Fundraising Tips From Vungle Founder Jack Smith – Hustle Con 2016

How's it going? Yeah, whenever I always thought like it would be really cool going on a talk show because you get your own intro music, and then John was telling me, I don't know how the hell he came up with this song. I was like, I wonder what my intro music would be. But anyway, so my name's Jack. As Sam was saying, like, I Today I advise a few different startups, but previously I'd founded a startup called Vungle. And, uh, yeah, last year I came down and I gave this talk about how I pulled off an insane marketing stunt using LinkedIn advertising to get the last spot at an incubator called AngelPad, a bit kind of like Y Combinator. And that talk's online if you want to check it out. That was quite a popular talk. But Sam asked me to come down and basically talk about, right, what happened after you got into the accelerator. They gave us like $100,000, but what happened afterwards? And I want to also give you guys some tips, like what worked for me, some tips going into seed funding, raising your kind of first round of funding. I know during the Q&A for some of the other speakers, some people had questions on that, like approaching angel investors and stuff. So I want to give you some tips. So to kind of pick up where the story left off, basically it was a Thursday and AngelPad told us, alright guys, you've got the last spot in our incubator. And it starts on Monday. So just get the first flight out to America. We were in London at the time. And it starts on Monday. And so me and my business partner, just the two of us, got on our plane, and AngelPad is basically like, as I said, a bit like Y Combinator, school for startups. You have about 12 companies in each batch. And what they make you do is you basically arrive— we actually had our suitcases, we're like turning up at the coworking space with our suitcases, and the first thing you have to do is pitch your company to all of your other teams sitting down. So we're basically sitting there listening to 11 other companies, and we're quickly realising, like, right, all of these other companies, the founders are, like, the most, like, totally legit engineers. Like, one team, like, they had PhDs in video encoding and worked at Google. One guy had written YouTube's API. and we were kind of the joke of the class. Basically, me, my business partner, we're not engineers, so people were like, "All right, guys, you've got a terrible idea." The idea has changed now, but, "We have a terrible idea, and you've got no one to actually build it. You guys are just going to flop so bad." I actually remember my business partner, early on in the programme, one other team was getting a bit more investor interest, you know, a bit— ahead of other companies. They were kind of feeling bullish, getting investor interest. And one of the founders actually came up to my business partner and he said, "Hey, I'll lead your fundraising round. Here's a quarter, you're gonna need it." And my business partner's like, "So pissed off, man." Like, they're just like going psyched up. And so I just want to tell the story today, like, all right, how did we go from like being the joke of the class to we raised the most money for the seed round at that class. Our seed round was $2 million led by Google Ventures. And then how did we become kind of breakout that's raised $25 million total and the most employees? How did we go from being a joke to the breakout, especially on a fundraising side? And so I want to give you some tips about stuff that we maybe didn't know these tips, but this went well for us and noticed it didn't go as well for some of the other teams. So, to start off, let's see. So, one day, it's a school for startups like Office. One day, one of the founders from the other teams turns up in a pinstripe suit looking like Gordon Gekko, and we're like, "Dude, what are you doing? You're an engineer. You're normally dressing in hoodies and startup t-shirts. Why are you coming in a pinstripe suit? What's the deal?" And he basically said last night, he was talking to the other guys, he's like, "All right, you just see, like, who's an investor gonna invest in? Is he gonna invest in, like, me, like, looking presentable and investable, or is he gonna invest in you guys, like, in hoodies and startup t-shirts, etc.?" But the thing is, what he didn't understand is that, especially raising seed round, it's not a presentation, it's not a show that you're putting on. It's not like, "Hey, let me just dress up." Like, he's in a hoodie, all the time. It's not like, hey, let me just put on my pinstripe suit, I go to a VC boardroom, I like stand up and I do my pitch, and then I'm like, hey, do you want to give me money? It doesn't work like that. They're investing in you as a person and what you're doing. And so basically what he was doing, and what a lot of people raising money for the first time do, is basically it can be quite daunting. It's like, hey, this— these VC XVC, they're managing like a billion dollars under management, and I've just got my tiny startup. We're just getting off the ground. Like, obviously they have all the control. Like, what can I offer them? So startups basically going in, basically they do their pitch and they're like, hey, so what do you think? Do you want to invest? And you're basically just like begging for money, you know. That doesn't make you appealing to invest in. And so the first tip I've got is kind of to just change the dynamic of control that you've got in your head, how you're thinking about approaching fundraising. Don't be putting yourself down and putting them on this, like, another level, like they're like gods, you know. Um, what happened with Vungle— and this is, you can't really manufacture this because VCs, they're going to be meeting hundreds of entrepreneurs a year, right? So you can't really manufacture this, but To give you an example of the complete flip opposite of the last slide, when we were raising seed round for Vungle, initially we only wanted— well, we didn't think we could raise any money, so we started out thinking, "Hey, let's try and raise $500,000." And what happened is, once we got to $500,000, then the meetings changed, because you're going in to meet a VC, and you're talking like, "Hey, this is what we do, blah blah." And they're like, "OK, cool. How much money are you raising?" And we're like, "We're raising half a million dollars." And they're like, "OK, cool. So how much have you raised? How much of the round is left?" And we're like, "Well, we've actually already got half a million." And so they're like, "OK, well, why are you meeting us?" And we were telling the truth, basically, at the time. It was like, "Well, look, we've heard really good things about you, and for the right partner, then maybe we'd like consider raising a bit more money. And so here what you get is the VC is basically having to pitch— the VCs were basically pitching us, like, this is why you should consider raising more and to let us invest. So if you think about the dynamic, the decision-making dynamic from the previous one, an entrepreneur might go in and like, this is what I do, do you want to invest? And VC is making the decision. Here they were pitching us like, would you consider raising more to make space for us? And so we're having a decision to make. So there's the flip opposites. It's hard to manufacture this, but you can at least do more of a level playing field. And so the level playing field is thinking, all right, I'm not going in begging for cash and they're sitting on a billion dollars. No matter who it is, a VC's job is is to be finding cool startups. They're paranoid all the time as well. Like Jason Calacanis spoke earlier, that guy that missed out on Uber and how he's like still upset with himself. His job is to find cool startups like you. And sure, he's got money, or he or she has got money, and you want that, but it's a level playing field. And so you should be having a conversation. And that leads me into my next tip, which is Basically, that for your pitch deck, your fundraising pitch deck, some of the best meetings we had, we never even got the deck out. We just had a conversation. Actually, our series— a VC invested in our seed round and then led the Series A. When we met them, we actually met him in his living room. He was just like in his slippers, and his like 4-year-old daughter's like running around. But that was a great environment because we're— it's, you know, he's not in a boardroom where you're like coming in and giving a presentation. We're in just an informal setting. So going for coffee meetings and stuff like that can be great. And so if you make your pitch deck like a picture book— so this is one of the slides from our seed round deck. You see, it's like big pictures, not much text at all, like maximum like one sentence, like This is like a 2-year-old's book, like a 2-year-old picture book would look like this, right? But the thing is, if you make your deck like this, even if you don't get the deck out, when you're just having that conversation with the VC, you can be thinking in your head. You can be thinking what your slide deck looks like in your head. So you could be like, okay, because it's like a picture book, it's like chapters, right? So you're like, all right, first I'm gonna talk about the team, then I'm gonna talk about the market size, and 'Then I'm going to talk about, like, our traction.' So you can be having the deck give structure, so it feels like a natural conversation, but you've got structure to the conversation because you're thinking about your deck in your head. Some pitch decks for startups, they try and cram all their information onto the slides. You have, like, cash flow forecast and, like, decision-making and, like, so much text. One, no one's actually going to read that, and two, They shouldn't be reading your slides. They should just— this should just be giving structure to a natural conversation. That's where it works best, where you can build a relationship. Another tip, it would be to make your traction— whatever your traction is, different for different people— make it memorable. One startup I met recently, like, this is just made up, but their traction slide actually have more stuff than this. It's like, hey, we've got like 2,000 downloads and like 200 of those are like active users and 300 of them are like monthly and then 10% conversion rate and what the hell. And an investor's like not going to remember that coming out. It's like, hey, the startup's doing amazing. Like, okay, how are they doing amazing? Uh, I don't know, they had like loads of stats. What we did with Bungle and like what you could do is have like one headline figure, whatever your headline figure is—downloads, users, money, revenue—and a time frame can also—that makes your growth kind of seem more explosive. Like, if you're like, hey, we just launched 3 weeks ago and we've got 2,000 users, then that's like, okay, cool, that's growing pretty fast. If you didn't have the time frame, that could be like, okay, you've got 2,000 users, like, did you launch 2 years ago? Like, You know, this gives it a bit of framing, and it's also more memorable. So when you go out, that VC can be telling their partners, yeah, this company's killing it, like they just got like 2,000 downloads in the last week. So think about the story of whatever your traction metric you choose is. Last, last tip is, um, be able to describe what your business does in the frame of a tweet. Because you've got to think, like, as I said, they're coming out of the meeting, and if I'm psyched about a company— I'm advising for different ones— and I'm telling my friend about it, I've got to pitch your startup. When I'm pitching, when I— when you leave the meeting, you're not there anymore. So how am I going to describe you? If you've used so much jargon and crazy stuff that only you can understand what you're doing, That's not gonna work, you know. So Sequoia, one of the top VCs, one of the partners there had a story that he met this team of amazing engineers, but they were using so much jargon and like so complicated how they were describing what they were doing, and he's like, "Look, I don't actually understand what you do. Here's the deal. Here's a business card. Write on the back what you do. I'm gonna go outside for like 5 minutes. When I come back, "Describe your business. You can only use the words you've written on this business card." Because he wanted it to be, "Hey, just make a simple description of what you do," right? So he left the room and came back, and the engineer— as I said, like, a great engineer— he had used kind of like shortcode. He'd used like a code to cram loads of words in. So he had like a symbol that actually meant like a sentence. And so they didn't end up getting investment from Sequoia. Um, one bit that can help with this, an exercise could be if you ask your friends, people that don't work with you, but maybe if you've got roommates, uh, partner, girlfriend, boyfriend, whoever around you, ask them, if you were going to tell someone else about my business, or if you were, you were going to pitch my business, how would you describe it? And you can listen to the words that they use. And, um, if they describe something totally which your business doesn't do that, then you should realize, like, okay, we need to rethink how we're talking about what we do, you know? So hopefully that gave you some— that was a quick bit, just giving some different tips for if you're raising money for the first time or raising seed funding. And hopefully that helped. This is my email address, happy to— if anyone wants to reach out, or if there's any questions anyone had now. Thanks a lot, guys.

Hey Jack, my name is John. I love your tactic on LinkedIn and how to get investment. Congratulations. What's your plan for Vungle and where are you taking it?

So I'm not working at Vungle anymore. The two of us arrived, me and my co-founder, and my co-founder is kind of leading it. And two of us arrived off the plane and now there's like 180 of the team. And Vungle, what it does, it basically does like video advertisements within mobile apps and games. Vungle, really, we were just like at the perfect timing because when we launched, mobile apps just used like banner ads and stuff, and so video was very disruptive. Vungle today, they keep on growing, and actually different markets internationally have started to get quite big. So Vungle's got an office in China now, and that generates quite a bit of revenue. It's kind of when you have a model that works, One of the next bits can be, let's try and take this internationally. And that's Vungle's bit at the moment. Thank you. Thanks. Do we have one more, or? OK, let's see. Hi, my name's Gavin. How are you differentiated from Unity Ads? Yes, so there's a number of companies in the same space as Vungle. And it's the same with lots of businesses, to be honest. When we started Vungle, there wasn't really anyone else just doing video advertisements. Unity, they kind of build a development platform and then let you put ads into that as part of it. And Bungle is separate, so not all games are built in Unity. Games might be built in other stuff. I'm not the best to kind of pitch the differences, but what I know is that app developers like having different choices. They don't just want to have one company. You know, they want to have different choices. And so Vungle, definitely from the stories I've heard about developers, fills kind of a need for a lot of people. Fair enough. All right. Thank you. Thanks.

So it sounded like most of the talk was talking about what you did after that 500K. Yeah. Can you talk a bit about that first 500K and how you got to it?

Sure. Yeah, that's definitely a good point, and it's important. Always to— yeah, I like to go into the depth. So basically, a lot of the initial investors we got, we went to this AngelPad incubator, and we met a number of people through this incubator. I can say we were raising— I don't— I've got a bit limited time, but basically a number of the first people we met during the incubator. At the demo day, we met some different people, and the first bit for us was getting the The first raising half a million, the first bit was getting $250K. Once we got $250K, anyone you go and meet, you're saying, "Raising half a million, we've already got half of it." That's a bit more control. The first part, we'd built a relationship— Google Ventures was the first one. We'd built a relationship with them through the program. So they saw us at the start, and they saw, like, "Okay, you guys are terrible." And then they saw us at the end, and they're like, "Okay, you've made a lot of progress." And we also were framing it like, hey, thanks. So anyone that we met, we're like taking on their advice, and we're like, this is how we implemented it. We also got some of our first— one of our very first angel investors had founded a company in the space. The Bonobos founder also talked about this, you know, like, has someone else started a company in the space or invested in a company in the space? I just cold emailed the founder of another company, a mobile ad company. He'd sold his company. I was like, "Hey, looks like you're kind of legit in the space and you sold your startup. I'd love to get your thoughts on what we're doing." We went and met him, showed him what we're doing, and he's like, "Hey." I'm like, "By the way, I actually do some angel investing. I'd love to invest." So that's how we got the very first capital, and that gave us way more credibility as well. Like, hey, this guy who's had an exit, uh, he's backing another mobile ad company. Cool, thank you. Okay, thanks. All right, thanks, Jack. All right, thanks a lot, guys. Okay, this is our last speaker before we get