For any startup looking to raise venture funding–or even VCs trying to figure out what entrepreneurs want (where is Mel Gibson on that, anyways?)–Jason “Prince of Pivoting” Goldberg offers a transparent look at how he went about raising $40 million for Fab.com led by the likes of Andreessen Horowitz.
In Mr. Goldberg’s case, he faced the added pressure of not having time to go through the usual dog-and-pony show during the run-up to Fab.com’s first ever holiday season. (Yes, that’s right, that $40 million came just six months after the company swerved from a gay social network to a flash sales site for design.)
So the serial entrepreneur decided to do things a little differently.
According to Mr. Goldberg, the rules of funding are not so different from The Rules itself:
“It’s also a lot like dating. You have to go on a lot of first dates before you can move on the to the second, third, fourth, and then hopefully marriage. The worst thing you can do is slut around. It wastes a ton of time, can damage your reputation, and doesn’t get you far.”
Keeping that time constraint in mind, rather than wasting precious hours on slow dance of talking about team, leadership, and vision, he jumped right into the good part: the core numbers–something VCs often don’t look at until the end of the process. Thus, he began the funding process by sending each potential investor he’d identified as a good candidate a login to Fab.com’s RJ Metrics Dashboard to see for themselves if they wanted to learn more.
It’s not until a p.s. at the end of the blog post that we learn that Mr. Goldberg tried to invest in RJ Metrics since they proved so useful, but basically the company provides a business intelligence dashboard connected to your production database that updates every few hours and produces some handy graphs.
“As a dashboard it’s fantastic, but the real power of RJ is in its cohort analysis — RJ enables you to effectively monitor each cohort of users by join date and then then evaluate their revenue contribution, payback periods, engagement levels, and lifetime value.”
Starting with the numbers helped “[tee] up a series of well-educated discussions with the VC’s around the next level of data analysis, e.g. trends amongst cohorts, time to 1st purchase, and repeat purchase rates,” writes Mr. Goldberg. For those worried about exposing that level of information about a young company, Mr. Goldberg offers the following tautology:
“The data is the data is the data. If you can’t measure it, it never happened. Any investor worth their salt needs to understand your data before they invest, or you don’t want their money anyway. So, put it all out there. If the data is good, it’ll speak for itself, and then you need to tell the story of how it gets even better. If the data isn’t good, well, then you need to tell a story of how you are going to turn it around. Either way, the data is the data is the data.”
In the end, it seems like Mr. Goldberg found the right fit in Andreessen Horowitz partly because of its response to the numbers:
“Jeff [Jordan] and his partners — more than any other firm we talked to — really jumped right into the data, digested it, analyzed it, and then quickly focused on how they could work with us to realize our big vision.”
Although Mr. Goldberg claims that “we didn’t focus on valuation much at all,” we imagine he didn’t exactly object to a $175 million jump in valuation, currently teetering at $200 million.
Now, how about we get really meta and have RJ Metrics do a behind the scenes blog post about what happened when Mr. Goldberg asked to invest?
