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.
November 11th, 2008 at 8:06 am
[...] shopping service Jellyfish to Microsoft (which it later used to create Live Search Cashback), have raised $4.3 million for their new startup, [...]
November 11th, 2008 at 8:15 am
Congrats on your first round of funding! Looking forward to seeing what you do to shake up the CPG space
November 11th, 2008 at 8:30 am
[...] shopping service Jellyfish to Microsoft (which it later used to create Live Search Cashback), have raised $4.3 million for their new startup, [...]
November 11th, 2008 at 8:33 am
[...] shopping service Jellyfish to Microsoft (which it later used to create Live Search Cashback), have raised $4.3 million for their new startup, [...]
November 11th, 2008 at 8:37 am
[...] shopping service Jellyfish to Microsoft (which it later used to create Live Search Cashback), have raised $4.3 million for their new startup, [...]
November 11th, 2008 at 9:29 am
Congrats guys – it is tough out there, certainly. Well earned and good luck.
Adam
November 11th, 2008 at 9:31 am
Congratulations. It is a very impressive achievement in this economy.
But, I would never turn down money, especially now. If you could have raised a $10 million round now, I would have raised it. Preferred, common, whatever. I suspect that the end game for this website is to be acquired by WalMart or Amazon or Target or someone like that. (WalMart’s website has always been disappointing.) I also suspect the goal is to be acquired for hundreds of millions of dollars. Selling preferred stock now won’t significantly diminish the founders take in the long run.
You guys have sizable personal net worths, so you are probably less concerned about it, but for entrepreneurs who don’t, NEVER TURN DOWN MONEY.
November 11th, 2008 at 10:40 am
Congrats from Germany! TS
November 11th, 2008 at 11:40 am
Great job! This blog has been an absolute treasure…to be able to follow a start up company like this is really a great read. It’s great to have this kind of exposure for the city of Madison as well. Looking forward to the launch.
November 11th, 2008 at 12:21 pm
Well, well… Congratulations Brian and Mark!
November 11th, 2008 at 12:30 pm
[...] ?????????2????????????????????????????????????????????????Jellyfish????Live Search Cashback?????????????????10???????3???????????Brian Wiegand?Mark McGuire?2?????????????Alice.com??$4.3M?430????????????? [...]
November 11th, 2008 at 12:39 pm
Congrats and well done. Tough to say whether VC $$ is the way to go at this point, but I would be more inclined to review the run-rate for the next 6-18 months and base your analysis 90% on those numbers -worst case as well as best case.
What would be a drag is to have the “success- disaster” scenario, but as long as the technical team is strong and knows what they are doing (and you can pay them too..), this can be mitigated in most cases..
I would avoid VC funding for as long as possible. While I would agree to a point with @ G, I have seen way too many startups beholden to VCs of late where many good people were forced to get let go due to the edict of the VC-based BOD.
Many of those who didn’t take that $$ are now hiring- at least in Silicon Valley..
Trust your instincts- they have served you well so far…:-)
Good luck on the launch and i wish you success-
DD
November 11th, 2008 at 1:27 pm
It all sounds great! My question would be how are the ethical issues of good wages, job security, health care, etc. being provided for for the folks who do the warehouse labor? As a strong opponet of the Wal-Mart’s of the world ,who don’t provide for employees with living wages, health care etc. How do you propose to treat employees from the top all the way down?
Thanks!
November 11th, 2008 at 3:31 pm
Thanks so much for the comments everyone. It is always fun to announce a new company. As to the funding raising discussion, I agree it was a tough call. Cash is king, but the trick is to try to raise the minimum amount you need (with some risk cushion) in order to hit some important milestones that justify a step up in valuation for that next funding event. We feel pretty good that we were able to do that here, and keep our options completely open for the next round. The biggest risk is that the economy continues to tank and start-up funding dries up, at which point we will all be in tough shape. If we hit our milestones, our strategy should play out nicely (I hope!).
November 11th, 2008 at 3:36 pm
@Martha, thanks also for your questions on the WalMart comparison. We aren’t releasing any details on our business at this point, but we have always tried to pay people a fair wage and have always provided health insurance for our employees. I agree with you that these are very important issues.
November 11th, 2008 at 8:15 pm
[...] shopping service Jellyfish to Microsoft (which it later used to create Live Search Cashback), have raised $4.3 million for their new startup, [...]
November 12th, 2008 at 5:46 am
Congratulations, guys, and thanks for sharing the great news! I have to believe in order to have raised this amount of money in today’s economy you’ve developed a strong, compelling business case loaded with potential customer value. I’d be extremely interested in your thoughts on the Alice.com business case, in general, and what information you believe is important to include in every business case.
Times have changed in the business world and so go the way entrepreneurs need to sell their ideas and business propositions. I appreciate any advice or comments you feel comfortable sharing.
Best of luck and high scores! (Bowling reference…)
Brad in Milwaukee
November 12th, 2008 at 1:43 pm
You guys are awsome I have so enjoyed watching your progress along the way. I also liked you comment to @martha-the people at Jellyfish certainly seems happy and I’m sure your new employees will be also. Congrats you guys and best of luck
November 13th, 2008 at 1:36 am
Congrats on the funding. How do you guys do it with such rapid repetition? Do you outsource your software development? I was part of the founding team that created the first and still largest student-run venture fund at $20M and we have achieved two billion dollar IPOs. I’d like to get in touch with you guys and figure out how you guys work your magic.
November 13th, 2008 at 4:30 pm
You two never cease to amaze me with your business acumen.
As a former employee, I wouldn’t hesitate one bit in saying that Brian and Mark offer the best working environment I’ve ever experienced. You should feel LUCKY if you have a chance to work with them! No doubts that they will continue to treat their new and future employees just as well.
Congrats again and good luck!
November 14th, 2008 at 4:09 pm
Good luck!
Mark, I am looking forward to listening to your pitch next Wednesday at UW
November 18th, 2008 at 8:35 am
As a former customer, I am looking forward to the next installment of Mark & Brian.
Good luck guys in all you endeavors.
November 26th, 2008 at 4:12 am
You guys are a great success story you should be profiled on youngentrepreneur.com
January 29th, 2009 at 6:51 pm
I wish I could make that much cash one day…