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Matt Hunckler

When to Raise Seed Capital (and how to spend it)

Angel has been a member of the Verge community since I can remember. When he first pitched at Verge back in 2010 with his original idea for Smarter Remarketer, he was ready to raise seed capital. 

Since then, Angel Morales has grown Smarter Remarketer beyond  his original prototype and grand ambitions. They’ve grown a huge team of talented technologists, marketers, and operators. They’ve landed huge clients like SkyMall, Wet Seal, and Finish Line.  Oh, and I almost forgot to mention that they just closed a $7 million dollar investment round led by Battery Ventures.

I recently sat down with Angel Morales and Matt Tyner, Director of Finance, to chat about the their first raise of seed capital that started it all. We talk about when to raise seed capital, how much to raise, and how to spend your seed capital intelligently.

When Raising Seed Capital (and spending it), Remember to:

  1. Build a functional prototype to demonstrate to seed investors
  2. Land at least one early customer
  3. Spend seed money tactically
  4. Invest seed capital in sales leadership

What questions do you have about when to raise a seed round? What have you learned along the way?

Learn more about seed funding and startup fundraising at The Innovation Showcase on July 10. Grab your all-access pass here: http://theinnovationshowcase.com

When to Raise Seed Capital (Transcript):

We’ve transcribed this interview for your reading pleasure. Let us know what you think!

when-to-raise-seed-capital

Angel Morales:

Angel Morales, cofounder of Smarter Remarketer our Chief

Innovation Officer. My job day to day is to keep tabs on where the industry is moving, keep tabs on where our product is at, and make sure the two hopefully intersect (frequently and meaningfully).

Matt Tyner:

Matt Tyner, Director of Finance here at Smarter Remarketer. Day-to-day always changing. Started out in the accounting and finance focus of the business. I assisted and led fundraising here.

Matt Hunckler:

When did you guys decide to raise seed capital and why?

Angel Morales:

To raise seed capital we were a team of four. And it was right around when I started to run out of money (which pretty quick). And we knew that there was a market opportunity. We knew that to capitalize on it you needed to build.

In a previous start up I had tried to raise money on a slide deck and a promise… and a smile (not necessarily an award-winning smile, but a smile none-the-less).

It didn’t fly so we decided that this time around we’re going to go out we’re going to build a rapid prototype. We were going to prove out the validity of that prototype by getting one client.

We achieved that and then we knew that to commercialize we needed to start raising cash.

Matt Hunckler:

In terms of your seed capital when you guys raised it… How did you spend it? And if you could do it again, would you do it differently?

Angel Morales:

That’s good. Honestly, you really don’t have any choice but to spend seed capital pretty tactically.

We primarily spent on building the commercial product that was based on the prototype. Early on, I mean we were fortunate. We had a lot of relationships in our target vertical, which is retail. So, we didn’t have to spend a lot of money on sales and marketing. It was more like, we can pick up the phone and go, “Hey, we finally built it!” And they were in.

So the early, early-stage seed money, it was spent really tactically primarily on R&D and then getting out to a couple of conferences. Airfare to fly out on meet with some prospects.

As you move a little past that early, early seed (funding) … where we were actually sprout … that’s where the challenge that we encountered, and Tyner was with us at this point, but we were raising just enough to act tactically when we should have been able to raise more money in one point so that we could act more strategically.

We can take some of the risks that were required in order to grow a business versus to sustain that really sprout-level company. And frankly, you know back then it was pretty hard to raise money in one fell swoop here in Indy.

Matt Tyner:

To add to that a little bit, we talk about what we would have done differently if you had a chance… The importance of sales leadership I think is something that really stands out to me as a potential growth area.

Your need for funding obviously decreases when you can bring money in the door. So really focusing on sales talent early on in sales spend areas I think here as vital as anything else …. especially as we talk about valuation these days and ultimately what happens when you go raise more money).

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About Matt Hunckler

Matt's a founder and organizer at Verge. He's a connecter, writer, and habitual start-upper.
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