How Raising A $2M+ Seed Round Really, Actually Went How Raising A $2M+ Seed Round Really, Actually Went A couple of days ago, I closed a little over $2M in a seed funding round for Seed&Spark. I’m supposed to send a press release to, like, Techcrunch or something with the headline, “Seed&Spark Raises $2M Million to Accelerate the Diversification of Entertainment,” which, if I’m gonna be honest, is not a bad headline. But I won’t. Not only because I’m loathe to further Silicon Valley’s regressive myth of the rockstar entrepreneur, but more importantly because the headline itself — and accompanying boilerplate article — does a complete disservice to the real story (involving real humans and human emotions) of closing the round. "To me, fundraising is not an accomplishment. It’s most often the marker of the strength of your existing network" - Emily Best Also, to me, fundraising is not an accomplishment. It’s most often the marker of the strength of your existing network. It is not the marker of having built a successful business. Fundraising means I convinced a bunch of people (and in my case, a BUNCH of people) that I probably CAN (possibly, maybe) build a successful business. Fundraising is a hurdle I have to clear on the way to building the business I want to build. It isn’t the business. The business I want to build will give rise to the creative middle class across the country. It will bring transparency and accountability to the entertainment industry. And these are the things we at Seed&Spark believe are lacking in order to meaningfully diversifying the industry. When we do those things, that is when I will really celebrate. “Another reason I don’t feel like celebrating the close of this round is that it did not go the way I was told it would go.” -Emily Best And perhaps another reason I don’t feel like celebrating the close of this round is that it did not go the way I was told it would go. It did not go the way I was told it should go by all those thousands of headlines screaming that “Uber for Mousetraps Raises $5M from Sequoia” or whatever. It did not go the way it was explained to me that “successful fundraising” goes. And nowhere ever did I read a story that looked like mine, that gave me any inkling that how it was going for me was ok. But I don’t think I’m the first person to ever experience this kind of uphill climb. So I’m just going to tell you how it went for one reason alone: if there is someone out there like me, reading this today, they won’t give up tomorrow. Maybe they will keep fighting. See, if you’re a good entrepreneur, you’re good at pretending you know what you’re doing even when you don’t. You can come up with confident sounding answers to hard questions, deliver them with passion, and then go figure out how the fuck to do what you just promised (or who can help you figure it out). But the internal experience of keeping that up, day to day, isn’t always so great. And that’s due in part to the predominant messaging that says you should always seem like you are “crushing it.” Like somehow being tired, overwhelmed and scared isn’t also a part of “crushing it.” Only a few of my very closest advisors and friends have ever really heard what entrepreneurship is like for me. Most people don’t really want to know how the sausage is made. But it’s important to know, especially if you’re trying to do this for the first time, so you don’t think you’re doing it wrong because your experience doesn’t seem to fit into a sexy TechCrunch headline. So here is how the Seed&Spark sausage got made this year. Don’t worry, we’re both uncomfortable with that metaphor. Quick background: I was an actor and filmmaker when I started Seed&Spark. I didn’t have a corporate job, I had four jobs. I had a mountain of debt from a divorce that forced me to sell a house I’d bought at the top of the market at the bottom of the market. Most of the capital that funded the first year of Seed&Spark came from my occasional voiceover work for Amazon Kindle product videos (which you can still find on their website). I was waiting tables to pay rent and I was in the restaurant with my tie and apron on when I found out I got my first $125K investment. It would take me another 18 months, but that would turn into a one million dollar angel round that closed in 2014, on my birthday. I would close a $500K bridge in 2015 through equity crowdfunding — which we did after I walked away from a term sheet from my dream VC with terms so insulting that my lawyer literally said, “You don’t say no to this, you say go fuck yourself.” (His words, verbatim, and he’s really nice.) I asked him if it could possibly have been gendered. He said he didn’t know, but he’d never seen one that bad before. (Yeah, I cried in my car on the way home, you bet I did.) Then I closed another $500K bridge in early 2016, right before my team and I went to Techstars in February. I was 16 weeks pregnant when we went into the program and I moved away from my husband and friends in LA into the freezing cold of Boston’s late winter. Yeah, I know. Right before we left for the program, a large strategic investor based in NY had made a visit to our office in Los Angeles, met the entire team, and said they wanted to lead a $2M round on a $10M valuation. They were going to go back and see if their participation would be $1M or more. So I floated into Techstars, ready to circle the wagons to close out that round. In the first couple of weeks of the program, I started completing further diligence from that investor, meeting with other arms of the company who might want to work with Seed&Spark. Those meetings seemed to go really well. During this time I was doing “mentor madness,” a dizzying portion of the Techstars program where we would meet dozens of potential investors and advisors all day long for weeks on end. Some further investment leads seemed to come out of that. Then, the big institutional investor went totally silent. Like, completely and totally silent. Not one of the four people I had been communicating with would respond to an email, and to this day (more than two years later), I have no idea what happened. I had to start looking for a brand new lead investor. All throughout the program, as I grew increasingly pregnant, I took meeting after meeting, following the instruction provided by Techstars about how to take a great investor meeting. I am a good student, so I was doing the things. What I didn’t know then was actually how to find the right investor to meet with. So I spent a lot of time lumbering up and down hallways, waiting with my bottle of water in conference rooms, and speaking to people who would then make it very clear I was not in the right place. Some of them wanted us to be building an entirely different business. One angel group wanted our crowdfunding platform to have 3x the traction of Kickstarter before they would consider an angel investment. You can read that sentence again, because I asked them for clarification twice and that’s what they confirmed with me. What I didn’t know then is that’s just a really dick-ish way of saying no. To be fair, Boston is a ridiculous place to fundraise for a content business, and I’m not saying anything about Boston it doesn’t already know. During Techstars, we managed to land a huge sponsorship deal with Mastercard which took some of the money pressure off of us for a little while, but I made it all the way through Techstars and demo day without knowing who would lead this next round. The program ended in early June, and I left Boston with some great relationships, and the painful memory of a phenomenal number of “no’s.” Later that month, I would get about 20 more investor introductions to LA-based funds from one of the Techstars Managing Directors, and work my way through meeting each of them. What I heard almost every time was “I love what you’re doing, I think it’s so interesting, and I have no doubt that if anyone can be successful at this, you can. So come back to us when you have more _____”. What filled in the blank would vary, but it was all the same story. We needed more traction anywhere — everywhere, I guess — even though we were rapidly starting to catch the market leader in crowdfunding and show some (not enough!) really interesting traction in streaming. I got about 30 no’s in a two-week period from pretty much every named investor in town. But I was having better luck with some angel investors, who were returning my calls and excited about what we were building. In August, I gave birth to a healthy baby boy who we named Cody. About six weeks later, I was able to put together a term sheet with a group of angels that would account for $425K of what I hoped would be a $2M round. Up until then, I was told that getting the term sheet was the hardest part. I’d gotten one from before a blue chip VC which sucked, now I had one from a rad group of angels. So I can now say that respectfully disagree that the term sheet is the hardest part. It’s what comes next. And, I’m going to gloss over the birth of my son here but just for history’s sake, I was breastfeeding every 2–3 hours for most of the next part of the story. See, not long after we got a term sheet, the election happened, which I believe fundamentally changed the operating landscape for our business. We put our heads together as a team, and came up with a renewed sense of purpose. We were going to be extremely public about exactly how we meant to increase diversity and inclusion in entertainment. This probably made any investment conversations I had in the following few months pretty wobbly, as we were navigating a shifting landscape and our story within it. But I started to look at everything about our fundraising process differently. If we wanted to increase diversity and inclusion in entertainment, and we could imagine being wildly successful building a new studio model, I started thinking about who would stand to get rich if they invested in us. Nobody had ever talked to me about my cap table as it related to the very core ethics of the company. I was made to think what was important was getting the blue chip VC. And I had done that circuit, and out of more than 40 firms, I talked to ONE woman. ONE. I spoke to three people of color, all men. I realized the vast majority of women and people of color I had met along the way were not associated with funds but were angel investors. And if I wanted to build a company focused on increasing diversity and inclusion, then I wanted my cap table to reflect that community as well. It was after meeting with (to no one’s surprise) Arlan Hamilton at Backstage capital that I started to be really intentional about who I was meeting. It was the easiest deal I ever closed because Arlan and I are trying to do the same thing in different industries. I realized I was on the hunt exclusively for values-aligned people who had demonstrated their values with their investments before. Arlan does not think making money and doing good are anathema. She didn’t see us as a “double bottom line” company. She understands that our core values are the key to building massive financial value in the company. We were not willing to “grow at all costs.” That means we actually weren’t a fit for Venture Capital’s timeline. So I completely changed my investor outreach strategy. And by the time I had figured all this out, we were in the middle of negotiating our first crowdfunding rally with the Duplass Brothers, which would be our first celebrity-driven initiative, and we were getting ready to launch the beta for our subscription streaming platform But we were completely out of money. And in February of 2017, we let go of three people, and the entire rest of the team agreed to major pay cuts so we could stay afloat. We didn’t know how long we’d have to maintain the austerity measures. I started talking to every woman-led fund I could find. And for the most part? They were all still raising money, having the same struggles and same conversations I was having. Like, “we love what you’re doing but come back with more traction.” Huh. Weird. It’s now June 2017. Cody is nearly a toddler, and so is my term sheet. An existing investor agrees to put in some more money so we can stay afloat. Revenue is decent. I can bump the team back to their regular pay. We have about $1.2M circled for the round. We launch the crowdfunding rally with the Duplass Brothers the day before we launch our subscription streaming service. We are trying to execute on so many fronts so quickly, I feel like I can’t possibly just focus on fundraising, but I try. July passes, then August. Pretty dead, just like they promised. September rolls around, and it’s clear this Duplass Brothers rally is going to be a smash success. Here is the thing, I’m not just my company’s sole fundraiser, I am the one who does business development. Because #startups. So I have to make a choice: heads down fundraising in the window between Labor Day and Thanksgiving, or heads down business development while brands are working on their 2018 budgets. I choose the latter, because if I don’t, I miss that window completely. I try to keep fundraising leads warm, but I go chasing brands and production companies to partner with. I land a couple I love. We live to fight another day. Once I close those deals I get some wind under my sails and decide to close the year out strong. I reach out to a bunch of our previous investors with this new traction. A bunch of them double down, for a total of a few hundred thousand, which they wire. It’s enough to limp along. Like we’ve been doing since forever. Yeah, we’re good at hiding it. Christmas, then New Years. We launch a huge initiative in January 2018 as we always do, and I go back to fundraising. My house gets infested with rats, the landlords don’t care, and I have three weeks to move my family out. I close a few more investors, small checks from great people. December and January are our slowest revenue months, so February arrives, and we’re gonna run out of money again. My co-founder sits down with every member of the team while I am on the road trying to build business and fundraise and every member of the team again agrees to take a pay cut for a few months until revenue comes back up — and this time we boost everyone’s equity packages substantially. But you guys? I’m tired. Like, I’ve been doing this for nearly six years and it all feels stop and start and I don’t see my toddler enough or get date nights with my husband and why would I run my own company if it’s not a significant improvement to my quality of life? And if I also can’t guarantee a great quality of life to my team…then what? Then we launch a ticker on the homepage of our website that shows we’ve helped more than 850 movies and shows raise more than $11M (it’s now over 900 and $12M). The vast majority of those are helmed by women, people of color, LGBT* creators who are reaching audiences with incredible success. And the ticker just keeps ticking up, up, up. I remember why. I turn to my husband in bed one night and say to him: Listen. I am going to give this six more months. I am going to give it everything I have. There is nothing I want to do more than this, but maybe I can find other ways to do it. And we can’t keep limping along — I won’t be responsible for stalling the careers of the band of absolutely brilliant humans who are on this Seed&Spark journey with me. So if I can’t swing momentum in our favor, to close this round with enough runway in the bank for 18 months, I’ll quit. And I meant it. I figured six more months was the most I could ask of the team to continue like this before the right thing to do was release them to the next great step in their journey. To be honest? It was the thought of having to disband this team of remarkable humans at Seed&Spark who I love like family that lit the fire. So the next day I called, emailed and texted everyone I knew who I thought could help me make connections. We had significant new traction, we had a clear message, and despite the pay cuts, the team rallied tremendously and together we found a renewed energy for growing our way out of this trudgery. I started connecting to some of the most exciting investors I had come across yet, who felt the same way about us. "Closing this round really isn’t something that can be reduced to a headline. It was a growth and learning experience, full of twists and turns no one prepared me for" - Emily Best It took me about ten more weeks, but I closed the round. There’s actually still money trickling in for the next week or so, and we’re “oversubscribed.” I closed three biz dev deals last week. We’ll have enough money for a while — certainly to get to our next major milestones. I’m not quitting. Closing this round really isn’t something that can be reduced to a headline. It was a growth and learning experience, full of twists and turns no one prepared me for. Maybe you’ll say I just wasn’t that good at it. But our cap table is meaningfully diverse in all the ways that matter to me, and full of operators, too, who are always there to help when the going gets tough. But now is actually when the really hard work begins. We have to put our heads down and build what we promised. But now is actually when the really hard work begins. We have to put our heads down and build what we promised. I’ll tell you what: this fundraising process has made me more sure than ever that while it will take longer to scale than a “growth at all costs” kind of company, I know that we can achieve our goals by staying dedicated to our values. It’s given me more faith in myself and my team that we can do this. So you, out there, don’t give up. Find the lesson inside each meeting, stay focused on what really matters to you, and you will find your people. Emily Best Emily Best is Founder and CEO of Seed&Spark, a startup that's mission is to bring a rise to the creative middle class across the country and bring transparency and accountability to the entertainment industry. She is also Co-creator of @FckYesSeries.