Rich - great post. Think your points about SaaS companies and the multiple smaller "seed-esque" rounds makes a lot of sense. We're a SaaS (or perhaps DaaS company for the acronym inclined) that thinks similarly.
One question I'd love to get your perspective on - how did the capitalization raised by competitors such as Get Satisfaction impact your thinking (they've raised a lot more - we track this data). If more money helps acquire more customers more quickly ultimately helping you "own the market", did the idea of raising less ever seem like it could be disadvantageous over the long-term? If what competitors raised didn't impact your thinking at all, why not?
I ask because we've discussed the same question ourselves and so would love to hear your perspective.
And finally of course, congrats on the raise and on building a real business. We have your current round as a Series A and your last year's raise as Seed VC on CB Insights for what it's worth.
There was funny slide in our deck where I list out us, our competitors and the amount raised:
GetSatisfaction - $21MM
Zendesk - $25.5MM
UserVoice - $0.8MM
:)
My take away from that is that the delta is so large that we're not going to beat those guys by out-raising and out-spending them. I don't know that we would really know how to do that anyways. It's just not who we are.
If we're to "own the market" we'll do it our way: by building the best product and creatively marketing it. We don't (currently) need tons of money to do that.
While there was a de-emphasis on valuation, there are many instances where a subsequent inside round is not a good thing. If the follow-on round is at the same terms as the prior, the dilution for employees and existing stake holders will take a bigger hit.
In the article, Rich mentions, they are getting the money at a 7x increase over the prior round. Great for them. It is not always the case.
I'm honestly not sure what the names mean anymore. I've seen people call their 4th round their Series A. Our original round was called our Series A (just what legal put on there an no one really payed attention) whereas I think most would describe it as seed.
Seems like it would be more descriptive to say "our N+M round" where N was funding to date and M was the delta that round would give. Obviously many times you don't want to be descriptive. But if you did.
One question I'd love to get your perspective on - how did the capitalization raised by competitors such as Get Satisfaction impact your thinking (they've raised a lot more - we track this data). If more money helps acquire more customers more quickly ultimately helping you "own the market", did the idea of raising less ever seem like it could be disadvantageous over the long-term? If what competitors raised didn't impact your thinking at all, why not?
I ask because we've discussed the same question ourselves and so would love to hear your perspective.
And finally of course, congrats on the raise and on building a real business. We have your current round as a Series A and your last year's raise as Seed VC on CB Insights for what it's worth.