I don't personally know Rand, but I've been following his former company (and his personal twitter) for a long time. He seems to be a genuinely thoughtful, great guy with really good intentions...however, this post felt like a little bit of a humble-brag (nothing wrong with that).
It's great that he is sharing his documents, however, the chances of anyone who hasn't already raised $20M+ from VCs (and/or created popular videos for 10+ years) ever following in these footsteps are slim-to-none.
If you really don't want to raise money from outsiders, just don't raise money. Many people launch businesses with very little money. Some of us win, some of us lose. If you're in a position to raise capital from 30 "somewhat" high-profile entrepreneurs/investors, congratulations! You should probably do it!
But if you're not in that position, do it like Rand did from the beginning. Work your butt off and make things happen. Then someday (hopefully), you can post your own humble-brag on your blog.
Super fair criticism of the post and process/structure. My only pushback might be that you can raise $25k or $50k with this structure (doesn't have to be $1.3mm) and you can use these docs with 2 or 3 investors if 30+ isn't the right match. I agree that anytime you announce you've raised a bunch of money, it's bragging. But I don't know a way to a) make that transparent and b) inspire other folks to consider alternative fundraising options without a post like this.
First - your new business sounds like a(nother) winner to me.
Your pushback = really good point. Personally, I wouldn't recommend that anyone tries to raise $25-$50k, as their odds of hurting a really good relationship will be at about 99%...but I understand what you're saying.
My advice is that if you are thinking about raising under $500k, or only raising money from family and friends, just go through the struggle as a bootstrapper. You'll learn a lot more and probably get further than you would with the friends and family money. Plus you'll still have a place to crash and be welcomed to a warm meal from time to time, if needed.
Of course I say this as someone who was never able to raise capital. So, my bias is what it is. I'm a bootstrapper. Good luck, Rand - wishing you the best!
> If you really don't want to raise money from outsiders, just don't raise money.
This sounds like it’s perpetuating a false binary between VC and bootstrapping. This probably works in VC‘s favor, but not individual founders’ (on average).
PS - Basecamp is another ex of a tech co that raised money from non-VC investor(s) (Bezos) who got dividends—not a payday on an exit.
I meant to say that the “VC or bust” myth works in favor of VCs (since anyone in need of any money at all will feel like they have to work with VC terms)
Rand, this new business sounds EXACTLY like something I would want. Right now, it takes hours to figure out which blogs/bloggers to target in my niche.
My only concern would be: is this a one-off use product?
Perhaps if there was a sort of simple CRM to track relationships with influencers, it would make me come back more
His rationale and deal structure sound very similar to Indie.vc's investment in my company (Tapster Robotics).
With Indie.vc, I have the option to distribute profits back to the investor as a viable, realistic option between "Be the next Google" and "Spend all the money and die".
I hope more start-ups pursue deal structures with these kinds of options. Building a business to millions or tens of millions in revenue should not be considered a failure. (But it would be perceived a failure in traditional VC deals.)
I would be very interested to hear more about your experience with Indie.vc. Especially a summary of the pros and cons that you've seen, pitfalls to avoid, etc. Have you by any chance published a writeup on the subject? If not, I'll be the first to read it, and to thank you for it!
We're bootstrapped and profitable. Unfortunately we incorporated as a Delaware C Corp because we didn't know we wouldn't raise.
If non-VC were more normalized, like Rand thinks maybe it should be, it probably would have saved us a bunch of money and hassle from the get go. I also think the expected return as a founder is probably better if you don't shoot for the extremely unlikely event of building a billion dollar company in 5-7 years.
I'm rooting for you Rand! Btw I finally moved our blog over to a subfolder like you suggested. Keep up the awesome work, can't wait to try SparkToro.
In a nutshell, it is more complex & expensive to run a c-corp compared to, for example, a LLC. The way taxes are handled is a meaningful part of the issue.
What red tape? If it's basic accounting issues, that's true of any business. If it's c-corp specific paperwork, that takes an hour of my time once a year to submit the annual report to Delaware.
This sounds like the type of investment round that would be a much better fit for most open source companies. The way Discourse got started was very similar, except for it being a Delaware C Corp rather than LLC.
I wish there was a crowdfunding platform that made investments like these more accessible to the general public, similar to Republic.co but without that need for an exit to get a return on your investment.
As I understand it there’s nothing stopping a company from setting up a Regulation CF round on one of the crowd funding platforms like MicroVentures or SeedInvest. MicroVentures in particular seems to do deals like this for movie productions, which have a similar structure but also probable Hollywood style accounting.
I completely agree. I didn't know about how Discourse was started, but would be interested to learn more. Do you have an article or writeup to recommend to learn more?
Joe Wallin is a nice guy, and was very helpful to a previous business I worked at. Recommend reaching out to him for anyone incorporating a startup based in Seattle.
I like #3. It increases alignment of investors with the fonuders.
I do wonder what the top line valuation was for the round, aka what ownership stake does this $1.3M represent. I think that's a key clause esp when the company might pursure a lower growth but more sustainable option. If they have models it'd be interesting to discuss them for sure.
(Rand from SparkToro here) Honored that you'd think of us, but no plans to hire in the near term. We're gonna be super-conservative and try to get a product to market before we consider hiring.
It seems to make fun of people who raise money for their startups. Maximizing returns is not part of VC funded startup, tho it eventually happens on acquisition or IPO, hyper growth is.
Not everyone can raise a seed round this way. Most founders from modest background really can't raise 1m from their friend circle.
The kind of surity i see around this is only possible if you've already tested water or if you've access to some advantage.
I guess it's a product like similarweb and collects data from ISP dns resolvers, browser extensions and wifi points. Some consultants are selling this as a package now and only thing you've to add is your marketing and face to it.
It's great that he is sharing his documents, however, the chances of anyone who hasn't already raised $20M+ from VCs (and/or created popular videos for 10+ years) ever following in these footsteps are slim-to-none.
If you really don't want to raise money from outsiders, just don't raise money. Many people launch businesses with very little money. Some of us win, some of us lose. If you're in a position to raise capital from 30 "somewhat" high-profile entrepreneurs/investors, congratulations! You should probably do it!
But if you're not in that position, do it like Rand did from the beginning. Work your butt off and make things happen. Then someday (hopefully), you can post your own humble-brag on your blog.