YCharts CEO Shawn Carpenter had a great idea when he was still at Google. There were more stock websites for investors than you could shake a 401(k) at. When it came to financial analysis, they all concentrated on variations of shares prices and earnings per share with all the technical investing metrics you might expect. But they had next to nothing on the underlying historic performance numbers —accounts receivable, margins, R&D expenses, gross margins, and other categories that appear in public filings and that help professionals better understand how a company actually did over time. 

So Carpenter started a company that would not only provide all this information, but also add flexible graphing so users could see and compare trends in the same visualization tool. YCharts filled a market niche and has attracted about $4.75 million in investor money, including a recently closed series B round led by Morningstar. And what is one of the big tricks in landing that type of investor interest? Not asking for it, says Carpenter. 

He knew he had a market niche that made sense. "People tend not to spend enough time on their investments because reading an SEC statement is not a lot of fun," he says. People could get the extra performance details and graphing on high-end terminals, "but the terminals tend to be $2,000 a month and the average person can't afford that." 

He found a talented programmer and started working on the project. By January 2009, the two were business partners. They started talking to investors in June 2009, but only after he left his full-time job at Google. "Until I left, investors wouldn't look at it," Carpenter says. "They figured it was something we were doing at night." 

When he finally could talk to investors, he didn't mention money. Instead, he began the courting process. "You have to create the train-leaving-the-station phenomenon," says Carpenter, who raised money in the 1990s for other ventures. At first, you have nothing: no product, no customers, no backers. Investors want to feel that they're onto a good thing, that others are interested and that there might be a market for the company. 

"As the conversation persisted over the next few months, things went better than we said it would," he says. In the process, he learned two key lessons:

  • Keep your investor connections apprised of developments.
  • At a minimum, you must hit the goals that you set in terms of creating a product or service and attracting customers. Best case scenario: Follow the practice of many smart public firms and be sure that you can beat the expectations you set. 

"That's how you build a business," Carpenter says. "You set your goals and then you hit them." By building the business, you're creating something that is of interest to investors because they see that the product will work and that the management team is competently executing the business strategy. 

When YCharts received a $1.5 million series A round in March 2010 from the Hyde Park Angels (an angel investment group out of the University of Chicago), the I2A Fund, Amicus Capital, and Social Leverage, the company already had 30,000 users. By the $3.25 million series B round in November 2011, there were 400,000 users.

The A round investors participated in the B round, but Morningstar put in $2.45 million. Both YCharts and Morningstar were aware of each other for some time, given mutual contacts, but it wasn't until the middle of 2011 that Carpenter met with the firm. Again, no talk of money at first. Not only did Carpenter want to avoid rushing and appearing like the financial equivalent of a nerd dating stalker, but he also wanted to see what Morningstar's investment philosophy was and if there was potential to work together. "They're courting you, as well," Carpenter says. "It goes both ways." 

Have a solid business, don't be too eager, and you, too, may be able to land the funding you seek.