Citysquares: Raising Money

Well it seems I’ve created quite a stir with some recent job postings. Having posted a few job openings on this here blog, on, on Craigslist, on, what did I expect? I suppose I wasn’t too shy about it either.

Since posting the job openings I’ve received emails from a couple local business publications and some well known web blogs. I was actually a bit surprised at how assertive some have been – wanting to be the first to break the news. I’ve even received a couple phone calls and emails from folks I haven’t heard of in many moons, some of them opportunists unfortunately.

So allow me to address the rumors here and now, and unofficially announce that yes, indeed, Citysquares is raising our first round of funding for an undisclosed amount. We’re in the final 10 yards of the closing phase and once it’s official we’ll be sending out a press release and you can expect some press and the typical buzz. I expect this to be official, and hence officially announced, at the end of this week or first half of next week.

The investment is being lead by eCoast Angels, of Portsmouth, NH. We’re also roping in a couple outside angel investors for this deal, with eCoast’s permission.

Over the past 18 months we presented to a couple groups. We never presented to a venture firm, only had informal meetings with a couple. Bob and I convinced ourselves, for better or worse, that at this early stage we weren’t looking for venture funding. Our rationale? We weren’t ready for it. We still had more work to do. Angel money just made more sense. Angels will buy into an earlier concept and business more readily than a VC. Another reason was this: if we can’t convince any angels to invest, how the heck are we going to convince a VC firm to invest? Ultimately, for us, raising angel money was our goal, but we wanted to find the right angels, not just any angels. We felt strongly about that.

I’m certainly no veteran or source of wisdom, but I do have my experience to share, and that’s what I’d like to do – share this experience and even share a little knowledge I picked up along the way.

When we first started Citysquares in late 2005, Bob and I weren’t immediately focused on raising capital. We weren’t even too sure we had a real business on our hands. It took a few months to realize that we were truly onto something, and that the recipe had some flavor. So very early in 2006 I set out to write our business plan, figure out who we were, and where we wanted to take Citysquares. We established an advisory board, worked very hard on what is still a very well written and comprehensive business plan, and began our fund raising efforts. As I stated above, we’d presented to four groups over the past year +. Some of our lessons and experiences include:

  1. We are not lacking for energy and passion. And that, beyond anything else, is what really peaked investors’ interest. You can’t buy passion and energy, it’s innate. You either have it or you don’t. Our energy and passion has taken us further down the road than anything else – hands down. Without that passion and energy we’d be working full time jobs somewhere else.
  2. We never got discouraged. If you’re an entrepreneur, that’s not a word in your vocabulary. Most Boston area angel groups invest in technology companies and life sciences; IT, hardware, telecom, software, bio-tech etc. Boston isn’t exactly the best place to raise money for a new media company. At the end of the day that’s what we are. Perhaps the most common reason these groups didn’t invest is because we lacked proprietary technology. That was also probably one of the most frustrating things to hear. Nevertheless, it’s reality. We never got discouraged. Disappointed, sure, but not discouraged or negative. Our advisers were incredibly helpful here, without knowing it. Just their presence, time on the phone or over coffee, really helped us understand that we must stay focused on the goal – just keep executing, keep working hard, and it will happen.
  3. If you don’t like the investors, run! In October of 2006 Bob and I were flown out to the west coast to meet with a potential investor. He flew us out and took care of our accommodations, very cool. After spending 4 days with him we realized that it wasn’t a good fit on many levels. We made our final offer and ultimately decided to walk away. This was not an easy decision. My gut was telling me to get on the next plane back east, but Bob and I wrestled with it each evening while in the car or at the hotel. This was another important lesson. Looking back it was probably one of the best lessons we’ve had over the past 18 months – you have to like the investor. If you don’t like them now, what do you think it’s going to be like in the board room when things get tough? Bob and I always believed in finding an investor who believed in the model, of course, but also our philosophy and mission, and who shared those values with us.
  4. Beyond the fund raising process, perhaps the most important lesson of all had to do with our advisers. Good advisers are truly hard to find. We met several folks who didn’t know us from a hole in the wall, yet after only a couple phone calls, emails, coffee meetings, or drawing pretty pictures on a white board, whatever, they were very aggressive and determined to “join our advisory board” and even proposed their own ideas for compensation. I’d been down this road once before with my previous company and learned some very hard lessons. So my gut was screaming at me. “Run!” it was saying, “run for the hills Ben!” Sometimes that’s not an easy thing to do, especially if you get like the person. Lesson here? Choose your advisers very carefully and know what you’re getting from them, but also set their expectations too. The advisers we ended up with, who’ve been the most valuable to Citysquares and to me, professionally, are the ones who never asked for a single nickel or share in the company, and have made unbelievable contributions. They call me just as often as I call them. We’re very lucky to have such kick-ass advisers. I was straight-up with them since day one, as they were with me.
  5. Know your Self. Much like growing up, it’s ever so important to know who you are, have a sense of Self, and purpose in life. I know it sounds philosophical but it’s a serious reality. A business is an entity, much like a person is. A business has a pulse, a mission in life, a personality. And without having at least a fundamental grasp on these things, you’re kidding yourself if you think you can form valuable relationships and try to raise money. Lesson here? Have a sense of Self, and know what you want to be when you grow up. And this has a lot to do with focus. Without focus you’re shooting at too many targets and early success is exactly that, a moving target.

One of the things that really struck me and Bob about eCoast Angels is the personality of the group. As Bob put it, “they seem like salt of the earth kinda guys.” I love that. He articulated it pretty well. Bob, Chris, myself, – yeah, we’re salt of the earth guys. So just from that perspective it seemed like a good fit even before we presented. The further down the path we went with eCoast, the more evident that became, but it’s also become quite clear that they have so much more to contribute here than just money. That alone is more valuable than any amount of currency. At a meeting with eCoast last week it became more and more clear that they’re full of not only wisdom and experience, but they’re full of ideas, energy, passion. I am truly, and in my gut, excited to work with them.

A couple of months ago I posted a blog entry titled, My Truth about Entrepreneurship. I was bare naked, at a very unpredictable time, and I wrote about it. I wrote that entry before meeting eCoast. I had no idea what was coming. At the end of the post I stated the following:

There is an old Chinese proverb, I believe, that goes like this:

The temptation to quit will be greatest just before you are about to succeed.

I have felt that temptation, I think I just went through it, over the past couple of weeks. I believe that I’ve just turned that corner and I’m now staring success straight in the face.

Well, I don’t think I’ve put my foot in my mouth just yet. My gut is treating me well. I know that the long days and the hard work aren’t over – I know the reality. But I also know that I don’t necessarily have to wake up every morning on the edge of a cliff, and walk each day on a precipice. I know that there are more lessons to be learned and that I will be tested in new ways. I’m excited. The future is bright, brighter than ever before, both personally and professionally.

Stay tuned for more. The best is yet to come.