In 2013, private companies in mobile raised almost $8 billion in venture capital in over 1,000 deals, according to Light Reading.
Maybe it’s your turn now.
But before you start refining your pitch, take a few pointers from three entrepreneurs, from different regions, who have recently been successful in raising venture capital. Sachin Deshpande, Senior Director, Product Management, at Qualcomm Ventures moderated a recent panel discussion with these entrepreneurs called Tips on Raising Funds in Today’s Financial Environment. In this post I’ll share some of the advice the panelists gave during their session.
Andreas Ehn, Co-Founder & CTO, Wrapp (Sweden)
Originally from Stockholm, Sweden, Ehn has worked in startups since 2005; first as part of Startle, Sequoia’s first investment in Northern Europe. Then, he helped grow Spotify to 150 employees and 1 million users as its first CTO during first and second rounds of funding. Now he is with Wrapp, a social gifting and promotion sharing app that has been through Series A and B funding rounds.
“At Wrapp, we raised seed money and Series A on the strength of our team and on simple arguments about the business opportunity,” says Ehn. “But we had to raise Series B sooner than we had planned and not for the reasons we’d planned, so it was tougher going.”
Shortly after Wrapp launched, a powerful German company cloned the app and rolled it out worldwide, effectively beating Wrapp to market. To fight back, Wrapp had to accelerate their own global rollout by putting feet on the street in 18 countries over three months to build relationships with retailers. Once they had overcome that threat, they turned to their original objective – the U.S. market – but they were running low on money and had to embark on their Series-B round sooner than anticipated.
Ehn’s learned that “With startups, it’s always a roller coaster ride and there are always going to be unexpected events. That’s why business plans in startups are science fiction.”Derek Fears, Co-Founder and President of Product & Marketing, Emprego Ligado (Brazil)
Fears started Emprego Ligado, a mobile-based job marketplace for operational (telemarketing, construction, hospitality) workers in Brazil. After raising an initial seed round, he raised a second round with Qualcomm Ventures and institutional investors in Brazil.
“Mobile is growing about 10 times faster than broadband and personal computing in Latin America,” says Fears, “but the investment community there is not keeping up. Back in 2011, you saw euphoric investing and ecommerce copycats in Brazil, and startups were raising $4-5 million Series A rounds off a 6-slide presentation. By the time we started raising money, it had gotten more difficult: VCs were over-extended in ecommerce, growth in China was slowing, and there was social unrest in Brazil. There’s also the fact that our unproven business model relies on the peculiarities of Brazil’s job market, so investors looked at us and saw both country risk and business model risk.”
Emprego Ligado ended up bootstrapping in early 2012. Then the company built a prototype and approached investors a second time, for a small seed round of $250,000. In 2013, they obtained their first round with two local investors and Qualcomm Ventures.
Fears’ lesson: “When you approach investors with a new product, it helps immensely to have something to put in their hands and show them. Also, traction – even a little bit – matters a lot.”Vamshi Reddy, CEO & Co-Founder, Apalya Technologies (India)
Apalya Technologies’ platform delivers live streaming for mobile TV. Founded in 2005, the company has raised A, B and C rounds and angel investment from companies like Qualcomm Ventures and Cisco, and from investors like IDG and Indo-U.S. Venture Partners.
“India’s environment is similar to Brazil’s,” Reddy notes. “We bootstrapped with $100,000 in 2006 and got the product to a certain level. Slide decks don’t cut it in the Indian venture community, so we needed to showcase our product and show numbers, particularly our user growth. We raised $500,000 from the nascent angel community in India, giving us about a one-year runway.”
Later, Apalya raised $3 million of Series C capital based on 200% year over year growth.
Reddy’s lesson: “Our first and second rounds took us about two months each for term sheet and closure. After that, growth expectations and the business environment became very different – after all, how do you sustain 200% growth? – and everything took longer. Consequently, our latest round took us about 18 months. Meanwhile, we ran mostly on revenue, with a bridge loan.”Next Steps
I’ll have more insights on specific funding topics from these entrepreneurs in my next post, so stay tuned. Meanwhile, is funding on your mind these days?
- Watch the video of this panel session, Tips on Raising Funds in Today’s Financial Environment.
- The Qualcomm Ventures QPrize™ competition is accepting business plans through April 18, 2014. Find out more about the international seed investment competition featuring seven regional prizes totaling $100,000 and a $150,000 grand prize.