How We Got Funded: Visual Revenue
When bootstrapping didn't cut it, the founders of Visual Revenue went out and raised $2.2 million.
Courtesy Subject
On Top of the World: Visual Revenue co-founders Charlie Holbech (left) and Dennis Mortensen.
Dennis Mortensen and Charlie Holbech are something of an anomaly in the tech world: serial entrepreneurs with an aversion to raising outside funds. "We are, perhaps naively, huge fans of bootstrapping," says Mortensen. They launched IndexTools, a Web-analytics company they sold to Yahoo in 2008, without any outside investment.
They didn't have that luxury for their latest venture, Visual Revenue, which makes predictive analytics software for media companies. Mortensen took the lead in their fundraising efforts after they begrudgingly accepted the fact that Visual Revenue wouldn't get off the ground without outside funding. It took two years for them to fully develop their product, pitch it to investors, and amass the capital needed to scale it. For Mortensen, that meant a lot of lunch meetings and after-work drinks with investors. Here's how it happened.
November 2009: A company is born
After the sale of IndexTools, Holbech and Mortensen stay on at Yahoo, where they receive work visas that allow them to stay in the country (Mortensen is Danish; Holbech is a British citizen from Hong Kong). "We spent six months bitching to everybody that we couldn't do anything new due to the visas," Mortensen says. At a Yahoo conference in Boston in 2009, they stop complaining and hunker down over cocktails to lay out a business plan for their new venture, Visual Revenue. Their citizenship worries turn out to be unfounded--both receive green cards within 60 days.
March 2010: Bootstrapping begins
Holbech relocates his family from Los Angeles to New York. Mortensen's Wall Street apartment becomes a de facto office, where the pair works with recently added co-founder and vice president of data modeling Alex Poon. They sink $150,000 from their savings into hiring employees and buying cloud server space through Amazon Web services. "An entrepreneur who hasn't bootstrapped a start-up doesn't know what pain is," says Mortensen. Life is made more bearable by the frequent home-cooked meals Mortensen's wife prepares for the group.
December 2010: Times get lean
Visual Revenue has a solid product built--but its bank account is drained. A handful of customers means a trickle of cash flow, but it isn't enough for Holbech and Mortensen to pay themselves a salary. The few new employees they bring on are paid the bare minimum. "I promised the guys we would work for free and scrape by for a year, and then we could eat," Mortensen says. "They started getting hungry." At this point, the pair realizes that bootstrapping isn't going to cut it. The co-founders need to start fundraising.
January 2011: Off to a rough start
Mortensen begins taking meetings with investors, friends, and basically anyone he thinks has more than $10,000 in a bank account to invest. Back at the office--which is now located in the New York Daily News building--Holbech takes the reins on operations, working weekends and 16-hour days while Mortensen is out pitching. "If you're fundraising, you might take your eye off the ball," Holbech says. "We weren't about to do that." Mortensen pitches an investor from Bessemer Venture Partners over lunch at Balthazar, a tony New York restaurant, scratching a business plan on the back of a menu. "I was so impressed with myself, but I look up, and he's just blank," Mortensen says. "There's no connect."
May 2011: A new approach
Realizing he needs a more ambitious pitch for investors, Mortensen stops writing business plans on menus and no longer pitches the company as a tidy little start-up. Instead, he starts thinking of Visual Revenue as an IPO-capable billion-dollar company. He emails Ariel Lebowits, the CFO of classified-ad company OLX, and meets him for lunch at Pret A Manger, a sandwich chain, on Manhattan's 36th Street. After a more audacious pitch over a sandwich and a Diet Coke, Lebowits agrees to put in $15,000 for a seed round. The goal is to raise $300,000.
June 2011: Practice makes perfect
With one investor solidly on board, Mortensen gets to work assembling a handful of other investors. Over Red Bulls, Mortensen meets with an employee of Lerer Ventures, a fund in New York City. The employee, who had previously interviewed at Visual Revenue, introduces Mortensen to the firm's managing director, Eric Hippeau--the former CEO of The Huffington Post. "I walk over there with no deck, and I pitch it on the whiteboard," Mortensen says. "I'm confident because I've pitched this 150 times before." Hippeau says the product clicked for him right away. "Dennis has a great sense of humor, and I appreciate that he's a repeat entrepreneur who runs a tight ship. It didn't take long to make the decision."
