How we skipped the VCs, crowdfunded our Series A — and raised nearly $2M online

Earlier this year, our Y Combinator startup SendHub tried to raise its Series A. Despite monthly revenue in the mid-five figures and a 25 percent monthly growth rate, we were shunned by over 50 VCs. So we turned to crowdfunding platforms to raise a successful round — an option that was simply unavailable even a year ago. Here’s how it worked for us.

We got our valuation from online funding platforms

Without a VC term sheet, it’s hard to know where the market will value the company. Set your valuation wrong and the consequences can be serious: If it’s too high, you won’t get enough interest from investors; if it’s too low, you might not be able to get all the capital you need. The best way to set the valuation correctly is to get a trusted third party involved. The new breed of curated online funding platforms is great for this, because they have internal panels of investors to help you pin down a good valuation.

Curated platforms like Fundersclub, Microventures and WeFunder act as filters for their captive audience of investors: You submit an application, they review it with their investment panels and give you feedback, and if they want to list your company, you’ll get a valuation too. We chose Fundersclub because its companies historically go on to raise strong A rounds — for example: Instacart (Sequoia), Coinbase (USV) and Goldbely (Intel Capital). And since Fundersclub is a fellow Y Combinator company, it was easy to get in touch. In the end we raised over $750,000 from Fundersclub and Angellist’s online fund, with Microventures investing in SendHub directly. The money from Fundersclub arrived in time to save our company.

Use momentum; create scarcity

After talking to over 50 VCs in search of a lead investor, we finally got one yes — but the check wasn’t large enough to provide more than a bridge. However, the “yes” gave us momentum, and when fundraising that can be all you need to turn a bad situation around.

We decided we didn’t want to take a bridge round. Instead, we wanted to get as much capital together as we could and go back to work. Angellist, which is like a LinkedIn (s LNKD) for startups, has by far the largest pool of investors and can be one of the best sources of capital, especially if you have some momentum. Plus, it’s even better for startups now thanks to a syndicate program that can dramatically increase the amount of money a single investor brings as other investors automatically buy in too.

Scarcity, or investors’ fear of not being able invest in your company, is an important asset in any fundraising process. We set a low and very achievable target for our fundraising, then increased the round size as it filled up. Each time a new investor committed, we asked them to post about us on Angellist, building more buzz.

Talk to everyone and use automated tools

Raising a large amount of money via small checks requires an awful lot of communication. There is no way around this: Almost everyone writing checks for $25,000 and over will want to chat on the phone with you, at the very least. It’s tempting to screen investors based on their previous experience and check size. However, we chose not to screen until after initial discussions, and although the time cost was high, we got some large checks from investors with little background in startups. (That said, we definitely had to deal with some time wasters.)

In order to send a personalized note to every one of the roughly 1,000 investors who expressed even a modicum of interest, we used email automation tools like Tout and Boomerang. We created an email template for almost every situation: initial outreach, diligence materials, common questions and even one for saying no to a meeting. This saved enormous amounts of time and allowed us to send upwards of 3,000 emails within six weeks.

We also put lots of materials online: product videos, screenshots, a road map and our fundraising deck. Some startups worry about their pitch deck being viewed too widely, but we felt there were more pressing matters to address. A comprehensive and regularly updated profile is a great way to reduce inbound questions, while generating more interest.

Competition is coming

We ultimately raised nearly $2 million online from the crowd — and it wasn’t a simple task. But it’s getting easier each day as the tools improve. While these new innovations are a significant threat to the traditional VC-based series A, their openness will quickly create similar levels of competition for companies. Online tools may be a more efficient approach to fundraising than traipsing up and down Sand Hill Road, but they still require your full attention. If you decide to raise online, expect it to absorb most of your time — and embrace the grind.

Ash Rust is the cofounder and CEO of SendHub, a cloud PBX startup. Follow him on Twitter @AshRust.