Christian Desjardins, founder of Punchtime and L-Spark incubator grad, recently went through a second round of seed funding for his SaaS company. What lessons did he learn from his first round? Techopia got the scoop.
What was your strategy going into discussions?
“We got a little bit lucky, I guess. In hindsight, I would say, I don’t know if I would’ve jumped on board so quickly. We gave up 20 per cent equity the first time around, which isn’t a whole lot, but it’s substantial. And then you have to deal with the realities of that relationship once you’re in it. It’s just like a relationship with a person. You don’t want to commit too quickly or blindly because then you might be in for some surprises. The second-time around, we were much more prudent and much less willing to give up equity easily. And we really got to know the people who wanted to work with us and wanted to invest in what we were doing.”
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The World Junior Championships will kick off in Ottawa in December, bringing tens of millions of dollars of economic activity to the city, as well as a chance for local
Did you get any legal advice?
“Lawyers got in pretty much right away. The lawyer we had originally was not extremely well informed with these types of dealings. He was our guy for all of our basic corporate needs, that sort of thing. He wasn’t completely out of his league, he did review the paperwork and it was pretty much standard stuff for the most part but it was a strange deal. The first time we did it, it was an equity deal, but part of the deal felt a little bit like a loan, which we didn’t really like. Eventually we changed that and that was part of the complex relationship. Definitely get a lawyer, and try to get a lawyer that’s experienced, that’s done this before. If our first lawyer had done this many times, it would’ve raised more red flags that we felt like we found out maybe a little bit too late. They weren’t huge things, but they did bother us, and if we had known beforehand, we would’ve made decisions differently.
People who have done a startup and have been through the whole process, those people are super helpful. Because along the way, they’ve met those people, they’ve made those connections. Learn from their mistakes as opposed to having to make those mistakes yourself.”
How did you determine how much to ask for?
“The first time we got funding, we didn’t have a really well-formulated, well-structured ask. We knew that we wanted to hire a certain amount of human resources. We knew we needed to do certain other things that cost money like buy equipment, pay rent, that stuff. So we raised about $200,000. From the onset, I would say, make sure you know who’s paying for the accountant and the lawyer fees that facilitate the transaction. We ended up paying a whole lot of it, and it cost us a lot of money. All of that money could have gone to more appropriate applications if we had taken more time to negotiate.”
What advice would you give to someone looking for seed funding?
“Get input from others. A lot of the advice that we got from L-Spark in the beginning, it’s not that we discounted it, but we found some of it comical and we just didn’t get it. And then in hindsight, they were absolutely right. They are people who have done this before and they were right on the money.
Get your pitch straight, have it super practiced, be critical about your pitch once you get a load of advice. It’s always more convincing if you can show a demo, something that works. Make sure you understand the financials of the startup. Projections are important.
Know your investor. That’s a huge part of it. An Ottawa investor and someone from the Valley are completely different. Somebody from California, first of all, the money is much more. There’s a lot more competition, and they’re a lot more interested in big ideas than they are in MRR (monthly recurring revenue). In Ottawa, they want to see real growth, they want to see recurring revenue, they want to see a viable business. Something that’s been tried by real people that it was intended for and it works.”
What’s the big takeaway?
Don’t jump in too quickly, take time to realize what you’re negotiating
Shop around for affordable accountants and lawyers who have been through these negotiations
Know who’s paying the bill for the legal work
Find people who have been through it before and trust their advice
Get your pitch straight and make sure you’re sharing something compelling
Know your investor!
