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How Rafat Ali Found a Job (Part 6)

Posted on Tuesday, Sep 9th 2008

SM: You turned down some private investors, what about institutional investors?

RA: We started to get interest from companies who wanted to buy us in late 2005. I had a friend who had a friend who helped me sort through it, and we went through the normal gyrations. We had meetings with three companies, and at the end of the day I decided they were not looking at us as a company, they were only looking at us as talent to hire. I did not see that as a good option. It would have meant security, but I knew there was more potential if we did it on our own.

We then decided to try and bring readers of the two sites together in an offline event, what I called the mixer. We had our first mixer in June 2005 in L.A. I put a notice on the site to see what reaction I would get, and I got tons of responses. I did not have the resources to put it all together, so the readers helped. We got a venue because one of the readers knew somebody at the Viceroy Hotel. A couple of companies who were advertisers actually went ahead and sponsored the mixer. The first mixer had 350 people.

SM: What kind of sponsorships?

RA: We earned about $12,000 total from three sponsors. We did not have too many expenses because we got the venue at cost. That was our first event, which was proof of concept. I did not know we were going to get into events that heavily.

In January 2006 I got a call from Alan Patricof asking to know more about the company. I gave him a 20-minute rundown of what we were doing. I knew he was getting into the VC game again, and as he was speaking to companies in the space our site’s name kept coming up. He had founded New York magazine way back. He knew journalism. This is why he wanted to invest. I knew that if I was going to take money it had to come from somebody who knew the news media business.

I met Alan the next week in New York at a conference. Within 20 minutes of questions and answers, I knew he understood exactly what I was going through. I had a wife, two part-time people, and was tackling everything alone. He laid out the challenges of my business, which took me four years of experience to learn, better than I could have described them. At that point we decided we would get the investment done, it would just take time. I did not even have a balance sheet. He introduced me to a part-time CFO who literally came to my house, pulled all of the receipts, and put it all together.

Even though I had advertisers I had not invoiced them for months on end. I would only invoice them when the money in my bank account was getting low. I would then invoice them for four to five months at a time. I learned that when you start a company you need to spend money on keeping the books in order. Sorting out the finances delayed us six months.

This segment is part 6 in the series : How Rafat Ali Found a Job
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