How we flew to Silicon Valley nearly bankrupt and returned with $1.2m

The dream was nearly over. The adrenaline and hype from spontaneously jumping on a plane and flying from Sydney to Silicon Valley to pitch potential investors was wearing off. I think we were on our 40th pitch in two weeks, which for us looked like 40 ‘No’s’, at this stage. We had a limited amount of time before our startup was dead broke but then, on our last pitch, we closed a deal for US$1.2 million. For the most part, the trip is a blur, but there are key moments that will be crystalized in my brain forever and I wanted to share them with you here – so that when you too think you are on the brink of defeat, you give it one more push.

From Heroes to Zeroes

“I’ll have a margarita and a coke, thanks.” This is a phrase I would go on to hear hundreds of times from my co-founder and close friend since we joined university in 2006. We were sitting at a La Illtimo Cafe & Pizzeria store in Ultimo, which at the time was a fairly dreary suburb on the outskirts of Sydney’s CBD (three years on, it is a booming startup hub). Our company was down to its last few thousand dollars in the bank, which is basically staring right into the abyss of defeat. It even started raining, the perfect end to signal our downfall.

We had started so brightly earlier in the year, raising a small amount of money from our families and friends to execute on our vision of changing the education landscape forever. It was a non-awkward, but brutally silent moment – we were both too consumed by our own thoughts to even realize we had not said anything for five minutes straight; just staring down at the floor. The food came and snapped us out of our trance, and I could tell from the look in the waiter’s eyes that he was sympathetic towards the two hunched over and sullen individuals in front of him, without necessarily knowing the details of what we were going through. We’d gone from heroes to zeroes pretty quickly that year.

Our launch and bright beginnings

The year was 2012. We had launched our website and introduced the concept of textbook rentals to Australian students. Over 20,000 people had come to our website in the first week. We had orders from every single state in Australia. We were covered in national media – none of my friends had ever managed that.

Were we successful? Was this what it felt like to be a success? It felt too easy, and it would prove fleeting. We quickly burned through all the cash we raised from our family, friends, fools, and pretty much every man and their dog based in Australia. Don’t get me wrong, things were going well in terms of growth. But our capital-intensive business model required, well, more capital – a lot of it to fund our growth while we figured out our way to profitability. We tried to raise more money domestically, but first-time entrepreneurs looking to raise millions of dollars in Australia was nearly unheard of in 2012.

Running out of cash

I remember watching a movie called John Q, with Denzel Washington playing a desperate father looking to save his son who’s suffering a fatal heart condition. The tagline was, “Leave a man no options, and you give him no choice.” It was during this meal that we decided we would spend our last few dollars on buying plane tickets to the mecca of startups, technology, and investments; Silicon Valley. There we would see if we could pull off the seemingly impossible and raise capital to keep our entrepreneurial dream alive.

What’s a pitch?

On the plane ride over, we worked on our pitch deck. A pitch deck is, essentially, a short PowerPoint presentation on who we are, what we are doing, and what our vision is, our traction (or results) so far. Most importantly, it outlines how much money we need, where we will spend it, and where this will get us.

I think I read Mastering the VC Game: A Venture Capital Insider Reveals How to Get from Start-up to IPO on Your Terms by Jeffrey Bussgang about three or four times on the red-eye flight to San Francisco from Sydney. This book came highly recommended from one of our mentors, adviser and all-round good guy, Mitch Harper (co-founder and CEO of BigCommerce and PeopleSpark). I recorded myself practicing my pitch again and again, trying to do it quietly without annoying the other passengers. I would then re-listen to it and try to tweak areas that weren’t compelling enough. I quickly learned that no matter how well you know the rules of the game, the best way to get good at something is through doing it.

The hunt for investors

So there we were, actually in Silicon Valley – sending out cold emails to investors faster than you could shudder. It really became a numbers game for us. Of course we would love a warm introduction, but it is one of those chicken-and-egg situations. To get a warm introduction, you need to know someone. But to know someone, you need a warm introduction (or luck).

It was quite deflating when our requests to meet investors were denied (or worse, ignored), but it does make sense. To get meetings in Silicon Valley, a lot of times you will need one or even multiple warm introductions – that is how strong the deal flow is at the top tier level of investors over there. We were fortunate to be on the receiving end of the “pay it forward” culture over there, whereby some friends or friends of friends would be gracious enough to have a coffee with us, hear our pitch, and give their two cents.

We pitched in offices. We pitched in cafes. We pitched at 8am, we pitched late into the night. We even pitched a random guy in the communal laundromat of a grubby motel in Milpitas, California, who mentioned he was kind of in tech (to this day I’m not sure what he meant).

This aggressive and positive attitude really helped us refine our pitch and better convey a compelling story, which ultimately made us stronger founders with better communication skills. We shed our suits and ties in favor of casual jeans and T-shirts (to better fit in, believe it or not). We listened carefully and tried to learn as much as we could. We were selective with the advice – we kept an open mind to all suggestions, but ultimately we found a million people have a million opinions, so we really needed to make tweaks to our pitch that we thought were relevant and pretty much trust our gut going forward. Every person we met, we asked for feedback on our pitch and for introductions to anyone they thought might be interested. This helped us grow the number of meetings from zero before landing in the US to over 40 by the time we finished our two-week tour there.

Brutal feedback from investors

“You’re boring me. You’re still boring me.” No joke, we actually received this comment at one meeting we went to. As optimistic and positive as we are, we didn’t expect to land an investor right away. We were right. The main reasons we were “passed on” by different investors (or so it was made clear to us) were being an Australian business whose market was primarily Australian. The cherry on top was dealing with a physical product. Venture capital firms often seem to have a checklist in their heads about what “fits their patterns:” strong team, large market, scalable idea, and so on. It became abundantly clear we really didn’t tick any of those boxes.

Thinking outside the box

The response to our request    

Flying to LA   

Closing $1.2m

Closing remarks