Blow-by-Blow: The First Fundraising

_*This article launches our Founder’s Diary, where a founder retells an experience with a challenge or task ‘blow by (agonizing) blow.’*_

*The following takes place between December 6, 2006 and February 27, 2007.*

It is my account of the experience, had alongside my co-founder, Walid Al Saqqaf, and other members of our team, of trying to secure the first $1M in seed funding for our company, “TrustedPlaces”:, from “HOWZAT media”: TrustedPlaces is a user-developed city guide to London, where I live.

*Dec 6:* I wake up at 6:30, for yet another networking event – our fifth in a month that is less than a week old. It is a breakfast session this time. By accident we meet Hugo Burge, of He’s a founder, too, and we quickly establish a good rapport talking about what it’s like to start-up a company in London, how some of the presenters at the event started and later “exited,” and also Hugo’s experience growing CheapFlights into a global company. Hugo tells us he is now a co-founder of HOWZAT media LLP., a freshly formed angel fund. TrustedPlaces, happens to be looking for money. We agree to talk further (!), though it’s nothing to get hugely excited about, as a number of previous encounters have taught us.

*Dec 11:* We have our first meeting with Hugo and his partner, David Soskin. We discuss TrustedPlaces in detail, our capital requirements, progress, business plans, etc. We agree on a follow-up meeting.

*Dec 19:* We have a three-hour session with Hugo and David, plus two members of the HOWZAT corporate finance team, Jo and Sascha. We cover more detailed aspects of the business, new product development. We even discuss valuation. I sense things are getting serious. We commit to delivering more detailed plans on the product roadmap and a marketing plan within a couple of days.

*Dec 21, AM:* Walid and I have had to pull an all-nighter to deliver everything on time as we had agreed. I’ve just spent 24 hours refining a business plan we thought was ready, contracts, my CV, everything we need for our corporate presentation for HOWZAT, We thought we had everything in place, but it had been a couple of months since we had looked at those docs. (How things change!)

*Dec 21, PM:* We receive HOWZAT’S first investment offer. It is not the same valuation we had suggested, but still within the limits that we had set. I have warm feeling, but also an awareness that the hard bit has just begun.

*Dec 22:* Receive term sheet. What does “dilution protection” mean again? We go back to the books, hit Wikipedia and Google. [Start looking for lawyers!

*Dec 25:* It’s Christmas. I travel home to Greece. Walid travels home to France, for the holiday.

*Jan 2:* We return to UK and sign the term sheet. We realize we still probably only about 40 percent of the way to getting the deal done. Due diligence has to be done. A lot of things can go wrong from here, but we’re positive and the investors seem positive, too. Some key changes on the TrustedPlaces product are helping traffic, reviews and the user numbers have grown since we first met Hugo. It is a big help.

*Jan 3:* I move house. I receive HOWZAT’s due diligence checklist and their request for a conference call to discuss it. I have to take the call surrounded by piles of boxes.

*Jan 8:* We still have no office at this stage, so we’re all working from home. Dima, our lead engineer has left his old flat, but the work can’t stop. He move in with me. I hand over my room, my bed and my desk while I handle the due diligence Q&A from the living room. I make Dima breakfast, lunch and dinner – it’s 5 Star service! We enjoy a big productivity jump, I suspect because we’re getting all this time to work face to face. Dima and I go for the occasional 15 minute walks to get fresh air and to problem-solve: we work out an algorithm for personalised recommendations to add to our site.

*Jan 9:* We meet three law firms and appoint one of them. The firm is expensive, but has been recommended by a fellow entrepreneur who previously went through a funding round with them, as well as an exit. Also, the partner representing the firm comes across as the smartest. She talks so fast and with such decisiveness, we figure we’ll be able to keep her billable hours low!

*Jan 10:* We spend all day with HOWZAT’s technical consultant for more due diligence. Their guy really likes the way we’re developing our software and gives a thumbs up to the way we manage code, backups, etc. Dima and Moty handle a couple of toughies really well. He asks: ‘How well does your architecture scale?’ They have schematics prepared showing a future architecture, mapped against future traffic and costs. They also have examples of previous implementations that have worked for others. I am proud of them. It is one BIG box ticked.

*Jan 14:* Most of the due diligence has now been covered. Everyone on our team is spent by the huge amount of energy required just to consolidate existing information and produce new documentation of our work product for HOWZAT.

*Jan 28:* We receive a draft investment agreement, amendments to the articles of association, and our new service agreements. We have to hit the books again to look up a few things—the number of new terms seem to increase exponentially with each set of documents. We meet up with our fast-talking lawyer.

*Feb 1, AM*: We launch a new version of our site. It’s a total refresh of the front end, plus a number of new features, like the personalized recommendations. Big exhale, then this: Hugo spots a bug in our search and recommendations feature (it had to be him!). Dima tweaks the algorithm, and tests and redeploys it – within a couple of hours. Even bigger exhale. Early user feedback is very positive and the links are starting to come in.

*Feb 1, PM:* A last minute misunderstanding on a term concerning ownership of the intellectual property adds more “excitement” to what is an otherwise quiet day (;-).We’re supposed finalise all documents tomorrow. We have to schedule a Skype conference with HOWZAT partners for 11PM to avert the crisis.

*Feb 02:* Final meeting goes as planned. We review and discuss all the documents in three-hours. Crisis averted.

*Feb 04:* Full TurstedPlaces team has dinner with HOWZAT media team. It is an equally big part of the deal’s due diligence. It is important to see if we will all get on with each other. The waiters us help us out: they confuse the day menu, twice; then manage to mix up Sascha’s order, three times. Everyone is amused, and relaxed now. We even discuss some obscure cricket rules (Turns out that a “HOWZAT”: is a verbal appeal made by a player to an umpire in a cricket match. As in: “_Howzat_ a fair call!?”) Everyone has a great time. Another big box ticked – and they pick up the tab, which is nice!

*Feb 05:* We sign the contract and service agreements. Fantastic, but we still have not closed. Although we have agreed on everything, HOWZAT’s investment fund members still have to approve the transaction. It is a nervous waiting period, but a good opportunity to focus on the product and enjoy a bit of sport, for a change.

*Feb 23:* Three long weeks later (!) we receive word that HOWZAT’s board has approved the investment. Still more days of nervous waiting. No deal is “done” until the money appears.

*Feb 27:* Biggest bank account balance I’ve ever seen. We’ve done it! Time to celebrate. Mini pub crawl and dinner at Asakusa, my favourite Japanese spot in London. I can pick up the tab this time!

So that was it — 83 days from start to finish. It was the first time any of us at TrustedPlaces had raised such an amount, and it happened much faster than what we had expected. Then again, it took nine months of hard work to lead us to the day when we first met Hugo. The pressure was very high at times, but we got lucking with good timing on a number of occasions. And we had some great people working with us on both sides. We had done it! The lessons we learned were many. Here are my top three:

*1) Don’t underestimate the effort you’ll have to put behind due diligence. Prepare for it.

2) Find people you trust (like a fast-talking lawyer) to usher you through the process. This is critical.

3) Help yourself by reading up on legal and corporate terminology before you even begin to try and raise funds.*

Now comes the hard part for “TrustedPlaces”: : spending the money right!