What I Learned Raising A Million Dollars For a Startup With No Business Plan and No Financial Projections (While Drinking a Beer)

Posted on March 2, 2010
Filed Under Business, Entrepreneurship |

For years now I’ve read startup and VC blogs just like many of you. I read a ton of posts about what my business plans should say or how to do financial projections. But in the end, that stuff was always painful for me. I’ve always been more of a doer than a planner, and more of a boostrapper than a fundraiser. The thought of wasting valuable business time working on a business plan made me want to puke.

Over the last few months, as I finished the fundraising for Backupify, my perspective has changed a lot. On the one hand, I was able to raise money without a business plan or any financial projections. That felt good. On the other hand, I learned some things that changed my perspective on the fundraising process. When I go through it again for our next round, and for future startups, I will approach it much differently than I did this time. So I thought that now, while these thoughts are all still fresh in my head, it would be good to write about my experience going from a newbie to the VC scene, to the CEO of a VC backed company. If I wait too long, I know I won’t remember things correctly, so this post is about what I learned and what I would suggest to those of you going through it for the first time.

There Is No Right Way To Do It, But There Are Wrong Ways
Posts that tell you what VCs look for should be taken with a grain of salt. In my experience, they all look for different things. At best, that post tells you what that particular investor wants in a company and team. I sat in front of VCs who thought I was crazy for not having a business plan. I was asked “how can you run your business if you don’t have a written plan?” I also sat in front of VCs who said “glad you didn’t waste time writing a plan, because we wouldn’t read it anyway.” It’s really more of an art, not a science. It’s kind of like dating. What I mean by that is…

It’s Not About Convincing Them, It’s About Whether There Is A Natural Fit
I always thought the goal was to be so smart and savvy in the presentation that some skeptical VCs would be won over by my impressive arguments. It doesn’t work that way. They either like you and your idea, or they don’t. It’s like dating because your goal in dating is not to convince someone who is a bad match for you that somehow you are really a good match. That’s a recipe for divorce. It’s really about finding the person that is naturally a good match. Same way with investors.

A perfect example is to look at the questions I got after each presentation. If someone said “interesting, but why does anyone want to backup Twitter?” I knew instantly they weren’t a fit. They saw the small version of Backupify. They saw where it was, not where it could be. The people who eventually invested realized after just a few slides that it wasn’t about backing up Twitter at all.

Look For Vision
The best thing that can come from your presentation is lots of ideas generated by the potential investors. When investors start asking questions like “what if you could do X?” or “have you thought about creating a feature for Y?” that is a really good sign. It means they get it. It means they can add value. It means they are a good fit.

Moving the Needle Trumps EVERYTHING Else
I’ve been involved with startups that spent months working on a business plan to go out and raise money. And I’m not knocking plans overall. They can definitely be a great exercise in thinking through your company. But the single biggest thing you can do to impress these guys is go out and move the needle on your business every day. Mark Suster says entrepreneurs need to Just @#$% do it, and I couldn’t agree more. There are so many people who think they want to be entrepreneurs because it sounds fun to run your own company and “be your own boss” (which isn’t true anyway), one good way to weed them out is to see who can move the needle without many resources. All VCs know you could do more if you had a boatload of money, so to go in whining that “we can’t do anything because we don’t have money” is a waste of time. Figure out how to maximize what you have. Investors see all kinds of people who have day jobs, little free time, little spare cash, but big ideas. Most of those people don’t move the needle. Others figure out how to do it. Those people get funding.

At Backupify, we did whatever we could with the little cash we could scrounge up. We got free labor at times, we used whatever connections or resources we could find, we nagged people to help. At times, I felt embarrassed showing the product to people because it sucked so bad. But look, even if you have no cash, you always have time and creativity. Find a way.

When I presented at the Open Angel Forum in L.A., I told investors if they were interested they had to talk to me before 10pm (the presentations ended at 9, I think) because I was leaving to catch a redeye to Boston for a morning presentation to a VC firm. Somebody in the back yelled “I love it.” Many of these angels were in your shoes once, and they love to see you display the same suck-it-up, gritty determination that made them successful. Show them you are going to do whatever it takes. Move the needle. Eventually someone will fund you.

Practice, and Listen
I did my presentation a BUNCH of times. The first time I presented to an investor group, I had 30 minutes. I went 40 and only got through half my slides. Each time it got better. Each time I revised the slides to make them clearer. It was boring as hell, but it’s exactly what you have to do to get better. It’s the same stuff you do on the product and marketing side, just apply that mindset to your slide deck. And most importantly, listen to the feedback. Early stage investors see tons of startups, and as a result, they build great filters for what works and what doesn’t. They aren’t always right, but their experience in the meta-patterns around what you are doing may be helpful, so give it serious consideration.

Be Yourself
David Cohen commented on my drinking a beer during my OAF presentation. It’s not something I would generally recommend that you do, but for that specific event, it just fit. It’s very tempting to listen to potential investors tell you to be this way or that way, but in the end, you have to be yourself and you have to be comfortable around them. Once you get funded you have to make lots of hard decisions and the last thing you want to do is built fake rapport with investors, because that is going to lead to lousy discussions about serious problems.

The point of all this, and the reason I wanted to dump this out of my brain while it was fresh, is that many of the people who write about startups have either been it so long (or else have never been on your side of the table) that they look at it through lenses that won’t work for you. Don’t think that there is some magic bullet, some secret phrase you can say or slide deck order you can use that will make it easy to raise money. It’s never easy, not even when you have a good idea. That’s the point. That’s why so few people ever do it. That’s why the best thing you can do is to accept that and just trudge forward trying and trying and trying.

Reading about things and doing things are very very different. If you want to learn to raise money, the best thing to do is go try to raise money. It will suck. But at least now you know you can skip that business plan.

Comments

48 Responses to “What I Learned Raising A Million Dollars For a Startup With No Business Plan and No Financial Projections (While Drinking a Beer)”

  1. uberVU - social comments on March 2nd, 2010 2:43 am

    Social comments and analytics for this post…

    This post was mentioned on Twitter by robmay: What I Learned Raising A Million Dollars With No Business Plan and No Financial Projections (While Drinking a Beer) http://bit.ly/bphbwT...

  2. Sacca on March 2nd, 2010 2:49 am

    Right on, Rob. Glad to be working with you.

  3. derekadesso on March 2nd, 2010 3:32 am

    Rob, great read. We’re working our way through this fundraising process for the first time and its great to hear your perspective. Especially convincing vs. natural fit. I couldn’t agree more.

    Good luck with everything

  4. Greg on March 2nd, 2010 3:34 am

    “But look, even if you have no cash, you always have time and creativity.”

    That is spot on.

  5. ChrisBergman on March 2nd, 2010 3:45 am

    Great brain dump, son. Keep it gritty.

  6. Charlie on March 2nd, 2010 4:28 am

    Good thing drinking a beer wasn’t an investor criteria!

  7. Danny M. on March 2nd, 2010 4:42 am

    Great post Rob. Appreciate you sharing your experience.

  8. Charly Simmons on March 2nd, 2010 5:02 am

    Thanks for demystifying this process. It’s good to know that something will suck going into it. It helps temper your resolve and sharpen the ax before trudging into the big green forest. Congratulations!

  9. mike dougherty on March 2nd, 2010 5:17 am

    nice post - very wise. congrats!

  10. RyanBuke on March 2nd, 2010 6:17 am

    Great post! I can relate to many of these experiences myself :)

  11. Paul Johnson on March 2nd, 2010 12:34 pm

    Thank you very much for this post Rob. Finally someone with balls tells it how it really is.

    Time to get out there…

  12. Roger Ehrenberg on March 2nd, 2010 1:35 pm

    Rob,

    Firstly, congratulations on getting funded. You are a good man and have worked hard for it. Secondly, terrific, from-the-gut advice. De-bunks a number of popular myths and will be insanely helpful to many.

    Best,

    Roger

  13. Leigh Scott on March 2nd, 2010 1:37 pm

    At the end of the day you are selling yourself…. to sell your product. “Dating’ is creating a relationship and “did you leave a lasting positive impression?” Sales.

  14. thinkVAULTer on March 2nd, 2010 3:28 pm

    Thanks! I love straight talk. I’ve already quoted from this on the thinkVAULT FB Fan Page.
    http://www.facebook.com/?ref=home#!/pages/Indianapolis-IN/thinkVAULT/170129609890

  15. Mike Stemple on March 2nd, 2010 3:36 pm

    Great post Rob. Spot on.

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  17. Ben on March 2nd, 2010 6:11 pm

    I am still in the ‘fail’ stage of fund raising, but hey, we are at it non-stop. We never stop building. In the past using this approach, we almost sold a company to Google, failed, and now working on our next venture. We are in the look for cash, while at-the-same-time, we continue to find creative ways to build our cool venture. Sometimes I even think to myself, hey maybe we will finish and break out even before someone will have the opportunity to invest. It’s a roller coaster, day by day.

    Nice write up.

  18. Milton Hasselbury on March 2nd, 2010 9:35 pm

    Very inspiring thanks on a day when I try to scrape a few dollars together.

  19. Chris Guthrie on March 3rd, 2010 7:00 am

    Great post. I really loved your summary about how there is no real magic way to do it. I also agree building a business plan is stupid if that’s not how you get things done. I too simply have an idea in my head on how I can make money and I set about taking the steps to do that.

    Chris Guthrie

  20. Mike on March 4th, 2010 2:26 pm

    Rob,

    Congratulations! Couldn’t have happened to a more worthy guy. I very much appreciate the advice, too.

    Mike

  21. John W. McKenna on March 4th, 2010 5:52 pm

    Rob,

    First, congratulations on moving the needle. Well done… While reading this post I was reminded of a post you did on you old bolg about your first job at the burger place. By doing what others won’t do, you are taking the next step that puts you that much further ahead. In my last job, we had a saying, JMAFD, “Just Make A F$*king Decision”. Words to live by…

    Take care…

    John

  22. Backupifys CEO On Wooing Investors: “Its Like Dating” - www.Korallenkacke.com on March 4th, 2010 10:01 pm

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  24. Justin Thiele on March 5th, 2010 1:31 am

    Great post, Rob. I really appreciate the perspective of people who have just gone through it. The part that really struck a chord with me was this:

    “It’s Not About Convincing Them, It’s About Whether There Is A Natural Fit”

    Being an first time entrepreneur, it’s hard to get out of the mindset of convincing people.

    Great insight.

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  26. Venugopal on March 5th, 2010 2:03 am

    Great post Rob.

    Congratulations on raising the fund !!!

    Cheers,

    Venu.

  27. Chris W. on March 5th, 2010 2:23 am

    Rob,
    Thanks for the post. Writing a plan sucks. Making it happen is What excites me.

  28. Patrick Giblin on March 5th, 2010 2:24 am

    Great POV and insight into the “never give UP!” mentality that this takes and many of us Entrepreneurs struggle with every day. It seems to be such an impossible break through to the right rooms and a good “date” with people who can fund. Mark Suster does make great points and in a brief meeting set the record straight as to what I had to do to get to the next step and it is very much what you have done to gain success in the first step. Congrats and thanks for sharing fresh memories of the struggles. Too often people “forget” what they learned to get there and thus those behind get no real direction. Also people spend too much time “protecting” the process like it is the secret to the Rubik’s Cube…We should all be helping each other find the right partners and investors and not looking at it as a limited pool. Good ideas and opportunities get funded with tenacity and heart. Thanks a LOT for sharing

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  30. Karen on March 5th, 2010 4:25 am

    Love the imagery of the needle and the nudge, and the investor dance-as-date. Sometimes I feel I’m just chasing my own tail and it’s great to hear of someone’s success, congrats!

  31. Pemo Theodore on March 5th, 2010 5:09 am

    Rob great advice, as a Matchmaker I agree that if you are not comfortable & dont have a good fit with investors then its not a match, just like dating! Also this will support you in getting into the flow as well, which means you will present at your best. Even in dating if you arrive looking & acting sloppy it won’t impress even a great match. If you get into the flow on a date you also have more chance of success in the match! Good work getting your first round of funding!

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  35. Peter Hojman on March 5th, 2010 7:33 am

    Thank you for your excellent post. It´s is so true and att applies to all businessideas all over the world.

    Regards Peter /Sweden

  36. JS Cournoyer on March 5th, 2010 8:45 am

    Hey Rob,

    Great post, I love your style and the way you think. I would have loved to meet you before and get a chance to invest. I give entrepreneurs the same advice: have a vision, be willing to listen but make your own decisions and get things done.

    Great luck with the business.

    Cheers,

    JS

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  39. startupbug.com on March 5th, 2010 5:16 pm

    What I Learned Raising A Million Dollars For a Startup With No Business Plan and No Financial Projections…

    For years now I’ve read startup and VC blogs just like many of you. I read a ton of posts about what my business plans should say or how to do financial projections. But in the end, that stuff was always painful for me. I’ve always been more of a d…

  40. Backupify’s CEO On Wooing Investors: "It’s Like Dating" on March 5th, 2010 6:43 pm

    [...] this week, CEO Rob May posted his take on the process of raising funding from VCs, which he likens to dating. According to May, pitching [...]

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  42. Tommy Jaye on March 6th, 2010 7:38 pm

    Nice read Rob….Let’s be real here, like in real entrepreneurs don’t write business plans, at least not until they positively, absolutely need funding. It should be a measure of last resort.

    BP’s do offer some insight into a given business and does help the “team” to gain a better understanding of what they’re trying to do. But that’s about all it does. Why? BP’s are static, highly perishable & more often than not, oversell content via miscalculated optimism.

    Better to concentrate on a well rounded market-sensitive “business model” that connects with a fine-tuned marketing plan that is further complimented by a customer-based financial prototype.

    These tools clearly out-benefit any possible purpose that a BP can produce including trading one’s equity for over-priced investment funding & the loss of the entrepreneur’s leadership.

    Thanks, Tommy Jaye

  43. Dr. Jochen L. Leidner on March 6th, 2010 10:22 pm

    Thanks for sharing this experience report.

    It’s good to keep in mind that a business plan is only a means to an end. A lot of entrepreneurship training puts too much emphasis on “the” canonical way of how to pitch; in contrast, I think your dating analogy hits the nail on the head.

    One thing you do have to show (also to yourself) is that your business has a lever, i.e. how many sales you need to bring in to break even, what your margin is and that your cash flow never hits the x axis…

    And because talking to angels/VCs is a time consuming process, but not a process that guarantees success, it’s important to put the focus on building the business as the primary activity and the VC talk as a secondary activity, if at all possible.

  44. Brent Norris on March 7th, 2010 6:37 am

    Mahalo Rob for the insight. We’ve / I’ve been doing exactly what you’re recommending for the last couple years. We continue to grow with some sponsorships of around 1k each time. We made local deals with government and have some great letters. We also just won an SBA homebased biz of the year award at the state level and on and on and on…

    My question is this…

    Should I keep doing what I’m doing and “hope” someone will recognize, or is there a way to get more folks to notice our efforts and would this speed up the process so we can serve more people?

    Thanks again, super insightful.

  45. Drew Knapp on March 7th, 2010 2:47 pm

    Cool man, awesome! Congratulations on your success!
    Thank you for sharing this with us. It confirms my belief too. It’s just unbelievably grueling to go through it. Worse than I ever imagined. I guess when you finally get there, that beer tastes really good.

  46. Backupify’s CEO On Wooing Investors: "It’s Like Dating" - Programming Blog on March 7th, 2010 7:26 pm

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  47. Ahmet Bulut on March 9th, 2010 9:07 am

    Great read, like the natural fit idea to raising money. It is a relationship after all, even if it is for pure business. Thanks Rob!

  48. Ryan Clarke on March 9th, 2010 6:33 pm

    Rob,
    Congratulations on following your convictions and on being yourself. Thank you for pulling back the curtains on what the process was like for you. I’m eager to absorb the rest of your posts since I am an emerging entrepreneur with no tech background but serious “hustle” and domain expertise.

    Being new to this space (web startups) and its processes have been an education for my partner and I. Everyone has a formula, or an opinion, or both. Some share, some don’t. No matter what we will keep keepin’ on. Thanks for the fuel.

    Ryan

  • About Rob

    Rob is co-founder of Backupify.com. He likes value investing, the Rolling Stones, college basketball, artificial intelligence, economic history and people who think independently.