Sramana Mitra: When you went to 500 Startups to raise money, what did you have in place? Of all these things that we talked about, how much of this is in place?
Zvi Band: We had a prototype and we had around 100 active users. 500 Startups saw that there is a big market here. We had the key aspects of the founding team. Then they saw that we’ve obviously been able to build something that, while it’s a prototype, was on to something. That was the origin of why 500 Startups invested in us.
Sramana Mitra: These 100 users were paying?
Zvi Band: They weren’t paying users. They had demonstrated a willingness to pay.
Sramana Mitra: Was there any other signal in that 100? Was there any other kind of signal that somebody would be able to pick up from this base?
Zvi Band: Great question. They were all people who said they would pay. That’s definitely one. Then they are all professionals. This wasn’t just a CRM for staying in touch with my college buddies; this is a CRM that people need and use. That was enough impetus say that this, clearly, could be something.
Sramana Mitra: 500 Startups put in how much money into the company?
Zvi Band: They put in $50,000 initially.
Sramana Mitra: This is now October of 2011. What happens next?
Zvi Band: Then we started building a product. One of the first things that 500 Startups said was, “You should raise more money.” For the remainder of 2011, my two co-founders were focused on trying to build and market the product. I was out fundraising. We raised another $150,000 over the remainder of 2011. Then in early 2012, we raised an additional $300,000. Within the first seven months of the company, we raised half a million dollars.
Sramana Mitra: Whom did you raise this money from?
Zvi Band: It was a lot of local angel investors who didn’t necessarily know the company that well or believed in the market, but they happened to know me. These were small angel investors and some friends and family. I, as a founder, put money in.
Sramana Mitra: How many investors did you raise half a million dollars from?
Zvi Band: That was probably around 15.
Sramana Mitra: This brings us to about middle of 2012.
Zvi Band: Yes.
Sramana Mitra: What happens next?
Zvi Band: We actually launched our product to the public. We still weren’t ready to charge people for the product, but we still tricked people into telling us whether or not they’d pay for the product by making them go through a pricing page. We set off to start building it. We spent the rest of 2012 continually iterating on new features. We ended up hiring our first two employees late in 2012. By 2013, we started charging people. We had a product that people were using everyday. That allowed us to then raise our seed round of a million dollars from a number of angel investors and small VC’s.
Sramana Mitra: Were the Bay Area investors of Washington investors?
Zvi Band: They were actually all over the country. Our lead investor was based in Germany. Our second biggest investor was based in Boston. Then we had 500 Startups as well as other angel investors continue to put money.
Sramana Mitra: How did you find these people in Germany and Boston?
Zvi Band: Angellist.
Sramana Mitra: So you used Angellist to raise money.
Zvi Band: Yes, and we also had a lot of personal connections. One of our contacts was also in the SaaS space. He connected us to this guy, Christophe Yan, who is an incredibly amazing investor in early-stage SaaS companies. He happens to be based in Berlin and so he ended up leading our seed round.
Sramana Mitra: On the business side, how were they tracking? What were you learning from the execution?
Zvi Band: We were learning a few things. One is, this is a product that people are willing to pay for, which is really powerful. The understanding that people are actually willing to put down actual dollars for something you’ve built to use it on a daily basis was a huge discovery for us. We did that by starting to build out the ability to accept credit cards.
Now that we had the ability to accept cards, what will it take to be able to bring on a new user and have them pay us? We ended up hiring our first couple of sales people. We ended up going down that route. We didn’t know how to run a sales organization. None of us had even been in sales before. Like most thing in startups, we’re just going to figure it out.
By the end of 2013, we were doing about a million in annual recurring revenue, which is a very big milestone to hit. We had put together a team of around 10. We had a product that people are willing to use every day. We had new customers coming in so we started to learn how to market it. Going into 2014, we realized, “We now have a company that we can start scaling.”