As they prepare to launch a platform two years in the making, the founders of Malartu Funds share their entrepreneurial journey, and why they're fundraising using their own site. This piece was originally posted on LinkedIn.
It’s a pretty cool moment when you experience the value of what you’ve built first hand. Malartu fundraising on Malartu is
For the uninitiated, Malartu Funds is an online platform derived from a pretty simple, yet arduous mission: Help startups grow. For the initiated, you know this has taken a number of strategic steps (read: “oh shit” moments) and a couple years to get to where we are today. I’d like to briefly touch on that and explain how we got to fundraising our current round.
- A most awesome meta announcement and
- An experience where we test the value of the ecosystem we’re working to create. That’s pretty meta too, actually.
I met my cofounders Jon Spinney and Lewis Sheats in the entrepreneurship program at NC State. Through Lewis’ class, we got to work with a pretty good number of startups in the Raleigh-Durham area. We got to work with a few while they raised capital. We knew the capital raising process was broken since fundraising is almost always the biggest complaint of any successful entrepreneur. We knew there was a better way to fundraise and we saw a few smart people doing it elsewhere, mostly in Silicon Valley. We knew that in some capacity those same processes could work for companies in our region, the Southeast, and specifically the Raleigh-Durham area of NC.
With these new fundraising processes came a big ‘ol mix of new and old securities regulation. Naturally, we went looking for people to help us decipher all those new and old regs and land on something business-y we could run with. We had a really hard time finding any attorneys who understood the landscape surrounding these regs, probably because these attorneys never had a client who would pay them to learn them.
Side note: Hats off to the legal world, man, the only industry where they require clients pay them to learn what they will later advise on as experts. Right on. Seriously.
Other side note to my attorney friends: Beers on you next time.
Well we found a group of highly-intelligent corporate attorneys who turned out to be equally as curious as us about these new fundraising processes and they agreed to help us out. Between the advice of our legal team and our personal obsession to learn the ins and outs of these new regs, we were teaching classes on crowdfunding regulation to law schools within the year. Not going to SEC jail — check.
Checking my survival bias here, but the next step was essentially to build a platform that could introduce entrepreneurs and investors to each other with the hopes that some of the investors invest in the more promising entrepreneurs. We wanted all of this done online, through our platform. Luckily, we weren’t the first to come up with this idea so we had a few marginally successful models to follow. I mention survival bias because I could say, “So then we built the platform under the current regulation and sailed into the sunset, raising money for all the Eddie Entrepreneurs and Sally Startups along the way…” but in reality, we built half of a platform under one set of proposed regs at a state level which failed to be passed despite bipartisan support, not only that year, but the next year as well. And then we switched to develop for another set of regs on the national level which had been passed 1.5 years prior.
Lesson learned: never bet on politicians, let alone NC politicians.
So we have version 1 of the platform rigged up and ready to launch. It wasn’t ready, but we had been doing this for a little over a year now and it was go-time. We hopped in our hamster wheels that powered the backend, said screw it and started talking to investors and entrepreneurs about using our new platform as an alternative to their traditional funding/fundraising. Some good reception, some not-so-good reception, but we kept pushing.
We made investments in 11 companies* in 6 months since that start date. It was awesome. and brutal. and terrifying. and slow. That’s more investments than a lot of VCs make in a year, but the dollar amounts weren’t where we wanted them and the process was still too inefficient for our liking. So now we’re staring 2016 in the face with a few investments under our belt and a pretty unexplainable passion to turn this seedling of a funding platform into a forest of financial anomalies. Onward.
We learned a lot about this new way of fundraising online, what works, what doesn’t, where we can compete with those previously functioning platforms, and where they will beat us every time.
So it’s now January 2016, Raleigh is quite literally on fire from 1.63 inches of snow and I’m sitting on this POS of a Macbook designing version 2 of our site in Wix. Yes, Wix. And yes, that’s the snow storm and a car on fire.
I get a text the next morning from a college friend that reads: “Met up with a childhood friend, David, last night for first time in ages. Turns out he’s been building in Ruby for years and interested in what you’re doing.” Well that’s handy, our platform is built on Rails—we need some dev help (Wix sure as hell isn’t going to get this done). Set it up my man.
So Davey walks in the next evening and we sit down to talk about what we’re working on at Malartu. I show him my Wix project and ask him what he thinks. He turns to me and quite literally says, “dude, I can code this shit in like two hours.” So I’m all like, “want to try?” and he’s all like, “Beers on you, let’s do this.”
So we start building. Me designing stuff on Wix (turned out to be helpful in many ways), him making it into a real thing we could actually use and scale, Jon reaching out to people about using this thing for another go round. About a month later we have version 2 of the platform—all the functionality we needed from version 1, a better onboarding process, cleaner, simpler design, and room to build in features our current users were asking for. There was a resounding “damn” from people who saw version 1 to version 2 and it goes without saying, but I’ll say it anyway: Davey is a f***ing rockstar.
There it is.
We run a few more deals through the new platform, this time without manning the hamster wheels—they run themselves. There are still some issues, but now we can work through them on the fly (like startups are supposed to do). There’s still something bugging Jon and I though. This is helping startups raise a little money but it’s not helping like it could. This is the tip of the iceberg. Where’s the missing piece?
Here’s the brainstorm that stemmed from that and led to today: with the exception of one company, our portfolio companies are sending scarce updates to us about progress, problems, hiring, whatever (hell we were sending scarce updates to our investors about the same stuff). It’s hard to do. It takes time. But what about that one company? These guys are knocking it out of the damn park. Detailed reports with granular data on a monthly basis, and they’re raising/making gobs of money. On top of that we notice that one of our competitors touts a specific and seemingly unimportant attribute: “We are the only platform that regularly sends updates to investors on all portfolio companies.”
They are small and far away but they are freaking. killing. it.
Maybe there’s a correlation there.
In the meantime I’ve been helping out a local venture fund with prospecting. I’m spending hours parsing old, publicly-available data scraped everywhere from SEC postings to Twitter. I’m getting this data from very expensive and very large databases. I’m using this stuff to find “signals” from promising companies that may want to fundraise soon and my mid-stage VC can swoop in and start the conversation early, getting an allocation in a hot growth company’s new hot round. Really wish I had data like what that one company in our portfolio is sharing, even on a macro level. Shit, we’d be able to spot the funding moment even before they do…
Called Jon. Told him we need more data on the companies in our community. He’s like “duh.” We conclude that the companies also need a better way of managing their own performance data, otherwise it’s just another thing for them to do. The companies need an easy way to share that data with their team on a weekly basis. Then they need to share with prospective investors so the ones hitting their numbers can easily raise/make gobs of money like the one in our portfolio. Poor data analysts at financial institutions everywhere need that data to predict later winners and get a pulse on innovation. Who gives a f*** about how many Twitter followers Acme Co got last week when you know their CAC dropped 12% since three months ago and their ARPU consistently rose 5% a week the last nine weeks?
There it is.
And here we are.
And we’re ready to go. The growth platform we wanted to build in the first place now has a funky name and a promising plan. Malartu is where business intelligence meets venture capital. We help companies aggregate and analyze their data, create reports, then share those reports with their teams, their advisors, and the right investors at the right time. Investors track startups, form syndicates, and grow portfolios of growing companies with more transparency than literally anyone has ever experienced.
And we’re eating our own dog food.
We’re fundraising on our platform. We’re launching our business intelligence tool in about one month and we’re raising a round of financing to boot. We’re ready to roll. Since announcing our integration of business intelligence to our platform we’re collecting interest from major networks of startups and investors, anything from university venture arms to development groups. Turns out more than a few people are picking up what we’re putting down.
*One of the companies we invested in was one we met through Lewis’ class. This company is WedPics, led by the talented and inspiring Justin Miller (@ImJustinMiller). Also the company that I referenced that is crushing it.