We Did It In Detroit, And So Can You: Fundraising Lessons Learned
As the co-founder of Assembler Labs, a Detroit-based startup studio, I breathed a big sigh of relief after we closed our inaugural round of fundraising at the end of March. It took about seven months of investor meetings, sending around documents, and wrangling signatures, but my co-founder and I looked forward to calmer calendars and more focus on building our business. However, in pursuit of building big, venture-scale businesses, we’ll never really leave fundraising behind.
Fundraising, as an action and a skill, is often critical to launching companies, especially for Assembler Labs. Whether you’re a startup attacking a big market and growing quickly, or a startup studio like us, you can expect to be back on the fundraising trail 12-18 months later. This means you have to get mighty good at it.
From building an investor pipeline, to increasing visibility and creating leverage, fundraising is an exercise in relationship-building, persistence, and communication, sprinkled with a healthy dose of good fortune. I tell the story of how we raised our first round in the hopes that it helps you when it’s time to raise your own investment capital, now or in the future, and demystifies a sometimes-opaque process—especially here in Detroit and, more broadly, Michigan.
Being new to town is hard, but not impossible
Ian Sefferman, my co-founder, grew up in metro Detroit and moved back from Seattle about a year before we started the studio, but I was (and still am) new to Detroit. One investor cut to the heart of it when he asked us, “You’re both relatively new to Detroit—what makes you think you’ll be able to build a network to not only recruit founders, but even get this off the ground?”
Great question. Fortunately, we had some advantages: Ian’s dusty, but not completely dormant, Detroit and Michigan relationships; the assistance of Techstars; an attitude of confident näivete; and a modest, but growing, willingness to get out there and meet people.
Before I even crossed the Michigan state line, Ian had begun poking his head into the Detroit startup scene. He reached out to VCs in the city, had a lot of coffee meetings we’d debrief on afterward, and started meeting founders working on their own companies. Simultaneously, we tapped our Techstars alumni network (Seattle Class of 2012 in the house) and got involved with Techstars Detroit, which exponentially opened up (and continues to expand) our network.
From there, it was all about meetings, asking those people who else we should talk to, and more meetings. We ended up meeting or talking with a little over 400 people, of which 150 were potential investors. Yes, our calendars were fun to look at.
The 150 potential investors were mainly angels, with a handful of VCs mixed in. We found that most VCs had mandates that prohibited investing in LLCs or non-traditional startups (like studios), but former founder/operator angels totally got what we were trying to do and were excited. They didn’t have a limited partner’s structural constraints and wanted to strengthen their connection to the Detroit startup community through our studio.
In the end, we raised money from 21 fantastic investors. We faced plenty of rejection—94 said no—but are happy with our 14 percent close rate and our capital raised.
If we were to do this over again under the same circumstances, I think we’d aim to double the potential investor pipeline, which probably means networking even harder/smarter and meeting with 600-800 people.
Barely two weeks after we left our jobs, I remember Ian and I discussing our media strategy. I felt like it was too soon and we were way too unproven, while Ian thought we needed to launch publicly as a way to get some attention. All we had was a website, a Google sheet with some business ideas/problems, and a pitch deck. We didn’t have a spinout business, we hadn’t (in)validated anything just yet, and we weren’t even in the same city: I was still in Seattle and Ian was in Detroit.
Man, was I wrong. What we had was enough for a compelling narrative. I didn’t see that our Detroit focus and me physically moving to Detroit was sufficient to pique some interest. Five weeks after we left our jobs, we were written up in three publications: Geekwire, Crain’s, and Xconomy.
Those three articles led to people reaching out to us and, in a round-about way, to 11 percent of our fundraise (and to meeting a handful of potential founders). I historically … Next Page »