Part 3 - The End: Turning a No into a Yes, overcommitments and closing the round.

When we set out to fundraise we made a long list of investors and organized them into three categories, A, B and C:?

1. VC funds that would be a perfect fit for us and could lead the round, such as Forward Partners, JamJar Ventures and Playfair Capital?
2. VCs that would be good to speak to if possible
3. People we knew directly

Given our progress on tech, brand interest and our pitch more generally, we felt confident enough that we could secure an A fund as a lead investor if we were introduced by contacts I had met over the last 4 months of fundraising.?

However, warm introductions are not easy to get. Each one uses up social capital and so not everyone will go out of their way to make them. This makes them all the more valuable and we can’t thank those that helped us enough.

When you are warmly introduced, you only get one chance to create interest, so you had better be ready for it.

Once introduced the initial conversations with A funds went very well. A positive indication was that most of the funds wanted a second meeting.?

At this point, we also had smaller commitments from two of the smaller SEIS and EIS funds we had spoken to. At ￡200k each, these took us to ￡1.2m in commitments, our round minimum, though they were conditional on the involvement of an institutional lead in the round. Finding a lead was now crucial and those follow on meetings were even more important.?

Some of these VCs said no to investing as a fund as we just were not the right for the type of investments they told their LPs they would make, but they really liked Kuai Commerce as an angel investment.?

So whilst we heard no’s from the Fund, we got a lot of Angel tickets from the partners and associates who worked at these VC firms. This didn’t move the needle in terms of commitments but indicated that our pitch was now fine-tuned.

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Following these warm introductions and a few rounds of follow-ups, we saw two funds emerge as front runners to lead our round: Playfair Capital and Forward Partners. Both funds could lead, both could follow on in future rounds and both had the right background and thesis to make us a good fit for their fund.?

It was now mid-August and I had had 3 calls with Chris Smith, Managing Partner at Playfair Capital. One Monday night, he sent me a long list of questions concerning the business. It’s important to note here that as you progress with VCs the questions get deeper and deeper, hence why fundraising is definitely a full-time job in these later stages.

I sent him a reasonably detailed response by Tuesday afternoon and on Wednesday night, Chris replied saying “whilst none of these risks are a deal breaker, on balance we cannot build conviction and move forward”.?

I was beyond gutted and couldn’t get out of bed on Thursday morning. It was the closest I had ever felt to burnout. Chris asked for a catch-up on Friday afternoon to give us feedback that he thought would help with the round. Following the advice of my co-founder James I pushed it to next Tuesday. Sometimes it is better to catch your breath, prepare and smash a call rather than take it at your lowest moment. We decided we didn’t want to hear a no and therefore to use the time to go deep on Chris’ questions.

After reflecting over the weekend and preparing a detailed rebuttal for most of the major points, we were ready. James and I got on the call Tuesday morning and said to Chris, “We have the data to debunk your main points of risk and we are going to take the next 30 minutes to tell you why you are wrong to pass on us”.?

Chris looked surprised at our approach, but by the end of the call he had reconsidered his decision. He wrote about this in a recent blog post:?

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“As an investor, I am constantly learning and trying to improve.?

Kuai is one of those investments that taught me a disproportionate amount and provided a timely reminder of what VCs are meant to do — take risk. Not silly or lazy or ill-informed risks, but risks that are carefully considered through an efficient and disciplined process, and balanced against the potential reward. This is something Jonny understood extremely well and conveyed to me mid-way through our discussions when I emailed him to say that I was passing.?

For the first time I can remember, a founder made me do a 180. It was that impressive!?

My past email contained eight key risks. Jonny asked for a call to get some additional feedback.?

Of course I agreed and jumped on with him and James to see how I could flesh out what I had written to help them with the round. As soon as the call started, Jonny said that he and James were there to change my mind. I was a bit taken aback, but I sat listening to them take each key risk and explain how they mitigated them in forensic detail. Most arguments were backed up by impressive levels of research and data that showcased their expertise in the market and the fact they had, at least at this pre-seed stage, thought of everything.?

Those that couldn’t be backed up by data, were convincing as a result of a potent mix of experience, clear passion for what they are building and a sense of never ending persistence (evidenced by believing they could make me change my mind in the first place!).?

Back on track, we wrapped up our own research and investment memo quickly and took the opportunity to Investment Committee (IC)” .?

We went through IC with Playfair and Forward Partners at the same time, whilst still taking meetings with angels and other funds. Telling people we were at IC with two A-list funds ended up being a great way to increase FOMO, but if you are reading this and raising right now, never ever lie about your progress with investors! The VC world is tiny and any exaggerations about progress with other funds will get found out quickly.?

Now in mid-September, I expected to hear back from both Playfair and Forward Partners on the same day. The lead investor at Forward Partners called me at midday to tell me they were not continuing with the process but that she would like to invest as an angel. A small silver lining but I was still, of course, disappointed. I held off from breaking the news to my co-founders Adam and James, before I had heard back from Playfair.??

?Two hours later, we got a voice note from Chris Smith at Playfair, saying we had passed the IC and they wanted to lead our round.??

We finally had the yes we needed!

7 months, 100’s of calls, 100’s of no’s, a war, a venture market crash and an uneasy UK economic picture. But we had our lead for our pre-revenue, pre-product startup.

After this, fundraising was fun! Once you have a lead investor everything changes. FOMO sets in for everyone else who was on the fence and every conversation becomes much easier.??

The two funds who had each committed ￡200k on the condition we had a lead now wanted to increase their investment. Additionally, all the angel conversations I had lined up converted into a yes within 1 or 2 calls.?

It is much easier to raise when you don’t need someone's money, and that makes them want to give it to you even more.??

Our minimum requirement was ￡1.2m and we had ￡800k committed before Playfair agreed to lead. We went from ￡800k, to ￡2m, to a total of ￡3m in hard commitments in under 2 weeks. We could have taken more but we had enough. Being oversubscribed allowed us to build the strongest cap table possible by making room for angels that could bring more than just money - experience, introductions, and industry knowledge. It was an incredible position to be in!?

It took six weeks to wrap up the legal process and by the start of November, we had ￡2m in our bank account.

Fundraising was an absolute rollercoaster, from the highest highs to the lowest lows and burnout. But even if we hadn’t been able to raise the money, the experience and contacts gained would have set us in good stead for the next stage of our careers.?

As it is, the easy part is over and now the harder graft begins. Time to get building...!?