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How to raise one of the largest Seed round's in Australian history - A strategy of Carted's fundraising strategy
We're talking about how Holly and Mike from Carted ran the most effective fundraising campaign to gather support of world-class VCs with a record AU$13m Seed round. These headlines and deals don't just happen, there is a process behind them - Read on for a teardown of their fundraising strategy.
As a disclosure, we are pre-Seed investors in Carted through TEN13. We backed the founders, Holly Cardew and Mike Angell when they set out to change the face of social commerce originally via their product, Vop. This progressed into a bolder ambition with Carted, our investment notes are here if you want more background on how they shifted their focus to building a universal commerce API infrastructure platform and how they plan to change the way commerce is transacted for the future.
A question many will ask is how Holly and Mike (managed to convince some of Australia's (and the world's) top investors to support them to the tune of AU$13m at their early stage.
Prior to their fundraising, we sat down with Holly and Mike on a monthly basis to catch up and strategise on the future plans for the business, the team shared their vision for Carted on building a Universal Commerce API infrastructure platform that could change commerce. Fair to say we were excited, this problem is massive and their proposed solution is potentially category-creating. However, this sits firmly in the venture investment category, it is high risk, requires serious capital & resourcing to build, and thus they needed a strategy and playbook to raise the capital required to deliver on their plan.
The team had an offer of investment for ~10% of the business from very reputable angels in their sector around January 2021. We sat down and agreed, if you are going to raise capital then let's run the right process, get in front of solid investors, prepare the pitch and due diligence materials, and optimise for the outcome that they want and capital required to execute on their bold vision.
So we set out to pursue a US$5m fundraise and planned the process as outlined below.
Fast forward 3.5 months, the metrics as follows:
Effectively the capital raising came down to a few core areas:
The founders and team worked on a few areas that were really helpful in their preparation.
Here is the template that we shared and used with Carted, it's not rocket science but it helps hugely when shared in a collaborative space (ie: Google Sheets) to keep yourselves and your stakeholders updated on progress. Should be kept up-to-date like a CRM for future investors.
This will become your master document, including every meeting, response, contact info, status of each discussion. Trust me, when you have 4-5 meetings per day for a month - you will forget what happened in each conversation and next steps plus who is in or out.
Now the time has come to start engaging with investors, often a good strategy is to outline that you're not officially "raising capital" and will be going to market soon. Helps to start building a relationship without a requirement to make an investment decision quickly, before opening up to a fundraising process.
We generally counsel with our portfolio of companies that you should set a target timeframe to progress through the fundraising process, typically a good raising process will be complete within 3 months.
Carted kicked off its fundraising in mid-January 2021, had term sheets in Feb, and closed the capital end of April 2021 (often legals and structuring can take a month or so). 3.5 months to raise one of the largest seed rounds in Australian history!
We started by introducing them to investors via as warm an intro as possible. Some were through existing investors like us - I believe in the end, we had introduced Holly & Mike to over 30 VCs from around the world to complement their process. My outbox looked something like this:
As a founder, you should share a blurb to gather interest and make it easy for your contacts to make their intros:
Intro notes from investors or advisors to other investors looks like this, you want it to be punchy, include enough info to get to the next step which is an intro with the founders. Things that are important, why it's a fit for an investor (maybe aligned to their prior investments, content, stage), why they should take a meeting (create interest) and call-to-action:
Holly lead the charge on managing the process and getting doors opened to the right investors, in the end, they were connected to 115 investors and pitched to 85+ firms or angels. The recommendation here is to consolidate these into as condensed timing as possible, suggest 2-3 weeks for intros and first discussions. It's not always possible to keep it tight and on track with your timeline, but try to engineer this as best you can to keep the process moving along.
How do you get investors excited about your business further than the traditional meet & greet?
Things that Carted did really well was to generate buzz about their raising, it was known that they had ambitious plans and were gathering interest in the investor market. This happened because investors talk and share deals (way more than you think), the more you meet then likely the more doors that will keep opening for intro calls and interest in you.
On top of this, they were doing one of my favourite tactics of Building in Public. This can be seen by founders as giving up proprietary info, over-sharing on the direction of your business, giving up proprietary insights, etc. In our view, this strategy shows the traits that investors want to see in founders - ambition (and willingness to share it publicly), moving fast, being held accountable, having conviction in their views.
My all-time favourite from Mike, they are not aiming small:
And more here:
Plus videos of their future product in action:
In addition, Holly is active on Twitter and was introducing some great tweets to drive further interest:
These Tweets generated more interest and actually brought investors to the table for initial chats. This type of content helps to drive interest (read: FOMO) and bring potential investors to the table.
In a Seed financing round, the initial focus needs to be on finding a "Lead" investor. That's a VC or investor that can set the terms including valuation and are inputting a solid cheque to show skin in the game.
For your fundraising process, make sure you understand where an investor sits in this type of process and whether they can or can't lead a round.
Once you have a lead investor leading the charge, you will find that it's much easier to close out additional investors behind them.
In Carted's case - The team ended up with multiple lead terms sheets and interest from major investors in both Australia and the US & UK. This was a great point to lock in terms with a strong lead that's well-placed to partner with them into the future.
That lead for Carted was Blackbird Ventures, an Australian VC that has notoriusly led investments in companies like Canva, Safety Culture, Culture Amp, Zoox, and others. They are one of Australia's big three funds and showed great conviction in the process and emerged as the lead investor for Carted Seed round.
In Carted's case, they had a lot of interest and ended up including the below as investors in their round:
One of the largest funding rounds of 2021 to date in Australia and certainly one of the largest Seed rounds that we have seen. It's a credit to what Holly and Mike have set out to build and we're lucky & excited to be supporting such an awesome team and their ambitious mission.
Read about the announcement on the Carted blog here.
Thanks to Chris Gillings from Cut through venture newsletter for these ecosystem stats. Another one of our portfolio companies Mr Yum is also featured on the list.
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