App de­vel­oper shares the straight dope on get­ting cash

Ottawa Business Journal - Techopia - - Front Page - BY CRAIG LORD

Chris­tian Des­jardins, founder of Punchtime and L-Spark in­cu­ba­tor grad, re­cently went through a sec­ond round of seed fund­ing for his SaaS com­pany. What lessons did he learn from his first round? Techopia got the scoop.

What was your strat­egy go­ing into dis­cus­sions?

“We got a lit­tle bit lucky, I guess. In hind­sight, I would say, I don’t know if I would’ve jumped on board so quickly. We gave up 20 per cent eq­uity the first time around, which isn’t a whole lot, but it’s sub­stan­tial. And then you have to deal with the re­al­i­ties of that re­la­tion­ship once you’re in it. It’s just like a re­la­tion­ship with a per­son. You don’t want to com­mit too quickly or blindly be­cause then you might be in for some sur­prises. The sec­ond-time around, we were much more pru­dent and much less will­ing to give up eq­uity eas­ily. And we really got to know the peo­ple who wanted to work with us and wanted to in­vest in what we were do­ing.”

Did you get any le­gal ad­vice?

“Lawyers got in pretty much right away. The lawyer we had orig­i­nally was not ex­tremely well in­formed with th­ese types of deal­ings. He was our guy for all of our ba­sic cor­po­rate needs, that sort of thing. He wasn’t com­pletely out of his league, he did re­view the pa­per­work and it was pretty much stan­dard stuff for the most part but it was a strange deal. The first time we did it, it was an eq­uity deal, but part of the deal felt a lit­tle bit like a loan, which we didn’t really like. Even­tu­ally we changed that and that was part of the com­plex re­la­tion­ship. Definitely get a lawyer, and try to get a lawyer that’s ex­pe­ri­enced, that’s done this be­fore. If our first lawyer had done this many times, it would’ve raised more red flags that we felt like we found out maybe a lit­tle bit too late. They weren’t huge things, but they did bother us, and if we had known be­fore­hand, we would’ve made de­ci­sions dif­fer­ently. Peo­ple who have done a startup and have been through the whole process, those peo­ple are su­per help­ful. Be­cause along the way, they’ve met those peo­ple, they’ve made those con­nec­tions. Learn from their mis­takes as op­posed to hav­ing to make those mis­takes your­self.”

How did you de­ter­mine how much to ask for?

“The first time we got fund­ing, we didn’t have a really well-formulated, well­struc­tured ask. We knew that we wanted to hire a cer­tain amount of hu­man re­sources. We knew we needed to do cer­tain other things that cost money like buy equip­ment, pay rent, that stuff. So we raised about $200,000. From the on­set, I would say, make sure you know who’s pay­ing for the ac­coun­tant and the lawyer fees that fa­cil­i­tate the trans­ac­tion. We ended up pay­ing a whole lot of it, and it cost us a lot of money. All of that money could have gone to more ap­pro­pri­ate ap­pli­ca­tions if we had taken more time to ne­go­ti­ate.”

What ad­vice would you give to some­one look­ing for seed fund­ing?

“Get in­put from oth­ers. A lot of the ad­vice that we got from L-Spark in the be­gin­ning, it’s not that we dis­counted it, but we found some of it com­i­cal and we just didn’t get it. And then in hind­sight, they were ab­so­lutely right. They are peo­ple who have done this be­fore and they were right on the money.

Get your pitch straight, have it su­per prac­ticed, be crit­i­cal about your pitch once you get a load of ad­vice. It’s al­ways more con­vinc­ing if you can show a demo, some­thing that works. Make sure you understand the fi­nan­cials of the startup. Pro­jec­tions are im­por­tant.

Know your in­vestor. That’s a huge part of it. An Ot­tawa in­vestor and some­one from the Val­ley are com­pletely dif­fer­ent. Some­body from Cal­i­for­nia, first of all, the money is much more. There’s a lot more com­pe­ti­tion, and they’re a lot more in­ter­ested in big ideas than they are in MRR (monthly re­cur­ring rev­enue). In Ot­tawa, they want to see real growth, they want to see re­cur­ring rev­enue, they want to see a vi­able busi­ness. Some­thing that’s been tried by real peo­ple that it was in­tended for and it works.”

What’s the big take­away?

Don’t jump in too quickly, take time to re­al­ize what you’re ne­go­ti­at­ing Shop around for af­ford­able ac­coun­tants and lawyers who have been through th­ese ne­go­ti­a­tions Know who’s pay­ing the bill for the le­gal work Find peo­ple who have been through it be­fore and trust their ad­vice Get your pitch straight and make sure you’re shar­ing some­thing com­pelling Know your in­vestor!

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