The purpose of this case study is to provide an example of a successful seed financing for founders to learn from. Raising seed financing for a new venture is an exciting and nerve-wracking process. While no two founder’s journeys are exactly alike, at Unusual Ventures we believe that there is much that can be learned from distilling the lessons learned from those who have accomplished the same task. Vivun is an example of a team of first-time co-founders with a product vision to build a new enterprise software company.
In this document you will find:
1) A description of the Vivun founders and the insight that led to starting the company
2) The process the founders followed to successfully raise seed financing
3) A detailed description of the fundraising pitch and its contents
4) How Vivun’s co-founders evaluated the terms of the seed financing and ultimately chose their investor.
In 2018, Matt and Dominique Darrow quit their respective jobs at Zuora (the company had just IPO’d in April that year) and Google and set off to travel and recharge. It was while they were camping in New Zealand that Matt brainstormed an idea for a new company based on his experience as a presales engineer. During their travels, he designed and coded an initial prototype, and by the time they returned from abroad, Matt and Dominique had decided to incorporate a new company and recruit their founding team.
They approached their longtime friend John Bruce, who was at SignalFx at the time, to be their first alpha customer and design partner. John was very familiar with the problem Vivun was solving and soon decided to leave SignalFX and join as a co-founder. Each co-founder brought a unique skillset to the team. Dominique added post-sale expertise (i.e. implementation, support, and customer adoption), while Matt had extensive presales domain expertise and a strong product background. John was a presales expert and a phenomenal engineer (one of the first five engineers at Pandora). They recruited their fourth and final co-founder, Claire Bruce, a gifted lawyer who had previously run legal for a billion dollar business to manage all corporate operations. They knew that building a business would take more than just tech, and felt confident they had put the right founding team together to ensure their success.
With the founding team in place, the group went full speed into their customer validation process. They experimented with cold outreach messages and tapped their network with the goal of obtaining conversations with 30 presales and product leaders. The goal of each interaction was to pitch the idea and receive input on the pain of existing solutions as well as collect reactions to the product. The Vivun team wanted to make sure they were getting objective feedback, so they took the extra steps to get in front of people who didn’t know them personally to see if they shared the same belief in the need for a new presales product.
For three months, the team conducted "briefing" sessions with presales thought leaders and consultants to test and validate their idea. At the beginning of their customer outreach process, the Vivun team was unsure of who exactly their ideal customer was in terms of company size and industry. Their initial conversations were with presales leaders at publicly traded companies to startups, and spanned several industries. As they continued outreach and moved toward confirming design partners, they narrowed in on their ideal use case of software-driven companies going through inflection points of growth. Satisfied they were at a point where they could take the next step with several prospects, the Vivun team then spent the subsequent three months (from January to March 2019) engaging closely with their top 10, carefully selected design partners. In April 2019, bolstered by the positive reactions from design partners, the Vivun team decided they were ready to raise seed financing.
Vivun’s founders had a strong desire to be the first to market with a category-creating product. Matt admits that at the time, the Vivun team knew very little about fundraising. They started by tapping into their personal network, including prior CEOs they worked for and friends with positions at venture capital funds. Based on these conversations, the Vivun team started to get an idea of how the fundraising process worked, but everyone had different, and often conflicting advice. As Matt describes,
In the end, nothing happened as anticipated. We heard the story about SignalFX skipping its seed round and going straight to a $8.5M Series A. That was the lore of Silicon Valley. You show up with a deck and there’s a frenzy of interest. In actuality, there was way more rigor than anyone had let on.
From April to July, the Vivun team continued iterating on the product based on customer feedback and achieving several key product development milestones such as launching integrations to platforms like Jira and GitHub, rolling out their native mobile apps, and investing in ease of setup and administration to let customers get started immediately. They worked out how much money they wanted to target for their raise based on the goals they wanted to achieve in the seed stage. They worked backward from that number to create an operating plan and calculated financial projections that showed how the company would drive toward the $1M ARR mark they had heard investors would be looking for.
The Vivun team made sure they did their homework and scoured online databases like Signal, Pitchbook, and Crunchbase to research investors, filtering by factors, including:
Based on this research, the team came up with a shortlist of potential investors. Part of the advice they received was to go through warm introductions where possible, so they focused on tapping their network to see who could provide a warm introduction to the target investors on their list. At first, they mistakenly engaged with a few firms through the 'front door' (i.e. through a request to meet from a junior member of the investment team). In hindsight, Matt notes that more often than not, those meetings and cycles were wasted effort vs. getting directly connected to Partners at the firms.
By July 2019, Vivun had a strong founding team, working product, and traction with an early set of impressive customers like Flexera, Xactly, and Harness. They felt ready to begin the fundraising process and began arranging intro meetings with their first investors.
One initial mistake the Vivun team made was thinking they could engage with investors who were looking for Series A milestones. Matt found that while many investors claimed to be “early stage”, what that often meant in practice was that they wanted to see clear evidence of product-market-fit, most easily demonstrated by at least $1M in ARR (annual recurring revenue). This was a milestone the Vivun team had not yet reached. They knew they didn't have the $1M in ARR, but thought that early customers, product traction, and a detailed plan for getting there would suffice. As Matt recalls:
"We would have 2-3 meetings with each investor. They would call our customers for references and push us on our revenue and operating plans. There was very little transparency throughout the process. No one would ever say no. They just said, ‘It’s not the right time for us,’ or ‘The conviction isn’t there yet.’ We burned 4-6 weeks talking to the wrong investors. It was probably one of the most frustrating moments of my professional life."
This “false start” cost multiple weeks in wasted effort. Looking back now, Matt stresses the importance of knowing where to start and engaging with the right investors during the seed stage. They had introductions to great investors, but it was the “wrong place and the wrong time”, resulting in several wasted cycles on meetings that ultimately went nowhere.
After July’s false start, the Vivun team regrouped in August and adjusted their strategy. It was clear from those early meetings that investors were having a difficult time understanding their vision as a category-creating company building something completely new. The Vivun team quickly realized they would need to do a better job targeting investors that were true company builders and comfortable with investing at the earliest stage. With that goal in mind, the Vivun team arranged meetings with multiple angel investors based on recommendations and relevant industry experience. They moved forward with three of those angels who then lined up 20 meetings for Vivun and helped introduce them to more stage-appropriate seed funds. Around the same time, Vivun received an introduction to Unusual Ventures through Harness, one of their existing customers.
The Vivun team was transparent with all investors about their timeline and wanting to timebox their fundraise into a four-week window. They didn’t want to stagger the meetings in multiple waves, knowing this could drag out the process and give investors the upper hand by letting the market price the round. Instead, they focused on meeting with everyone quickly and working the round to a close.
Throughout their fundraising process, the Vivun team started to get a better idea of their ideal investor. After struggling through several meetings with investors who didn’t understand their product or market, they knew they wanted an investor who had domain expertise in the Enterprise B2B space, who was familiar with the role of presales. They started to accelerate the process with investors who fit that criteria and crossed off investors who didn’t.
As for the pitch itself, they started with 20 slides. 40 revisions later, they whittled that down to a handful of slides. As Matt recommends, “Don’t over rotate or over complicate all the slide work.” According to Matt, investors were interested in the origin story, their backgrounds, and why they had a unique insight that others didn’t. When they told that story really well, they had great meetings every time.
Pro-tip: Having a product in the market already can extend your process because people want to talk to your customers. If you’ve made those customers happy, it can collapse the process. You know those are the references they’re going to lean on the most so you can short circuit that. Matt notes that if he could go back, he would’ve tried selling to portfolio companies of the firms he wanted to pitch.
By September 2019, their pitch deck and ability to tell the story were top notch and several high quality investors made offers to lead the seed financing. They had narrowed those offers down to three firms, including Unusual Ventures. The Vivun team had 1:1 conversations with the Partners at each of the potential firms and discussed the key terms with their attorney before they made a decision.
For Vivun, there were several factors they took into consideration when making their choice of which VC to partner with. One big concern for Vivun was the level of engagement. Some firms were intriguing to the Vivun team, but too structured in their approach: the Partners at these firms wanted weekly meetings, action items, retros, etc. The Vivun team was put off by the amount of structure and overhead. On the flip side, other firms had too little structure where they offered a check and network, but not much else. Matt and the team felt like they couldn’t really trust that these firms would be there when they needed help. They also wanted a firm that was set up to help them with the goals they had for the next 18-24 months and would be fully committed to their success.
Matt’s advice is to find an investor with the level of engagement that is a good fit for you—there is no one size fits all when it comes to a VC partner. Check with a couple of founders who have experienced that investor at the same stage so you get a sense of how much oversight there is. Talk to founders to understand where things weren’t always rosy, and how VCs reacted. Unfortunately, sometimes oversight tends to go way up when things go wrong.
Financing terms matter and the Vivun co-founders made a list of the things that were important them, including:
As illustrated above, there are multiple factors that might impact a founder’s decision of which investor to partner with. It’s not as simple as taking the biggest check handed to you. For Vivun, the ultimate selling point was Unusual’s Get Ahead Platform (GAP), which offered hands-on help without excessive oversight—the right level of engagement for their team.