Reflections On Closing Our Series A Financing At Estimize
- Posted by Leigh Drogen
- on September 11th, 2012
I just signed the last papers which close a deal to raise about $1.2M in Series A financing for Estimize, the company I started with Matthew Jording in June of 2011 after leaving StockTwits and shutting down Surfview Capital.
It’s really hard to explain the mix of emotions I’ve been through over the past 18 months. I didn’t want to leave StockTwits, I wanted to build Estimize there, but Howard pushed me out the door, and I’ll forever be thankful to him for that, no matter what the eventual outcome is. My girlfriend of about 9 months didn’t quite see it the same way at the time. I was madly in love with her, but she was weary of me starting another company, she knew the odds and the emotional toll it would take on me. She stuck with me anyway against better judgement, but I guess that’s what you do when you’re in love.
A few members of the StockTwits community, some silent, gave me about 100K to start Estimize in return for convertible notes, knowing that there was a high risk of failure, along with the fact that the 20% discount they would be getting on the eventual Series A valuation wasn’t much reward for that risk. I’m not sure many of you can understand what it’s like to have people put that much faith in you, your vision, and a really shitty pitch deck, it’s not like raising capital for a hedge fund, that was easy emotionally. It meant a lot to have these guys back us.
We executed horribly over the first 6 months, I mean it was awful. I made a lot of mistakes that first time founders make, and it hurt us. My co-founder wasn’t the right person to start the company with for various reasons. We ran out of money right as we were launching, he almost left the company, and I got shingles from not eating or sleeping. There’s a Business Insider article about our launch where they had to massively airbrush my face.
We got a product out the door though, three months after I had wanted to. It was riddled with bugs and held together with duct tape, but it worked, and so did crowdsourcing earnings estimates from the social finance community.
It worked, and now I had to make the company work.
Matt left the company and on the back of our stats and interest from a few quant funds in our data I was able to raise another 100K. For two months our junior dev Jesse Youngmann held things together, what a genius that kid is.
We found Brian Smith in March, an amazing full stack developer from San Diego on Angel List who had recently built an amazing product called QRawr, but didn’t have a business model for it. Somehow I convinced Brian to take Matt’s spot, and bring his former colleague and front end dev Adam Patten with him.
We had a team, and finally had an office at WeWork Labs.
By that time I had been rejected by at least 20 venture groups. I had no clue how to raise venture capital. A few of our investors and an advisor sat me down like a disappointed father talks to his kid after a bad play on the baseball field and told me I had to learn, fast.
So I did.
I’m not the smartest guy on earth, not even close. But I’m great at three things: synthesizing massive amounts of information into a discernible story, seeing patterns and trends in data, and learning new skills quickly through imitation.
In mid April my team really started to execute well on the product side, and our metrics blew up, the venture groups started calling, and I was introduced to a friend of one of our investors, Irving Fain the founder of CrowdTwist. Irving taught me the rest of what I needed to know and walked me hand in hand through the capital raising process. I would have screwed it up again without Irving. A lot of people think that there’s just this flood of money out there for early stage startups and that valuations are through the roof. If you approach the VC game the right way, this can be true, it’s a great time for entrepreneurs for many reasons. But just as easily, good companies won’t get funded because it really is a game you have to play correctly to get funded.
We started selling data and had revenue, we also had a rapidly growing community and interest from some serious strategic partners. I was invited to meet with some amazing people at almost all of the top financial media and data firms, it was a torent of information and opportunity thrown at me all at once. And there was the classic advisor whiplash that many entrepreneurs talk about, everyone throwing their different perspective at you. I inhaled as much of it as I could while holding fast to my core beliefs and vision for the company and the platform.
The venture firms and angel investors that funded us were the perfect fit. We signed a term sheet with Bob Greene from Contour Ventures who was a major investor and board member at Multex. Jim Savage from Longworth is a large investor in uTest. These guys deeply understand financial data and crowdsourcing. We also raise a few dollars from other members of our community, something I am really happy for. I would love to do a crowdfunding round some day, even at a small scale, so that the community members who contribute to our platform can own a piece of it. I wish I had that chance at Airbnb early on, hell, I wish I had that chance today.
We had an amazing Q2 earnings season with all of our numbers moving in the right direction and our product really taking shape.
And then my girlfriend threw me out, after more than 2 years, after 15 months of putting up with me running this company, after all the ups and downs, she couldn’t do it anymore. I wasn’t the same person I was 15 months earlier, I had put all of my energy into this company, and often there wasn’t much left at the end of the day. I lost someone really special and important to me. I highly doubt….no I’m absolutely positive there’s no way I would have gotten this far without her there.
I’m still heartbroken and haven’t yet figured out whether the sacrifice was worth it. I know I’ll regret losing her forever, but things heal with time, I’ll always love her and be grateful for what she gave me, a lot of love and a lot of support.
I’ve never been through the volatility of emotions like I have over the past 15 months. I knew the base rate statistics on the probability of us failing going in (high), and like every entrepreneur I did it anyway. Throughout the whole process I focused on one thing though, doing it as clean as I could. Succeed or fail, I wanted to be able to say I did it clean. There’s no shame in failing, especially in this game, that’s hard to control, but you can control doing it clean and putting everything you have into it, refusing to quit until it works, because I knew eventually it would work.
Raising our Series A financing is just one more step in the process that we laid out when we started building this company and this product, trying to disrupt something significant in the financial world. There is such a huge opportunity in building the first open financial estimates platform, from a business standpoint as well as how many broken institutions we can disrupt. This financing helps to provide the tools and talent to implement that vision.
We have a long way to go towards being what I would deem a success, but to have an amazing group of investors backing you who believe in your vision and ability to execute on it is something to celebrate. You have to celebrate your wins, because there will be a lot of losses along the way too.
I’ve learned a lot of different lessons and I’ve got a lot of different stories to tell from the past few years. Some I can share now, some will have to wait.
Now, as Chris Dixon likes to say, the clock starts ticking, the expectations go up, we need to raise our game again.
Thank you for believing in our vision, I’ve burned a lot of the social capital I had built up the previous few years and I’m going to burn a lot more before it’s over, I hope I can repay it sometime soon.
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Leigh Drogen is the founder and chief investment officer of Surfview Capital, LLC, a New York based investment management firm employing an intermediate term long/short momentum strategy. More »
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