I joined Mobivox in January of this year to help raise our 2nd round of VC funding. We closed our $11 million round in July. I am very pleased to welcome IDG Ventures teams from Boston, China and Vietnam to Mobivox’s investor group. (Previous funders include Brightspark and Skypoint.) That we were able to raise money from funds in three different countries on two continents, all in one round, speaks to the leverage that a global strategy can bring to your business. We know now that Mobivox’s global scope—our plan is to build the World’s largest community of mobile users—made a difference in the success and speed of our funding prospects. But there are other tips to be plucked from the roadmap we used, too.
With this in mind, I’ve broken down the process we followed, below, plus some of the other lessons in it for founders seeking professional financing now.
January – February: Initial pitches. Introduce the VC community to Mobivox. Hone our pitch.
March: Launch an alpha service. No investor would seriously look at us till we had a product to give them.
April: Meet our new lead-investor prospect. Undergo pre-term sheet due diligence
May: Receive term sheet. Launch our public beta.
June: Documents, IP due diligence
Beginning-to-end the process took a little over 6 months. It would have been faster if we had been in the market with the Mobivox service first, but the pace really picked up after when we launched our public beta in May.
One important thing to take away from the timeline is that, with the exception of January and February, we managed to accomplish one significant milestone in the funding process each month. Try to do this yourselves; all successful deals require momentum to get to the finish line.
1) Target : We only approached well-funded VCs with a focus and track record in mobility, IP communications and/or consumer plays. The funds we approached wanted to hear our story.
2) Think big: When we already had a lead, our CEO wanted to expand the round to get partners in Asia. I thought he was crazy. Today we have our lead and the Asian partners.
3) Be prepared: We went through some pretty serious due diligence, modeling multiple scenarios for our potential VCs again and again over the course of six weeks. They really tested our understanding of the opportunity.
4) You lead the document process: Don’t rely on your lead VC to drive the deal to close. They have too many other things going on. You need to drive the time line. Be due diligence ready before the term sheet and drive the process with the various lawyers.
5) Look for chemistry: Despite the grilling we got during due diligence, we really enjoyed our time with the partners of our lead investor. If you don’t have good chemistry on Day 1, you sure won’t when things take a wrong turn.
6) Spend time with all your stakeholders, not just your new prospects: Founders, previous investors, employees, your new lead investor – they all have different perspectives on a potential deal. If things go well with your company, your relationships with them will last for some time, so it’s important to dedicate serious time to communicating the new terms to them. We had previous investors from Brightspark and Skypoint. Their input on the round was valuable.
I’m sure there are plenty of other lessons. I’ve been doing this for eight years and I still learn something new on each deal. I’d be eager to hear what funding tips other founders might have to share.
Mark MacLeod is currently the CFO of Mobivox, his fourth venture-backed startup. His previously companies include Silanis (AIM: SNS), Hexago, and Terrascale, which was sold to Rackable Systems (NASDAQ: RACK).