investor
We probably had 8 meetings with our lead investor from when we started to closing our seed round. Many investors are eager to talk and learn about the company, but curiosity and strong interest will only get you so far. To find a lead you also have to fit their fund dynamics and overall investment strategy.
Our lead investor found us initially on Product Hunt, and looking back, it felt like a great fit from the beginning. We had heard that a great investor will turn the pitch back to you: they’ll sell you on the value your startup brings and how you differentiate in the market. Whenever a potential investor made this move, it really stood out to us. But “fit” is also about a more general feeling. You’re going to be taking money from someone you might be on a 10-year journey with, and if the relationship just doesn’t feel right then you shouldn’t take their money.
Advice for founders: Create a sense of scarcity and learn how to tell your story
Raising our seed round really helped crystallize some advice I have for other founders. One important piece of advice is for founders to define their fundraising process as clearly as possible and to set an appropriate deadline. This approach helps create a sense of scarcity among potential investors and will drive their decision making more efficiently. A formalized process with a target close date also helps push interested investors through the funnel at the same time, making it more competitive to secure a term sheet. Don’t be afraid to politely say to investors, “We’re moving to partner calls with 2-3 firms over the next two weeks. Are you interested in moving forward?”Raising our seed round really helped crystallize some advice I have for other founders. One important piece of advice is for founders to define their fundraising process as clearly as possible and to set an appropriate deadline. Click To Tweet
Another crucial piece of advice is to boldly experiment with your narrative to see what sticks. Be willing to organize your key points differently so you can carefully gauge how your VC audience responds. If you experiment with a sense of purpose, you’ll get very good at telling the most compelling story possible about your business.
More broadly, I’d advise founders to follow Paul Graham’s lead and be formidable! Do things your own way, but at the same time remain willing to constantly challenge your own assumptions and beliefs. Be humble enough to admit that you don’t know everything. Finally, never forget that you’re part of a larger community and ecosystem: make good friends along the way and pay it forward whenever you can.
For more details of our pitch deck and how we used DocSend during our raise, read our story in The Weekly Index newsletter.