The first round of seed
capital for my business came from my parents and friends. It valued the company
at $1m, which everyone was happy with. It quickly became obvious that we would
need more cash within six months if we continued to grow at the same pace.
We met with Capital
Ventures, who seemed interested in investing. We had several meetings and they
asked for lots of information. After 8 weeks they said they would invest subject
to the approval of their investment committee.
We did not hear back from
them for a month. I called them and they said the meeting was postponed but
they would get it to the committee within two weeks. Ten weeks passed and cash
was getting low - we had less than 3 months left – when we heard that the
investment committee had approved the investment and they would let us know the
terms once they finished the due diligence. That took four more weeks and we
only had a month of cash left.
They came to our office
and said they wanted to buy 45% of the company at a $650K valuation and if we
met certain benchmarks, they’d buy another 20% at the same valuation.
It was a disappointing
offer, but we were out of cash and had to accept the offer. My parents and
friends were very upset that they had lost money investing in me.