Next Big Sound raised $25k in May of 2008 and $18k in the summer of 2009. Some quick math will show that we were capitalized to the tune of $40k for a year and a half for myself and co-founders. Things were pretty tight. I was used to the company just paying bare living expenses: rent for the summer, laptops when we needed them, AWS, plane tickets etc.
“How much money are you guys raising?” Investors would ask. “However much we can!” We’d gone on very little capital for so long it was really hard to come up with a number that didn’t sound outrageous. In our Techstars pitch we decided we were raising $300k. That seemed like more money than we’d ever need.
Like all companies going through an accelerator, we really wanted to be able to stand on stage and say that we had all of it committed, or mostly committed. One of our mentors that summer was a big angel investor. He was the only one I asked before demo day. We’d been working closely all summer and I’d been assured by other entrepreneurs that he invests in “tons of companies.” He said he was not in a place to make an investment in Next Big Sound, that was a really hard moment.
Everything changed on August 6, 2009. I’d been working on the pitch for a month straight while David, Samir, and Walter built the actual product and site. We launched very early that morning and had the biggest 8 minutes of our lives on stage.
At that point Foundry Group had a soft rule about not investing in Techstars companies. Jason Mendelson had been our lead mentor all summer long. He had worked with us from the time we had no idea what business we’d build to the launch of a compelling company. Jason was far too biased towards us to make an objective investment decision but his partners, Brad and Seth, came over to him and asked him why Foundry wasn’t leading the Next Big Sound deal. Jason was ecstatic. Getting a term sheet from Foundry at the end of that summer was one of the most exciting points on the NBS journey. We’d worked so closely with them, and trusted the Foundry team so much, that I never actually signed the term sheet. After a quick negotiation, that made a small cameo in Venture Deals, Jason and I walked across the street from their office to a salon where Brad was getting his hair cut. To be specific, he was laid back in the chair getting his hair washed. He sat up when he heard us, asked if we had a deal, and with a head full of shampoo, shook my hand. That was the official consummation of the investment.
The term sheet was for $600k and Foundry offered to do the whole round or leave room for strategic angels or VCs. I flew to Chicago with 5 other Techstars companies to pitch Chicago VCs, a room full of everyone I’d been begging to invest for the year and a half prior and with our round fully committed. That was a great feeling too.
We closed our financing September 23, 2009. 45 days after our launch and demo day presentation.