How We Raised $20M for Our Startup in the Middle of a Pandemic.

If you’re an entrepreneur, you wear a lot of hats. Chief financial officer, marketer, hiring manager–to name a few. But the one hat that both my co-founder, Adam Jackson, and I loathe the most is the “fundraiser” hat. 

Eight companies later and more than $155 million dollars raised between us, we still hate the idea of asking for money, but we’ve gotten pretty good at it. 

That’s why we decided to use this article to open-source the most valuable lessons we’ve picked up along the way. Some of these lessons come from our own successes (and failures) and others come from leading fundraisers and investors we’ve been privileged enough to learn from over the years.

We’ll give you a play-by-play of how we found the right investors and raised $20 million in the middle of a pandemic. Then when you’re ready, we’ll show you the framework we followed to build a winning pitch deck. 

Whether you’re a seasoned entrepreneur or just entering the fundraising stage, our hope is that this article will transform the way you talk about who you are, what you do, and the unique value you can bring to the marketplace.

Choosing the right investors.

The goal of fundraising is just to get fully funded, right? Not exactly. 

While securing funding is a part of every founder’s journey, the truth is, money can only get you so far. Instead, you should focus on finding the right investors. The right investor can give you immediate access to the insight, knowledge, and network you need to fast-track your growth–things that would normally take you years to accumulate on your own. 

So how do you know which investors are best for you? 

To figure that out, Adam and I listed out the top strategic values we thought would help us the most in the next stage of our business. 

For us, our investors needed to be: 

1. Geographically strategic. Our startup, Braintrust, is a global network of talent and enterprises. It made sense for us for our investors to reflect those same values.
2. Token economics and blockchain experts. In order to build a new type of network with new ownership and incentive structures, we wanted to work with other experts in the field.
3. Able to help with enterprise adoption. We knew we needed to build strategic alliances if we wanted to win over more enterprises in the months ahead. 

Chances are, you don’t just need funding to get your business off the ground. You need key partners, mentors, and advisors who can help you realize your full potential. 

Don’t set those priorities aside when you start fundraising. Use them to help guide you to the right investors. This tactic won’t just help simplify your search. In a sea of founders asking for money, it will help you stand out from the crowd by showing investors that you’re being more strategic in your approach. 

When to Ask for Money

Getting access to the funding you need is all about timing and if you wait until you actually need the money, you might be in for a rude awakening. 

Adam and I raised $20 million in the middle of a pandemic and it wasn’t because we were broke. By the time we were on a Zoom call with investors, we still had more than half of our seed capital sitting in the bank, over 30 months of runway, and a path to breakeven by the following year. We were in a strong position. 

So why were we fundraising? 

It was simple. Momentum, milestones, and market knowledge. Here’s what we mean by that. 

Principle One: Momentum  

Imagine two founders walk into a room. 

Founder one is out of money and needs to secure their next round of funding as soon as possible. They’re exhausted from the grind of fundraising and the most recent rounds of rejections and critique took a toll on their mental health. Their team is starting to get nervous and some are getting ready to jump ship. It’s do-or-die. 

Founder two walks into the room with confidence. They have plenty of money in the bank and their team is still riding high from some of their recent wins. As a result, they’re able to pitch a compelling narrative to the room full of investors, knowing that if they say “no”, they still have plenty of time to ask others. And because they’re not just chasing quick money, they’re able to have a more meaningful conversation with investors. In other words, they get to interview prospective investors just as much as the investors are interviewing them.  

Which founder would you rather be? 

It’s not a trick-question but most founders end up being like the first one. That’s because they make the mistake of thinking that need is the most important qualifier for raising money and as a result, they miss out on millions of dollars in funding each year. 

When it comes to fundraising, momentum–not need–is the most important qualifier. 

Before our most recent round of funding, Adam and I felt good for a few reasons: 

• While COVID-19 was causing other startups to hit pause, we were thriving due to the massive shift toward distributed teams. What originally looked like a huge threat ended up putting the future of our startup into overdrive. 
• We were in the middle of a massive influx of enterprise demand. Our recent publications in the New York Times, Bloomberg, Yahoo Finance, Business Insider, and other major outlets allowed us to add major clients like Stanley Black and Decker, Porsche, Coursera, Bank of America, and dozens of others.
• The waiting list to join our talent platform surged to more than 40,000 with no marketing spend. 
• We were consistently onboarding 1-2 enterprises a week with signs of organic growth. 
• We had inbound interest from outside firms and customers trying to pre-empt a Series A. 
• We had 30+ months of runway. 

While others may have celebrated this momentum and turned on auto-pilot, we went out and used it to raise another $26 million in funding. 

Principle Two: Milestones 

Every founder’s idea is grounded in a belief. 

For Adam and me, our belief was that the traditional web 2.0 networks that thrived off of huge fees while concentrating ownership to investors would soon be a thing of the past. In their place would come new web 3.0 networks that were user-owned, thereby allowing them to grow faster and become more valuable. 

That’s when we came up with the idea for Braintrust, the world’s first user-owned network that connected leading enterprises with top tech talent. Since this was a new concept, we needed to figure out which hypotheses we wanted to test first and then identify the milestones we would need to reach in order to know whether or not we were on the right rack. Once our milestones were established, we put our idea to the test. 

Here is the first round of requirements we came up with:  

Essential KPIs

• Reach a Growth Rate of 10-20% (GSV month over month)
• Enlist 10 enterprise logos with current spend and potential
• Showing some account expansion ability (perhaps cohorts?)
• CAC: LTV rate over 3
• NPS (It’s early but we wanted to have as many testimonials as possible.) 
• Talent earnings on the platform need to be more than 20% elsewhere
• Clients must save more than 20% on our platform 
• Burn (This was to show that we were profitable on our seed round.)
• Referral engine driving client signups and talent signups 

Non-Essential KPIs

• Fill Rate/Liquidity over 40%

Here’s how we ended up doing by March 2020: 

• Reached a Growth Rate of 30-40% (GSV month over month)
• Enlisted 25 large enterprise logos with 100% retention and negative churn
• Increased fill rates to 60%
• CAC: LTV rates were 1:4 
• The talent was earning 30% more than on any other platform
• Clients were saving up to 80% on our platform  
• Received 12M impressions in one month from talent posting about Braintrust on social media and earning BTRST 
• 30% of our enterprise clients were coming in via our connector program, where people earn BTRST based on the clients they refer
• Secured a path to profitability on our seed round 
• Increased our talent waitlist to 40,000 via referrals incentivized by earning BTRST

Our metrics showed our hypotheses were correct and when we passed each one of our milestones, we knew we had the momentum we needed. Now, it was time to go out and get the additional resources we needed to turn the flywheel even faster.

Principle 3: Market Knowledge

Over the next 18 months, we developed the right go-to-market plan and a clear view of the product and team we needed to build in order to succeed. At that time, we had accomplished everything to-date with just seven full-time employees (and an enormous talent network). As we entered the expansion phase, we knew we needed to build out our core team and hire key executives to help take us to the next level. 

While we planned to double the core team, the premise of building a user owned network is that many of the essential functions to run and maintain the network are done by the community vs. inhouse teams. The software plus the Braintrust token incentives gave us everything we needed to grow with a very lean core team and a giant community.

Once it was clear that we met all three criteria, there was no time to lose. 

Adam and I set an ambitious six-week target for wrapping up this next round of funding. Traditionally, August and September are the worst months to fundraise as most investors are on vacation but due to COVID-19, they were all at home–eager to get back to work. 

Here was our 6-week plan of action: 

Week One

1. Create two versions of the deck. The first deck was a teaser and the second was a full-deck for presenting virtually or in-person. 
2. Write a blurb. This gave our investors something they can easily share. (See our full notes here)
3. Create a target investor list. We started by identifying the partners we wanted to work with and then we came up with a plan to meet them. 
4. Conduct friendly scrimmages with existing investors and supporters. This helped us gather feedback on the narrative and elements that we were missing. 
5. Make a turn on the original deck and materials. We learned from the feedback we received and made another turn on the pitch deck. 

Week Two

1. Schedule 15 meetings with potential investors. We showed up with our latest pitch deck and got ready to take notes. 
2. Gather notes, questions, and feedback. We used these meetings as an opportunity to hone our message and narrative. Our rule of thumb is that if we hear the same feedback three times, it’s a trend, and we should adjust accordingly.
3. Ask for references and referrals. We find that the best way to add to your potential investor list is to ask your existing or potential investors. In our case, we were looking for investors that had either deep marketplace experience or deep blockchain experience. Our plan was to bring together the best of both worlds.
4. Secure commitments. We got commitments from existing investors to fill out as much of the next round as we can. This reduced the amount we needed to raise from outside firms.

Week Three

1. Schedule more meetings. We started by looking for new potential investors that could either lead or follow in the round. 
2. Get your first “no’s” and “not now’s”. It was important for us to understand why investors walked away. The major reasons investors passed on Braintrust were: 
1. “We don’t get crypto/tokens/user-owned economies...” 
2. “Our LP agreements won’t allow us to invest in tokens…” 
3. “It’s too early…”
4. “We don’t have examples we can point to of this model working at scale yet…”
3. Schedule more meetings. We scheduled our meetings for the following week in order to give us more time to adjust our presentation. 
4. Tighten up your deck narrative. By now, we knew what works and what doesn’t, which gave us another chance to make another turn on our pitch deck and narrative. 
5. Create the data room for due diligence. For us, this room included contracts, financial models, technical specs, and instructions for use. 

Week Four

1. Structure deals. We structured the deal with two co-leads: Acme and Blockchange. This gave us two strong marketplace and blockchain investors. While we spoke with several firms and had offers to lead from existing investors, we wanted to bring in some outside perspective and capital with experience in both marketplace and blockchain. Both firms had an impressive background and we felt that creating co-leads would help us round out the cap table. Given their fund sizes, we needed to size the investment amount and increase the round size to accommodate them. We decided to go up to $20M for the round, announce the $18M raise, and then keep a small amount open for a couple more strategic investors in our second close.  
2. Collect allocations. At this point, we started collecting amounts for final allocations from other investors. We prioritized existing investors and then started to create a list of our top new investors. We chose new investors based on their ability to provide value in either bringing more enterprise clients or helping us think through additional elements of the token economy.  

Week Five

1. Sign term sheets with co-leads. Now that we were confident about our co-leads, we started to sign agreements. 
2. Decide on the other investors. We figured out who we wanted to have involved and reached out to them personally to let them know we had lead investors in place and would be oversubscribed. 

Week Six

1. Secure funding. We received funding from co-leads, insiders, and new investors in the first close. 
2. Share the news. We wrote and scheduled our initial press release announcement. 
3. Reach out to investors. We reached out to investors and advisors to ask them to write/post/share about Braintrust on our press release date. 
4. Secure launch release. We secured our launch release with Techcrunch. 

It was a sprint, but we made it happen.

And by pushing ourselves, we were able to wrap up the process in six weeks and avoid a long, drawn-out round of fundraising. 

Now, I want to dive a little bit deeper into a few of the key elements outlined above, specifically how we created our deck and narrative.  

The Pitch Deck and Narrative 

The most common reason investors walk away has nothing to do with the quality of the idea being presented. It might be brilliant. But if the founder fails to communicate a compelling and coherent narrative, they’re going to lose every time. If you want to raise money, you need to capture the imagination of the investor, and there’s no better way to do that than through a compelling story.  

I won’t go into the details of every slide you need in your deck. Instead, I’ll focus on the two most important slides. If you get these right, you’re going to get the attention of investors. If you get them wrong, nothing else will matter. 

The first slide is your most important and it’s where you identify the problem you’re trying to solve. This is your chance to lay out the problem in the marketplace from the customer’s point of view. Ideally, you want to describe the problem in the context of a broader trend (or confluence of trends) that will make your company inevitably huge. Just remember that without a problem, there’s no narrative. (For more on this, check out The Secret Structure of Great Talks by Nancy Duarte.) 

The second slide is when you introduce the solution (e.g. your product). The best way to do this is to use the first slide to tell the story of the world as it is today. Then use the second slide to tell the story as it can be, with your product. This juxtaposition is the key element to any winning presentation, whether it’s your first or your hundredth. If you can convince investors that your product solves the problem in a meaningful way, you’re off to a great start. (To understand how most investors see your pitch, check out The Ladder of Proof by James Currier.)

Once you establish the problem and solution, here’s how I suggest laying out the rest of your slides:

• Slide One: Problem
• Slide Two: Your solution
• Slide Three: Traction 
• Slide Four: Business model
• Slide Five: Underlying magic/technology
• Slide Six: Marketing and sales
• Slide Seven: Competition
• Slide Eight: Team
• Slide Nine: Projections and milestones
• Slide Ten: Status and timeline
• Slide Eleven: Summary and call to action

(To learn more about presentation structure, check out the 10/20/30 Rule of PowerPoint by Guy Kawasaki.)

If you find the process of preparing your presentation overwhelming, don’t worry–you’re in good company. Adam and I spend dozens of hours preparing and rehearsing for each hour of presentation. You need to write out each word and know who is going to say what. To make sure that you’re ready for EVERY question, list out the 20 most difficult questions about your business and then come up with great answers for each one of them. Pitch to your existing investors, advisors, and trusted friends. Get their feedback. Push them to tell you what’s broken in the pitch and what you need to fix. Then do it all over again. 

Valuation

Valuation is always the touchiest part of fundraising. It can also be the most arbitrary since it’s driven solely by supply and demand. 

We knew that going into it which is why we chose not to provide any guidance on valuation. Instead, we asked the insiders who wanted to lead the round what they thought was a fair step up in valuation given the progress we’d made since the seed round. 

Rather than optimizing for the highest valuation, we optimized for those we thought would be the best partners at this stage of the project. And to ensure that we would never have to raise another private round of capital for Braintrust (remember, we hate fundraising), we raised more money than we thought we’d ever need. 

Conclusion

Fundraising isn’t for the faint of heart. It’s always hard but for different reasons each time. 

Adam and I faced the unique challenge of creating a new business model from the ground up. There were no playbooks to follow. No blueprints. And definitely no examples of how our idea is currently operating at scale. 

We are incredibly grateful for our early investors IDEO CoLab, TrueVentures, and Homebrew–that believed in us and our vision for a user-owned economy. And to our new investors at Blockchange and ACME, we are so excited to have you on board for this next stage of growth. Last but certainly not least, we want to thank our amazing community of talent on Braintrust. Without you, we wouldn't be here today. 

And for you–our advice is simple. Go in from a position of strength. Stay true to your values. Be patient. And if you persist, you’ll find the partners and capital you need to get your ideas off the ground. 

Simple as these tips are, though, they’re powerful. Once you master them, you’ll never fundraise the same way again. You’ll begin to win over new investors, and with each new pitch, you’ll become more confident. 

Our hope is that by sharing this with you, we can help create the world we know is possible.

Sincerely, 

Gabe Luna-Ostaseski, Co-Founder & CRO

Adam Jackson, Co-Founder & CEO