It’s no surprise that it’s been tough to start and run a new business in the downturn, but Julie Brown of Inner Rewards shared her blow-by-blow experiences raising money over the last year with Collective-E. The full post is worth a read, but here are some excerpts. At this point in the piece, she has raised $765,000 from an angel who proves, throughout the tale, to be just that.
July 2008—I set out to hire a team and get started with an aggressive goal of building and launching a beta site by the end of the year. Because my investor wanted to build a company ready to be fully backed, and given an aggressive timeline to build a full blown site with content and videos, we ended up with a very high monthly burn rate (monthly expenses). I immediately set out to raise more money.
September 15th, 2008—Lehman collapses and the market is in turmoil, every single investor runs for the hills. I have now built up a full staff with 7 employees and 40 contractors and need to raise cash quickly or we will run out of money before I can even launch.
October 2008—I am now fundraising 30 hours per week while building the company. I continue developing the pitch and am going to every networking lunch and dinner I can find in Silicon Valley and New York. I am on the phone at least once per day with a potential investor…
I eventually do get some more investors to come in, but now each investor takes an average of 8 conversations at 90 minutes each, and for every single person that came in many I talked to didn’t choose to invest…
December 2008—In a miracle feat, we launched our beta site, albeit a very trimmed down version, but it was launched.
January 2009– In January, the economy actually got even worse. We launched, which was great, but investors started calling immediately expecting results. Expectations were high and they wanted traffic immediately. Everyone was getting very nervous, investors were scared and they started to pull out. I continued to focus on raising money and my job for at least half of the timewas focused on raising money and the other half was spent appeasing current investors, I didn’t have time to actually run the company. I also needed to keep employees happy and feeling secure, and when I wasn’t there they got nervous and I started to worry that key employees would jump ship….
These were my darkest days and very difficult to muster my own motivation….
Thanks to the angel investor, Inner Rewards eventually makes it through, but the whole experience is harrowing. If you’re thinking of starting a business that requires a reasonable amount of cash, it’s worth reading her story and the takeaway she offers.