Launch Pad closed $1.3MM using open-sourced docs and you can too.

This week we announced that Launch Pad has closed a round of seed funding to open more Launch Pad locations on our mission to help…

This week we announced that Launch Pad has closed a round of seed funding to open more Launch Pad locations on our mission to help catalyze startup ecosystems around the country.

We believe that startups can be started and scaled anywhere, but we know it’s not easy. So in service of our mission, we want to share insights into how we raised this funding round and what we learned.

Today, we are announcing that we closed a $1.3MM seed round for Launch Pad. We had participation from investors on the east and west coasts, but the majority of our investors are from New Orleans. Fundraising is always tough, and fundraising outside a major startup hub market is even more so. We hope that some of our experience will be helpful to other startups going through the fundraising process, particularly those in non-hub markets.

Getting the Company Ready to Raise

A meetup at Launch Pad Nashville.

Throughout the process, I described Launch Pad to investors as a 9-year old company and a 1-year old startup. We spent our first 8 years solely focused on the New Orleans startup ecosystem, during which time entrepreneurs working at Launch Pad created 5000 jobs, raised 160MM in VC and graduates expanded to 600,000 sf of real estate in New Orleans. In 2017, we expanded our vision for the impact we could have as a company to cities experiencing similar growth — “momentum markets” — across the country.

What we understood clearly is that investors needed to see that growth ahead of our ability to raise. We needed to show, not tell, investors that we are growing the company.

A big part of growing was bringing Anne Driscoll onboard — her background scaling several high-growth startups in Silicon Valley brought the expertise to build the infrastructure and culture for growth. As one investor reflected during the process “you guys really didn’t go anywhere until Anne joined.” 🙂

In 2018, we opened Newark and Nashville before we had raised any funding, and committed to Memphis prior to raising capital. We tightened our belts and funded this personally, demonstrating that we were “all in” on the business.

Investors are interested in demonstrable growth metrics — not just potential for growth.

This required us investing personally in this growth and building a great team at the management company level based in New Orleans that has created this growth infrastructure for us.

Over the years, I remember many conversations at Capdeville (RIP) about how we could structure LP for growth. None of those conversations taught us as much as starting the process. Three years ago we opened a our first expansion Launch Pad in Charleston. We stubbed our toe in that move and ended up closing the operation. The most important thing about this was the learning and being able to fight another day — we built resiliency into the business. We did a lot of things right; strong community, sold out offices, great space and location, but we learned the most from the exposure of the fundamental risks to the business; price sensitivity, premium rental rate, and on the ground leadership. We built a partnership with our landlord, which allowed us to exit the location without losing our shirts — and lessons that would stand the test of time.

Last year, we opened three new locations and built the muscles to identify momentum markets, underwrite deals, manage design and construction of multi-million dollar projects we feel like we have created the infrastructure to truly scale.

Our vision is to create the platform for entrepreneurs to build successful companies in the cities where they live, to ignite this spirit amongst underrepresented groups and be a part of bringing mainstreet back to life. We have set our sights on opening 20–30 new locations by 2020, being not just a coworking space, but an ecosystem catalyst.

With this new direction in place, we began the fundraising process.

Running a Fundraise Process

There are many-a-Medium post about the fundraising process, so I won’t rehash all of the best practices here, I’ll simply share some insights about our experience.

There are a lot of misconceptions about fundraising that emanate from the media awareness of the Silicon Valley mythology. You come up with world changing idea, create a beautiful pitch deck, set up meetings and next thing you know, term sheets come rolling in. Heck, if you are lucky, you’ve got competing term sheets.

In reality, most interested angels and non-institutional investors don’t know what terms are the right terms to put into a term sheet. So we set our own.

Set the terms

We began our process by defining what we felt were reasonable terms for the market and created our own term sheet. Below we’ve open sourced our docs, and you can dig in on terms that we felt were reasonable for a seed round.

We raised an equity round, not a SAFE or convertible debt. We felt this was the best fit for our stage and it also reflected the investor appetite in the market.

Find your ‘First Believers’

No investors want to be the first ones in the pool. It’s natural human instinct, you can’t fault them for it, but you can understand the dynamic and what it will mean for your process.

We knew that before we cast a wide net for investors, we needed to target a narrow set of people who would be our ‘first believers’ and be the first money in. With this in mind, we began conversations with a small group of people who with whom we had long relationships.

These first believers acted as the catalyst for our round. Once we got them committed and closed, we began the wider outreach to other angels in our network. Not all of the first believers ended up investing in the round, and we were okay with that too. The due diligence process during this phase was instrumental in our ability to close the rest of the round. We learned the parts of the business that would prompt questions and concerns, which allowed us to hone our pitch and uplevel the diligence process.

Even more than that preparation, we learned what our give points would be in negotiation, and what was non-negotiable. It’s okay to not close everyone, and its more important to have fewer investors that are fully aligned with where you are going.

Serious investors only

We took fundraising seriously and needed to manage the process closely because we were already scaling the company. Fundraising is a distraction from the day-to-day of the business, but it also helps you level up and think about the business strategically and in the long view.

The process followed the usual long, difficult road. Outreach covered cold emails, phone calls, dinners, travel, conferences — the whole gamut.

The one thing we didn’t do was pitch any angel groups or events where our fundraise was their content. We had a number of people who extended an invite to meet this or that angel group. In each of those cases, the person extending that invite wasn’t ready to invest himself/herself. We declined if the investor inviting us didn’t have the conviction to invest, because we knew that wasn’t going to be perceived as a vote-of-confidence to their angel group.

Make the ask

Each investor that ultimately closed got to that point after I made a clear and specific ask — “we want you in and here’s why.” In some cases it was the strategic value they would bring, in some cases it was the impact we knew they wanted to have with their investment. But as we approached the decision point, I made a personal and explicit ask to each investor including a “why them.” It’s powerful and investors need to hear why you want them and not just their money.

You’re not done yet, do diligence with diligence

Due diligence is the next phase of the process, and my perspective is that it should be saved until after you have a verbal commitment from an investor. When you are sending due diligence information you are really opening the kimono on your business, so don’t just email your DD docs along to anyone. Investors want to confirm that they are making a good decision and get some reassurance that what we are saying about the business checks out.

We took every due diligence question we received and composed a written answer to it including spreadsheets with financial modeling, etc. All of these were then included in a master DD doc that we sent out to investors as soon as they committed. In about half the cases we got an email back that said “this covers everything I was going to ask.” It helped us come across as prepared and professional.

What worked, what didn’t

As we reflect on the process we ran, we want to share some of the key things that worked and some things that didn’t:

• Materials — 12 slide deck, 4-page exec summary, pro forma model, financial statements (DD). Probably the most important piece of our materials was our written exec summary. We refined this over and over to give investors a chance to read and quickly digest what we’re a building with Launch Pad in a clear, compelling format. We found it a great companion to the verbal pitch.

• Intros — None of our “let me intro you to a friend” went anywhere. Almost all of the investors we ended up with were a 1st-degree connection. As I often reflect to founders looking to raise a first round — you probably already know most of your first investors.

• Conviction — Asking people you know and respect and have personal relationships with is very difficult. It required us to have complete and utter conviction in our vision and what we are building. On the flip side, as some investor conversations got sidetracked with discussions around terms or who else was investing, it was easy to quickly see which investors had conviction. Once they made a decision, they were in. Those are the kind of investors you want.

• Shut up and let my partner talk — I learned quickly at the outset of this process that in many cases the investors we were talking to knew me well. The person they didn’t know was Anne, my partner in the business. I recognized I needed to check my ego and let the smartest person in the room or on the call shine through.

• Pipeline — We managed the fundraising process just like a sales process and set up a funnel in our CRM. This allowed us to quickly do status meetings and take next steps on each, its critical to stay organized to keep moving. Creating and maintaining momentum in the process is crucial.

• Investors invest in lines, not dots — The process for our seed round took 6 months. Once we started to take funds in, we completed in 120 days. We made sure to connect with folks, and share updates that demonstrated we were doing what we said we were going to do, and doing it at pace. This built confidence in us, the business and was reinforcing for the earliest committed investors.

Open Sourcing The Docs

Since we used open-sourced docs as part of this process, we want to point back to those as a resource for other entrepreneurs. We worked with docs that were open-sourced by SparkToro and can be found here.

A big thank you to Rand Fishkin and Casey Henry from SparkToro for sharing their docs and experience with the community and for inspiring this post. This saved us money and time, and we want to pay it forward. The SparkToro docs provided a helpful starting point for us, and we made a few adjustments to them.

• Accelerated Distributions — In an effort to mitigate against the risk that we run Launch Pad as a lifestyle business, we tweaked the original distribution clause in the docs so that investors are returned 2x their capital at a 50–50 rate on any distributions rather than pro-rata until investors are recapped 2x.

Open Source Docs — we made the adjustment above, but otherwise worked directly from the SparkToro docs.

Thank you 🙏

To the Launch Pad 🦋 community, we want to send a big thank you and high five 🙌. Our members are our magic and we couldn’t have done this without your support and drive.

We’d like to thank our investors and first believers for sharing our vision and helping to fuel our growth. We’ve moved the goalposts and are ready to roll.

Thank you to the amazing 💯 Launch Pad team who keeps the wheels from falling off and relentlessly works to grow the business and have impact on the communities that we serve every day.

Thank you to Abid Hussain, our attorney, and Drew Carlson for managing the process.

Thank you to my partner, Anne, and our daughter, Harper, who’s early entry into the world was a welcome complexifier to the process, but proof that an expecting husband/wife couple can raise money and have a baby all at the same time.

Let’s go get ‘em!