We announced our first round of funding for Alice.com today (full release here).
A few takeaways from our fundraising efforts with Alice:
We Were Able to Raise a Large Round with Common Stock
Brian and I are really pleased to have raised over $4 million dollars in common stock financing. We were able to do this by utilizing a couple of great local angel funds and a number of individual angel investors, many of which also invested in us at Jellyfish.com back in 2006-07. I chalk up our success in raising large rounds of angel money (here and at Jellyfish) to the following three things, in order of importance: 1) a track record of success; 2) a disruptive model and clear path for executing on the opportunity; and, 3) a passionate team that effectively communicates the business. If you don’t have #1, the other two become even more important.
We Avoided Venture Capital, For Now
This was a big debate in the company, as we had several VC funds at the table. Alice.com is a big model, and we’ll be looking for subsequent investment to take advantage of our opportunity. So why not get hooked up with a solid VC fund from the outset? It really came down to weighing the negatives of granting VC preferred stock rights and other controls to the positives of getting a long term capital partner with lots of “dry power” to fund the future growth. We opted to stay with common stock, a diverse cap table, and maximum options to pick the right partner for our next round. As one Venture Capitalist put it to us, “if you can get the funding you need with a common round, why wouldn’t you?” I’d be very curious to have readers weigh in on this decision. I still think it was the correct one, but arguments can certainly be made against it.
The Sky Isn’t Falling, But It Is Tough Out There.
We started raising this round on August 28th, before the financial crisis and stock market meltdown hit full steam. I’m happy to report that although the round took longer to complete than we anticipated, we did hit our goal fundraising range. Our biggest issue was not getting turned down from people; it was investors cutting back on the amount they ultimately invested. Bottom line is that the company was still able to get the funding needed, even in this tough environment. I hope others are finding the same thing!
I’m Curious to See Whether the Slow Economy Helps Our Coverage
I’ve heard several commentators mention that one benefit of starting a company in a recession is that there aren’t as many competitors, and there isn’t as much start-up noise to compete against. This will be a first test for Alice.com of that claim. We don’t have a PR firm (yet), so our outreach on this funding news was somewhat limited. I’m very interested to see whether the economic downturn and lack of activity in the start-up world is one element of our coverage. I’ll do a follow up post on what we did to promote the release and a summary of the coverage we get soon.
We Are Poised to Launch in March 2009.
It feels great to get the funding completed and turn full attention back to executing on the business. We’ll be doing a closed beta in January and are poised to launch the first Alice.com offering in March 2009. The pressure to have a successful launch is intense, especially when you have past successes, but that is part of the allure of a start-up.