Our Roller Coaster $1.6m Seed Fundraise
Failed FOMO fundraising turned around in the eleventh hour.
In the world of startups, success stories often take the form of triumphant headlines, celebrating multi-million-dollar fundraising rounds and subsequent popped champagne.
These stories make it all seem straightforward – a tale of brilliant founders, soaring traction, ingenious solutions to problems, and bold plans for the future.
However, what these narratives lack is the grueling and unpredictable journey that precedes the funding victory. They lack the reality of the road that led to the fundraise. The long. Windy. Road.
This is our untold raw fundraising roller coaster story.
This is the eleventh part of my Megacool startup journey. Here's an overview of the full series:
Part 1: How the Megacool journey began
Part 3: Embracing Failure – How we tested 10 different startup ideas over 10 weeks
Part 4: Hackathon 1-3: From AI travel agent to photo management adventures
Part 5: Hackathon 4-7: The messy middle
Part 8: How we built our co-founder team
Part 9: From idea to live product
Part 10: Our bootstrapping hustle
👉 Part 11: How We Raised $1.6m in Funding 👈 YOU ARE HERE
Part 12: How we got acquired
Part 13: From Alpha to Acquired: The product, growth, and business model journey
Part 14: The emotional founder roller coaster
Part 15: The epilogue: Reflections on the whole journey
In the summer of 2015, my co-founder, Nicolaj, and I embarked on a journey to build a billion-dollar company, leaving the clean streets of Norway and its functioning welfare system behind to embrace the shit-filled streets of startup Mecca: San Francisco.
The summer was spent prototyping what our company would become by running ten hackathons. With enough savings to sustain us for two years, our initial plan was to delay fundraising until we had identified our unicorn potential, launched and had strong traction. However, due to dwindling currency exchange rates between the Norwegian Krone, where all our savings were "safely" stored, and covering the living expenses for our newly joined third co-founder, Tarjei, our savings would only last us til the summer of 2016.
We wanted to solve the enormous problem mobile game companies faced: how to scale their user base cost-effectively.
In this part, I'm sharing my struggles and introspections during our fundraising odyssey from the fall of 2015 through the summer of 2017. It delves deeper into the distinct phases that ultimately led us to secure our crucial seed round. I'll also be sharing overall fundraising reflections at the end:
Preparation: Crafting the Masterplan (Oct-Dec 2015)
Phase 1: The Wild Fundraising Odyssey (Jan-July 2016)
Phase 2: The Sequel: Fundraising Strikes Back (November 2016-March 2017)
Phase 3: Third Time's the Charm (May-July 2017)
The Enchanted Epilogue
Preparation: Crafting the Masterplan (Oct-Dec 2015)
Fundraising Strategy
"Discussed our seed funding strategy seriously today. We're going to actively work towards it if we don't get a positive response from YC." — Journal entry from 2015-10-04
Our hopes were initially pinned on securing a spot in Y Combinator (YC) — the elite Silicon Valley startup accelerator. However, the universe had different plans. Michael Seibel's (YC partner and Twitch co-founder) rejection email was a masterclass in being polite while kicking our startup dreams gently to the curb. Despite the rejection, we had promising customer leads and a working MVP. We were determined to prove YC wrong.
Leaning on advice from other successful startups and disregarding or short ~6 months left of savings, our fundraising strategy emphasized playing "hard to get" to create a sense of FOMO (Fear of Missing Out) among potential investors. We would say that we weren't fundraising yet and were trying to get interest from top-tier Silicon Valley VCs and European gaming VCs.
We planned to raise $1.5m on a $6m SAFE note1. We had landed on $1.5m, as that would give us an 18-month runway for 3-6 additional team members working from SF. We decided on a $6m cap as that would dilute us 20%, average for a seed round at the time. Detrimental in hindsight, we were recommended not to give any discount or special treatment on the SAFE.
Relationships
While focusing on our product and gaining traction during the fall of 2015, two Norwegian Silicon Valley-based VCs, Alliance Venture and Norselab, snatched meetings with us.
These VCs were impressed because most Norwegian startups pitching them weren't initially thinking globally, and they usually planned to leave the fish and the fjords after securing funding.
We stood out by being more ambitious and forward-thinking:
We had a US company from the start, as US investors only invested in US entities.
We had our visas squared away.
We had known credibility from our explosive organic growth of the Fun Run mobile games to 65 million downloads and reaching over 15% of the US population.
In their eyes, we were doing 'everything' right.
Despite their lack of experience in the games industry, these VCs showed an early interest in participating in our funding round once we began raising capital, as they believed in us as a team.
During the Alliance meeting today, they asked how big this could be.
Us: "We're going big. This is no lifestyle business.
Alliance: "How big?"
Us: "We're aiming for billions."
Alliance: "Dollar or NOK?"
Us: "Dollar"— Journal Entry from 2015-10-29
We also met with our ideal gaming VC during our intense development phase, whom I'm nicknamed 'Dream VC' in this post. The Dream VC had a great reputation among gaming startups and knew us from our Fun Run days.
"Had a really good meeting with Dream VC today. They asked us straight if they could invest in us." — Journal Entry from 2015-11-24
Blinded by the 3/3 "can we invest" VC meetings during the fall of 2015, we entered 2016 thinking fundraising would be easy.
Phase 1: The Wild Fundraising Odyssey (Jan-July 2016)
We didn't want to "waste" time if we could fundraise without too much preparation. At this stage, we thought early-stage investors were all about the team. We planned to pitch the Dream VC first and "take it from there" to close our round by March-April 2016.
If only there were a way to go back in time and alter our approach...
We were in for a rude awakening when we waltzed into our first real pitch meeting with our Dream VC in January 2016. Armed with casual confidence, we showcased our product, recounted our progress, and boldly skipped the tedious task of crafting a pitch deck. They expected clarity around growth forecasting and our business model. Unable to answer their piercing questions as detailed as they needed to actually want to invest, we left the meeting feeling like someone had pulled down our pants in front of the whole school.
Despite our initial poor pitch impression, we continued updating the Dream VC's team, not taking “no” for an answer. We met in San Francisco at the Game Developer Conference (GDC), but during our 30-minute slot with their new investment associate, none of the partners showed up, making it clear we wouldn't make timely progress despite our improved preparation.
Crafting the pitch deck
"As we were stepping off the bus, Nicolaj turned to me and said: "We need to have the pitch deck ready by the weekend. For each day that passes, we lose one day we could get closer to an investment." There's so much time that's been "wasted" on other things. It feels like he's disappointed in me and wants me to push myself further." — Journal Entry from 2016-02-08
"Have mixed feelings about fundraising. I feel like it's easy to present our case to investors in a sincere and trustworthy way. However, when I'm sitting down with the pitch deck, it's extremely hard to do the same. Why is that? Why is it so hard to put words on paper and make the slides tell our story in a convincing way?" — Journal Entry from 2016-02-18
"I keep struggling with conquering the never-ending big "pitch deck" beast. It's never-ending and never good enough. I feel powerless. How can I push myself to do everything and feel "a jour" enough to take Sunday off to recharge?" — Journal Entry from 2016-03-25
Crafting our pitch deck was a real challenge! While Nicolaj was deep into development, I took the reins on creating it. My previous experience with pitch decks was limited to flirting with them during the Fun Run days. I felt like Sisyphus. It was a constant struggle, forever pushing that boulder up the hill. It was never done.
Getting introductions — a race against the clock
The initial two months involved hinting at an upcoming fundraising round to create anticipation, attract preemptive investments, and build our network among investors. In our early meetings, we asked for feedback and introductions.
These introductions often took an entire month to materialize. At first, we didn't know how to speed up intros (tip: send an email to the person doing the intro and include why you want the intro and what you're doing. This makes it easy to forward the email with added context), and then it took time for the actual meeting to happen as VCs are busy.
Once these meetings materialized, I had 5-10 VC pitches a week. We got to pitch most of the early-stage VCs we wanted, but the feedback usually that we were too early. Surprised as we pitched ‘early stage’ funds for our Seed round, we later learned that the definition of 'early stage' had shifted from Seed to the Series A stage2.
"How can I appear confident when pitching when I don't have all the answers?" — Journal Entry from 2016-03-07
"We really need to figure out how to answer questions about our business model. Everyone keeps asking about it. Why can't we just get some funding so we can figure it out?" — Journal Entry from 2016-03-08
"I made a huge blunder during today's pitch. I hadn't done enough due diligence on [potential VC] and didn't know he'd built multiple games-related companies! My questions made me look like an unprepared fool. But as Tarjei said, it's important to learn from it and move on." — Journal Entry from 2016-03-30
"Had two really good meetings today! Feels like things are becoming more clear. The future discovery channel for apps on messaging channels! It's genius! And it's been so exciting to be working on the psychology aspect of this too. I've just one thing to say: THIS IS EXCITING! THE FUTURE IS EXCITING! AND I LOVE IT! VERY MUCH! And yes. I've had one very strong beer to drink prior to writing this…" — Journal Entry from 2016-04-15
Y Combinator
We reapplied to YC's 2016 summer batch, highlighting the progress we had made since being rejected in the fall of 2015.
We recorded our video, submitted our application, and crossed our fingers for another shot at the Ivy League of startups.
Yet again, were we invited into the lion's den. This time, it was with the then YC partners Justin Khan (also co-founder of Twitch) and Sam Altman (founder of Open AI).
"It was clear that Sam [Altman] didn't like to receive SMS, and not the least from games. They also didn't believe our numbers were strong enough to get interest from game developers." — Journal Entry from 2016-04-18
Receiving yet another "it's you, but maybe me too" rejection email only fueled our determination to prove YC wrong.
✅ Close 1: Norselab
One of these first 'ask for feedback and intro' meetings in February was with Norselab. They really wanted to participate in the round.
We formally pitched them in March and had a total of 12 (!) meetings until we agreed to a $200k sweat equity deal, and the money hit the bank. In addition to spinning out companies and investing, Norselab had a large, talented team of engineers and designers on staff. Their investment would be crucial to help speed up the product development.
"Proud of my negotiation abilities with Norselab today. Used a whiteboard to exemplify each negotiation point and was able to to get our points across and agree." — Journal Entry from 2016-04-19
As we didn't offer any discount on the SAFE, we gave them provisions to get the same terms as others coming later to the round, should they be considered better. Thanks to Norselab, we were excited to move faster on the engineering side with their resources!
Desperation
"We received two rejections today. More and more speak about fundraising as a numbers game. It really helps to hear about all the successful fundraisers out there who also had to pitch numerous investors before someone said "yes."
I really wish we had started earlier building relationships with investors rather than focused heads down on building the product/figuring things out. Especially since everyone says it's the team they invest in and not the idea." — Journal Entry from 2016-04-04
As we got closer and closer to our doom day of summer 2016, our expenses exceeded our expectations. On May 10th, 2015, I had just emptied both our business and my personal savings account, and a promising VC lead wrote to tell us that they wouldn't be able to invest until the summer—at best. They believed we had enough funds to reach our next milestone without them.
"Receive the 'it's me, not you' decline from [potential lead investor] today. Felt like a real smack in the face." — Journal Entry from 2016-05-10
I was so stressed that I sat down to pour my heart and head out and into a retrospective for the round so far. Even though I felt hopeless, I wanted to capture what I wish I had done differently when fundraising for the first time.
During this time, I got desperate. And it showed. I was like a dog spotting a squirrel whenever I encountered someone titled 'investor.' I treated anyone and everyone as a potential target for investment.
"This is so freaking hard to do. It's the hardest I've had to work. Ever! It's the toughest mental challenge I've faced. I'm now at a point where I'm truly questioning my own abilities to lead a company, do sales, and close funding. I really want to do this. We're tackling a huge problem in the games industry, and I so want to solve it!" — Journal Entry from 2016-05-26
✅ Close 2: Alliance Venture
Alliance Venture became our fairy godmother. Even though they had indicated an interest in investing in us back in the fall, our experience with the Dream VC had taught us never to ass-u-me.
"Started the meeting with Alliance to have them tell us: 1) What they remember about us and 2) What makes them excited about us. Both answers were really exciting and motivating to hear." — Journal Entry from 2016-02-04
We had a catch-up call with Arne, their San Francisco-based partner in early February. To ensure we didn't miss the opportunity, we followed up and expressed our readiness to start the process sooner than mentioned initially 'in a few months.'
"Exciting pitch meeting with Alliance today. Don't think it could have gone any better. They are still a bit unsure of our discovery angle but think we'll figure it out." — Journal Entry from 2016-02-25
We had five meetings with Alliance, and on May 5th, they confirmed their investment of $300k, pending approval at the June 18th investment committee meeting. Their terms matched those of Norselab as early backers, preventing future investors from receiving more favorable terms.
"Woke up to a message from Alliance Venture announcing they will invest $300k in us!!!" — Journal Entry 2016-06-18
We were so grateful to receive the $300k in fresh capital in July 2016 and finally start to run payroll. At that point, we'd gone 13 months without pay, and our accounts had dried up.
Phase 2: The Sequel: Fundraising Strikes Back (November 2016-March 2017)
In October 2016, Norselab and Olympic alpinist winner Aksel Lund Svindal (also a partner in Norselab) invested $50k each. That made our total investment to date $400k in cash and $200k in sweat equity. The capital allowed us to take a few months' breather from fundraising and focus on getting our product to beta.
During October, we were also approached by a new angel investor who wanted to invest $50k. We wanted it, assuming the process would be smooth and the terms would remain the same. We sent the documents for signing and had dinner to get to know them better.
That turned out to be the wrong order of events.
During the dinner, it became clear that our values were misaligned, and we started due diligence. It confirmed our red flags, and we pulled out at the eleventh hour. When calling them with the change of direction, it naturally wasn't well received and made us look bad. It was emotionally draining. We'd really needed that money but were proud of how we listened to our gut and values.
The whole team was pulled out and spent at least three full days distracted. This taught us always to do due diligence and that there's no such thing as a free lunch!
As November came upon us, it was again time for another fundraising push. This time, we specifically targeted six funds we had pitched previously. Our strategy was to ask for a catch-up meeting and share that we were raising up to $1m in additional funding.
We met with four out of the six and started due diligence with two of them. In addition to sending them a budget, projections, data, and strategy docs, they interviewed our customers.
Despite botching our first pitch meeting, our infamous Dream VC from the prior phase was impressed with our progress and tenacity:
"Later that evening, one of the partners from our Dream VC came over to say that we have one of the other partners very interested, while he is still on the fence due to defensibility." — Journal entry from 2016-11-30
During this process, we met with our Dream VC nine times and juggled piercing questions from all three partners and their sharp associate.
The other fund, let's call them Non-Gaming-Large-VC (NGLVC), was introduced to us right after we closed the initial investment in July 2016. During our first meeting, they said: "What I liked instinctively from what you sent through: CPI is such a drain and pain. The industry needs to find the secret sauce. Maybe that's you!"
We had four meetings with NGLVC and met two partners and one associate.
After months of discussions with both VCs, our Dream VC remained concerned about our business model and defensibility, while NGLVC believed we were too early and needed further validation:
We did speak with other investors during this time as well, but it didn't pan out to something tangible.
In March 2017, we paused our fundraising efforts to focus on generating revenue. Although our runway didn't let us see beyond the summer, our lack of revenue was a pressing point of feedback at the time—the macro investment climate preferred revenue over growth.
Phase 3: Third Time's the Charm (May-July 2017)
In late April, the CEO of a major game studio with whom we had our first paid agreement messaged me, asking for a 5-minute chat.
"Hey, my devs really admire your product. Devs usually dislike SDKs, but they respect yours. We share a vision of creating an alternative to the ad market. Could we speed up reaching our shared vision by joining forces? Are you interested in joining us to develop Megacool together?"
Among all the doomsday scenarios I had imagined before the call, an acquisition inquiry hadn't crossed my mind. I was stunned and simply responded, 'Let me discuss this with the team and get back to you.
The team was torn. Stability was tempting, but wasn't it too soon to be acquired? We were still in alpha!
In the following weeks, as we continued discussions about the acquisition, I used it to revive past conversations with potential investors. I sought advice on how to handle the acquisition decision, hoping it might generate interest from other investors or spark a competitive process.
As a founder, I saw this as a chance to create opportunities. I had previously played it too safe, but now I realized that having multiple options and competition would be in our best interest.
Unfortunately, no other investors were interested because we needed more time to address their previous concerns properly.
Luckily, Alliance Venture again came to our rescue, becoming our real MVP!
"It's crazy how fast the wind can turn! Arne said Alliance is interested in joining the round with a larger amount so we could 'muscle up'. They said it was too early to sell and that this was one of the 'triggers' they had been waiting for. Felt at once how a huge burden was lifted off my shoulders, even though I know that money is not in the bank until they are in the bank. For the first time, I am able to look beyond the summer." — Journal Entry from 2017-05-12
"The day before the day! Alliance has its board meeting tomorrow to decide on the investment. If it falls through, I still think this has been a hell of a ride, and I'm immensely proud of what we've achieved together." — Journal Entry from 2017-06-15
Alliance took the whole $900k round. With angel participation of $100k from their board member and Opera Software CEO, Lars Boilesen, this injected $1m in fresh capital, with a total SAFE investment of $1.6m.
The happy news was shared with the world in July of 2017 with an article in VentureBeat3 sharing how much we'd raised, introducing our product and why.
Of course, what's missing from the story was the extremely mentally draining windy road that led to the conclusion of raising our seed round. You have read it here instead.
The Enchanted Epilogue
The irony is not lost on me: we moved from Norway to SF, set up a US company to attract US investors, but in the end, raised our seed funding from Norwegian investors. The reality was this: even though we were someone back among the fish and the fjords, we were no one among the elite entrepreneurs with pedigrees from MAANG and Ivy League schools.
Our 'privilege' remained on the Norwegian shores.
Instead, we learned so many valuable lessons. Among them:
Start building investor relationships from the get-go and ask them: "What do you need to see for this to be an attractive investment?" and "Who else should I talk to?"
Transparency and clarity in communication are essential when dealing with investors. Choose terms that incentivize early backers.
Fundraising is an ongoing process; it never truly ends until money is in the bank.
Persistence is key. Don't take a "no" for a final answer; follow up, show progress, and keep investors engaged.
Once we secured the funding, it became clear how much of the team's mental capacity had gone towards it and worrying about basic needs like food and a roof over our heads. The fresh $1m gave us fuel for 18 months and grew our team to 7 people.
But that's a story for another time.
Fast forward to after we got acquired by Medal and participated in raising $60m in total for their B and C rounds, I observed Pim de Witte, our CEO, exceptional fundraising skills. Several key aspects of his approach stood out:
Velocity and Tenacity: We exhibited remarkable speed and persistence by following up promptly, often within 24 hours, even if we weren't fully prepared with materials.
Charismatic Storytelling: He possessed charisma and storytelling abilities, presenting his narratives with unwavering confidence and positioning himself as an industry expert.
Conviction: When he held strong convictions, he confidently defended his stance, even when investors challenged or disagreed with our approach or market outlook.
Fresh Start: He approached each meeting with a clean slate, leaving behind any emotional baggage or mood from previous meetings.
Nicolaj, Tarjei, and I are all extremely grateful to Alliance Venture, Norselab, Aksel Lund Svindal, and Lars Boilesen for their trust in us through this roller coaster.
A special thanks to those who gifted their time to provide feedback on this long read 🙏 Will Mannon, Leo Hepis, CansaFis Foote, Tiff Willson, Miche Priest, and Gautam Deviah.
A "Simple Agreement for Future Equity" (SAFE) is a legal contract used in early-stage startup financing, allowing investors to provide capital in exchange for the promise of future equity when a priced round of funding occurs.
Seed funding is the initial capital injection provided to a startup to help it get off the ground. It typically supports product development, market research, and initial business operations. Today, there are also “Pre Seed” rounds, even earlier than Seed.
Series A is the first significant round of financing that startups undertake after the Seed stage. It helps companies expand their operations and scale their business. B2B usually has substantial revenue numbers indicating produce market fit and needs financing to scale.
Lars Boilesen's investment came a few days after the announcement and is therefore missing from it.
Wow! The addition of the visuals is amazing. Well done - loved jumping on the rollercoaster ride of fundraising reading this article
I really enjoyed this read, Aurora. It's good to see that this rollercoaster journey isn't unique to us and I can relate to the emotions from your diary notes.