When I first launched my company, 7AM (which wasn’t called that at all, initially), I was engulfed in the Silicon Valley, venture capital investment hype. This founder had just closed a $1 million seed round, that founder just secured $14 million in a Series A. It was like the gold rush was happening all over again, only this time, I was living in it.
My journey into the entrepreneurship tech space started at Draper University, a seven-week boot camp built from the unique, freethinking mind of Tim Draper–a third-generation venture capitalist with a deep-rooted family legacy in Silicon Valley. His investments included Skype, Hotmail, Tesla, SpaceX, and many others. I had just recently transitioned from the entertainment industry, and I was so enthralled by the idea of starting a company. This would feed my creativity the same way directing commercials and music videos had. The only difference was that as an entrepreneur, it would be my company, not a project on behalf of someone else–I owned it.
Well, as luck would have it, (I actually don’t believe in “luck”–I feel it’s really preparation meets opportunity–but we’ll call it “luck” for the sake of digestibility), when the program was over, I received an investment from Draper himself. He believed in me and my company! That was all the validation that I needed, or so I thought. After my investment came through, because of the Draper brand, I pretty much had access to whoever I wanted to talk to in Silicon Valley. I took meetings with top investors, pitched the product, and quickly realized that Draper’s validation was, indeed, not enough.
Yeah, I had a “minimum viable product,” which, at that point, was more of a prototype. However, it hadn’t actually been validated by the market. You see, when product is in its early stages, it’s more than likely that the investor invested because he believes in you, the entrepreneur. The product is still, technically, a hope and a dream and even these are very rare cases.
Mind you, I’d spent seven weeks with Draper, so he really got to know me. Whereas, I was spending sometimes less than five minutes with these other investors. So, although I came by way of Draper’s recommendation, I was still pretty unproven and a very high investment risk. The best way for me to convince them was to actually build the product and generate traction with users. So, I stopped pitching and started building. I built the entire platform, front and back-end, using WordPress as a stack, pushed it out, and waited….and waited….and waited.
I had no customers–like none. I could not figure out, for the life of me, how to market my product. Who was my customer? Who was I trying to target? My demographic was too broad, which made my messaging off. My social media wasn’t growing. My site, which I had also turned into an app, was literally just taking up internet space, and I was burning through capital trying to figure it all out.Â
It was time to reevaluate. I went back to the drawing board and nailed down my customer’s persona. Who were they, where did they live, what did they like to do? How did they navigate through life, and more importantly, how do they navigate through the web? Do they live on mobile, do they like tablets, do they want lots of content or small bite-sized pieces. I had to become laser-focused.
Once I had the answer through tons of testing (that’s another story for another time), I started to target customers. Instead of using all of the social media platforms, I focused on the one that was giving 7AM the most engagement, Instagram. All of a sudden, the site was growing, I had a lot more contributors, events were popping up, people were asking how to get involved, and I was off to the races.
We are still a long way out, but now, I have investors asking me about the product–instead of me going to them.
I don’t know when or if I will go back to raising venture capital. In my opinion, if your business isn’t capital intensive, and you can fund it another way, do it. You retain ownership, creative control and the pressure is off. One of my competitors, who will remain nameless, started his company with $700 and a laptop and has generated over $100 Million in revenue and never raised VC money.
The truth is, when you are raising capital, it’s not just about you anymore, it’s about you and your investors–they want to make money. After all, that’s why they invested. At some point, they are going to be looking for an exit. Do they sell, do you sell, who acquires the business, does it IPO?
I think that’s way too much pressure when you are in the early stages of building a business. Once 7AM is established, if venture dollars become necessary, I will reassess and decide if I want to bark up that tree again. But, for now, I will continue to bootstrap and focus on building a great company.