How we Raised $5 Million for TurboSquid.com

This is a short story of how I got started Raising Capital and how we Raised $5 Million for TurboSquid.com 

By all accounts I was as far away I was from ever raising money for a company or talking to "Investors" as you could be.  

I grew up in a small town with one stop light (30 years later it has two) 

Right after high school I spent four years in the Air Force- because that is what my Dad and older brother did. I geeked-out on tech in the Air Force, I worked on the F4, F111 and F16 flight simulators. Awesome multi-million dollar CGI games. After my service, I went to a small college in Northern Arizona graduating with a B.S. in Electronic Engineering Technology.

After working for two large corporations, my entrepreneurial journey started while I was an employee working for a small software company in New Orleans, Louisiana called Digimation. (not exactly the epicenter to technology, drinking but not technology). They had sales of about $2 million a year selling 3D animation tools. Life was fine. But careerwise, I was not really going anywhere. 

Have You Always Wanted to Start a Company? 

I did.  Like you, I always had higher aspirations than just being an employee for a $2 million a year software company.  I wanted to be a "founder". I wanted to own equity in a company. I wanted to ride a big wave. I wanted to be part of building a tech company to $50 Million in revenue, sell it and get rich...and do it again (that was the plan). 

The owner of Digimation, who surprisingly had the same ambitions as I did. I borrowed his Tony Robbins DVDs "Awaken the Giant Within". We put our heads together and came up with a new business idea to get all of Digimations' 3D animators to upload their wireframe dinosaurs, guns, lights, chairs, characters... that are sitting on their PC's and let us sell their "3D assets" to someone else - where we would take a transaction fee. It was brilliant, No one was doing it, we would be the first to market. Sure, we were inspired by 3bay.

We had a couple of strategic advantages ...1. we were already selling 3D animation software and, 2. we already had a big 3D animator customer list.

Most importantly, customers needed and wanted our solution - we ran surveys to 3D modelers and asked if they had any models they would sell and then asked 3D animators how much time they would save and how much would they pay for a 3D wire frame dinosaur that someone else created.  Wow, the survey answers revealed we had the makings of a $50 Million company!   

We called our idea TurboSquid.  Why TurboSquid?  Because a "Squid" can grab many objects with all its suctions cups on the eight tentacles and "Turbo" because the owner had a poster of a Turbo Porsche dream car right over his desk.  We also wanted hard name to forget after you said it once! 

To create TurboSquid, an "ebay like e-commerce platform to download really large digital assets", we were going to have to build it ourselves - we could not find any off-the-shelf apps we could customize - remember this was 20 years ago.  

We had the ambition, desire, the plan, but no money. 

Where the Hell Do I find Investors with $5 Million Dollars? 

We knew what the TurboSquid platform needed to do but we didn't how to build a digital download ecommerce platform. We knew how to build 3D apps that sold for $99 each but had zero experience building a platform. We estimated that we would need around $5 million build the platform. (this was in the early 2000s - way before GitHub and GitLab and odesk and upwork)

The process of raising money was a mystery to us. We had no idea where to even begin. 

We had to find investors with $5 Million, tell them about our fantastic business opportunity, how they were going to make 10X their money, or we were going to miss out on the opportunity of a lifetime!  

We started doing what every amateur probably does, got on Google and typed in "Venture Capitalists".  

Oh Crap...6 months go by, then 9, then 12...

Three months go by, then six, then 12 months go by before we even get a meeting with the first investor.

Our results were miserable - no one took our call. No one returned our calls. No email returns. Nothing. Not even a, "No Jon, nice business but not interested". This was way before Linkedin had many users. 

It took nearly 2 years...18 months and 15 days to be exact before we secured an investment for TurboSquid. 

Yea sure....we eventually figured it out...we raised the money for Turbo Squid but not without some emotional scars. The outgoing cash flow required to support TWO companies: Digimation and TurboSquid, nearly killed them both! 

That first experience extracted a heavy toll.  Because we did not understand what it would take to raise capital, many of the original founders are no longer talking to each other.  

Have You Made These Mistakes? 

We made so many mistakes...from; not pivoting fast enough from our first idea, to thinking if we build it they will come to us, to not setting expectations on how long it would take, to thinking it was worth more, to not understanding if we were the right management to execute (we made a number of hire mistakes), to touting three year "Conservative Projections" to investors, to saying we had no competition, to thinking money will fix our issues....ugh we made so many rookie errors.  

When Scott Painter, Entrepreneur and founder of TrueCar and Fair.com said,  "Raising funding is like that Tom Cruise movie 'Edge of Tomorrow'. Every day you will die, and then you just need to wake up the next day, take what you learned, and try to get a little farther"....he was so right! 

But we did do one thing right: we reflected on the experience to understand what the takeaways were. We boiled it down to FOUR big, hard-earned lessons about raising capital:  

• Raising Capital IS a SALES and MARKETING Campaign 
• Raising Capital IS a numbers game 
• Raising Capital CAN be an emotional rollercoaster
• Raising Capital CAN take a long time  

Here's the Dirty Little Secret to Raising Capital!

What I learned is that Raising Capital is a Sales and Marketing Campaign and you will be running TWO different campaigns for two different product lines; a.) your flagship product that you sell directly to customers AND b.) Your company.  (They work together to Attract Investors - lots of cross over)

And because investors are programmed to see patterns, they know what works, and what will fail, why it is important for you to appeal to investors desires just like you would when selling your product to customers.  

And...that there is a "tried and true formula" to emotionally CONNECT with Investors.

And that if you mentally prepare yourself for the journey, like you would prepare to scale Mt. Everest, you will never be disappointed by the emotional rollercoaster.  It was all clear to me - I understood what was required. I demystified the Capital Raising Process.  

You'll Raise Capital 100X Faster if You DON'T Try to Do this On Your Own

Since my epiphany I had to test what I had learned. I wanted to climb this hill because I knew I was going to put myself in this position again and I did not want to repeat the same mistakes.  I wanted to learn more.  

So, I bought every book on Raising Capital on Amazon.  I followed and read all the blogs from Venture Capitalists.  I devoured the best of the best podcasts. FYI - I love listening to Jason Calacanis Podcasts.  I dived in head first.

And...I went about applying what I learned on a number of entrepreneurial personal projects, worked on an acquisition where I pitched over 500 investors (the company was in the UK) and I offered my service to clients that needed to raise money...testing the message and tracking results. Throwing out what didn't work and keeping what did.  

Over the last 10 years I think I spent over a 5000 of hours obsessively studying what works and what does not - there is way to do it more effectively.

The Right Message to the Right Investors

In the end, the Pro's will say, "There is a no shortage of capital, there is a shortage of good ideas".

Investors are looking for reasons to disqualify you, eliminate you from consideration, to dismiss your idea. Why? Because not even the smartest investors in Silicon Valley knows if you are going to be the next break-out billion dollar company.

BUT, they can tell which ideas have no chance in hell, so they eliminate these as fast as possible - and then double down on the best ones.

 If you send a small idea, if you send a crappy, messy, confusing idea or you show how unqualified you are to build a billion dollar idea...they will DELETE YOUR EMAIL AS FAST AS POSSIBLE.

Your job is to: match your idea with the right investor (yes today is different - you can find investors that specialize sectors, types of markets), make it clear, concise, compelling, de-risk it and make it a no brainer (at least get you to the next meeting) 

In conclusion, Capital-raising is a numbers game – most prospective investors will pass on your deal, but it only requires one prospective investor to say yes to be successful.

Cheers,

Jon Stoddard