Capital Efficient Entrepreneurship from Utah: Ben Dilts, Founder and CTO of Lucid Chart (Part 7)

Sramana Mitra: What about financing? You talked about your early financing. Talk about the rest of the financing history of the company.

Ben Dilts: It was in early 2011 that we raised a little over $1 million. We rolled that early friends and family money into that same round. That kept us rolling for a while. We have a culture of being frugal. We’ve never raised money with the idea that we’d have to raise money again. We raised about $1 million, and it officially closed in summer of 2011. I don’t think we ever burned half of it.

We, very much, looked at it as money that we need to operate right now. At the time, we were not profitable. We were definitely burning a little bit of money. We needed to cross this line fast. Pretty rapidly, we had caught up in revenue to what we were spending. We chased that line where we were only growing expenditures as we were growing revenue. We were borderline profitable. We’ve grown tremendously but we haven’t done it in a haphazard way. That was in 2011.

In2014, AdWords was this huge market. We should be able to figure out how to make this work. We’re not spending this money we had in the bank, but I was really nervous about betting half of it on getting AdWords to work in the next six months. We’re starting to make difficult hiring decisions. We might have a couple of fantastic candidates. We’d love to take them both but we have to make the call between them because there’s a cash concern.

At that point, we went out and started fundraising. In early 2014, we did what turned into a pretty quick fund raise. It was led by Kickstart seed fund here in Salt Lake. They actually wanted to get involved in the seed round back in 2011. For one reason or another, we wound up closing it before they figured out terms that made sense for them. They jumped on it pretty fast. With them leading it, we raised around $5 million. That was in 2014.

Sramana Mitra: You had substantial revenue at this point right? You must have ended 2013 with very substantial revenue. The $5 million was coming at a significantly validated point.

Ben Dilts: That’s correct. We were definitely raising from a position of strength. We hit our stride in 2011 to 2012 where we were covering all our expenses with revenue. We, essentially, doubled in size in terms of revenue and also head count every year since. In 2014, we’d been on this over 100% year over year growth for a few years in a row. There are tons of green fields in front of us. We had this big unmined database of users who we could go and figure out some way to extract value from. There’s so much promise.

We raised money pretty quickly. The reality is we did vet some of that. We used some of it but I don’t think we ever burned half of it. It’s the way that we operate. We did, again, raise money just recently. This one was entirely inbound. It was the strangest fundraising experience I’ve ever seen. We had some contact over at Spectrum Equity. We had talked it through with them. They were aware of where we were. They came and offered us terms on an investment. It was like that.

Sramana Mitra: How much did you raise from them?

Ben Dilts: The terms that they offered were actually pretty reasonable, but we didn’t just want to sign the sheet. We went around Boston and the Bay Area talking to different investors. In the end, we really liked the guys at Spectrum Equity. They’re really smart. They think like us. They have invested in a lot of companies that are similar to us. They could provide operational insights and how to continue to grow. The full round turned out to be about $36 million.

Sramana Mitra: What kind of revenue range are you at right now?

Ben Dilts: Tens of millions of dollars.

Sramana Mitra: I’m assuming to raise $36 million, you’re over $20 million in revenue.

Ben Dilts: That’s probably right. We’re growing very rapidly and we continue to grow rapidly. This year, it’s about a 100% growth. This Series B round involved a lot of the same considerations that we had with our Series A where we looked at it and said, “There’s a lot of things we want to do. We’re not in any sort of position that we have to raise capital.”

We had a lot of hard conversations internally about taking the money. In the end, we took it because we had, essentially, maintained control over our destiny. Even raising as much money as we have, the majority of the Board is controlled or appointed by us. That was part of the calculation. Are we going to be wound up being run by these guys? Even if we like them now, we want to make sure that we can control our own destiny.

Sramana Mitra: Did you take liquidity?

Ben Dilts: Yes, some early employees, founders, and some of our early investors took liquidity. Some of these rounds was simplifying the cap table. They’ve been in it since 2010. We rolled up a handful of those.

Sramana Mitra: Great. It was very nice meeting you. Good luck.

This segment is part 7 in the series : Capital Efficient Entrepreneurship from Utah: Ben Dilts, Founder and CTO of Lucid Chart
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