This week, our Founder Dating featured advisor is Jack Smith, a UK transplant who now advises Coin, Survios, Trak and Grid. Jack blew into Silicon Valley in 2011 with Vungle, a mobile advertising startup he and co-founder Zain Jaffer squeezed into a batch at AngelPad. Vungle ended up raising more than $25M, and Jack followed up by co-founding Shyp, mobile app for on-demand package shipping.
This week we talked with Jack about his experience fundraising for his two startups, and then being an advisor for new companies going through the same journey:
How many times have you been directly involved with raising funds for a company? How many different companies?
I raised for Shyp and Vungle and because I founded those two, I was very hands-on. And then with companies like Coin and Servios, I was on the sidelines a bit more.
What was different about your second time fundraising (for Shyp) than your rookie round raising funds for Vungle?
Well one thing is the climate was a bit different—right now there are a lot more companies getting funding. But the main difference in my approach from Vungle to Shyp was that for Vungle we had lots of different investors who each put in small amounts. It’s kind of referred to as a “party round,” where we just had lots of people an smaller check sizes, so $100K here, $100K there. One of the challenges with that style is that when raising for Series A you don’t really have one big champion. Whereas with Shyp we raised pretty much the same amount, but one investor that was the lead and invested over $750K of that $2M. That meant that when that company went out for Series A, for example, that investor invested so much that they have a lot more on the line so they’re going to invest a lot more time helping the company because they’ve just got much more at stake. So that was one conscious difference in my approach—recognizing the value of finding a lead investor.
How would you compare these to your experience advising for Coin’s fundraising?
Coin was entirely different because it’s a hardware product. If we’re comparing the very first round of funding (so Shyp and Vungle’s seed rounds) we look at Coin’s seed round, and they were going out raising funding with a prototype that was a piece of wood with wires hanging out of it. That’s very different. Coin raised smaller amounts initially when it was getting started, because hardware is very different and it was just one guy with a piece of wood in his backpack. He was quite a genius because he didn’t have any experience in hardware engineering, he just basically taught himself—locked himself in a room over a period of about a year and now he’s basically built a computer in something the size of a credit card. But Coin did get a lead investor in the seed round as well, so one guy who kind of vouched for them and put a lot of trust in and said “Hey, I’m gonna kick things off and I believe in this.”
Over time in your experience of fundraising, does the process get easier for you?
Not really. The process doesn’t exactly get easier, but you learn to pick up on certain things, like unwritten rules you didn’t know about the first time. Then when you’re doing a bit more, you get an understanding that actually raising investment is really a game of psychology. People invest because they’re scared of missing out on something big. Lots of people will invest with their heart rather than their head (in seed stages at least). So experience helps with learning to pick up more on the emotional side of things and also core things that you should do or should not do.
It doesn’t necessarily become easier because for the company to do well you need to earn the trust of the investors, but you can get a much better sense common psychological traits in people in general. But you need to rebuild those relationships every time because different companies appeal to different investors, so you’ve got to approach different sets of investors and build new relationships with them. But there will be common threads, because humans just think about certain things in similar ways.
How do you handle getting a “no” from an investor?
The thing is that if someone’s a good investor—often they will probably not outright reject you, because they’re trying to keep their options open. They’ve probably had experience where some company seems stupid to them and then a year later is worth about $2B. What will happen is the investors will probably hedge their bets by not outright saying your idea is stupid and rejecting it, because they don’t want to look like an idiot if it turns great. Instead they’ll probably just try to let you down softly. What can be hard, especially your first time, is getting accustomed to hearing lots of “no’s.” Fundraising is kind of like pushing a boulder up a cliff; it’s really hard at the start but then once you’ve reached that peak, eventually it becomes really easy as it starts going downhill. For example let’s say you’re raising $1M, and you raise $950K, then everyone wants to invest, because you’ve already raised the amount that you need. And that will come across in your persona. When it’s at the start when you’re trying to raise $1M and you have zero, that desperation can come across because you need them.
How do you help with fundraising as an advisor, since you’re not going to pitch meetings, etc?
In those cases I did things like helping them design their pitch deck for example, or helping them with the process of making a hit list of who they want to target as investors. Advisors aren’t going in to meet the investors and do the pitch, but I’m helping more on the sidelines and maybe making introductions to investors. But it’s the founder’s job to convert. You can’t hold their hand all the way because they’ve got to build rapport and trust with those investors when they go out to meet them.
How important do you think storytelling is in the fundraising process?
It’s essential. With Coin for example, the guy just had this piece of wood with all these wires hanging out. And you’re hoping to get the investors to believe that this can turn into something bigger. If you don’t have a story (especially at that seed stage) it’s unlikely that what you’ve got today is going to be worth however much you’re asking to raise. If you think about stuff rationally, lets say there are two of you. How can you rationally justify that two people are worth $5M? It doesn’t even make sense. But if you tell a story about how you built prototypes and build up interest, people are will be buying into that story and that growth.
What’s the biggest mistake you’ve made as an entrepreneur?
Well, there are lots. The main way I learn is by making mistakes. I don’t like reading theories, I just like to do something, mess it up and then learn from that failing. So there would be lots of things I’ve completely messed up at different stages of a company. One example would be the challenge that when there’s two of you (or however many founders you’ve got at the start) you have to do everything. That includes taking out the trash, answering the door, etcetera. There are just two of you and you have to look at everything that needs to be done and just chop it down the middle. The main challenge (and what I’ve failed at previously) is that as the company scales, you need to stop doing stuff. If you’ve got 20 staff, then you can’t be micromanaging stupidly tiny details. You need to trust those people that you’re hiring because you will never scale the company if you’re trying to hold onto doing everything. As the company grows, you have to be gradually “firing yourself” from different responsibilities.
What are the 3 things that you would tell entrepreneurs are “must knows” or “must dos” about entrepreneurship or the Fundraising process?
- I think in order for you to succeed in fundraising and get a company off the ground, you must identify people who may be able to help you and build relationships with them. If you try to do something alone, that’s going to be so much harder. You can make things a lot easier by finding people who have gone through that before and learning from them. Because especially in Silicon Valley, everyone wants to help each other because they’ve all been helped before. Silicon Valley is more unique in that it’s very much around helping and like a circle of assisting. If you’re in such an environment and you don’t take advantage of that, you’re really just shooting yourself in the foot in my opinion because you’re just making it a thousand times harder for yourself.
- The strongest way to get an investor on board is to get introduced to that investor by someone that they’ve invested in before. If I just find an investor and I just send them an email out of the blue, that’s highly likely that message is just gonna end up in the trash. They kind of outsource the due diligence process to their network.
- There are people who have done what you’re doing before and you might as well meet them and learn from them. The first investor that we got in Vungle after moving to America was an angel investor. I looked at companies for advertising on mobile phones and found that at one of the largest companies, the founder had left. And I just reached out to him on Linkedin and said “Hey, we’re working on something that you might find interesting, let me know if you want to chat.” We ended up meeting and he got really excited and he became our first investor. But even if he hadn’t invested, meeting him alone would’ve been invaluable because he’s been in a similar space. You don’t have to take everything they say as gospel, but it’s kind of crazy not to at least take advantage of hearing what more experienced people have got to say.