The Hard Thing About Funding

Done Saga, Episode 5

by Gilles Raymond

Photo by Conrad Ziebland on Unsplash

This series recounts the creation of the startup Done, from the first idea to the final product, with its best and worst moments (past and coming). No bullshit. Promised.


  • Episode 1, “The Two Foundations” After a near-death experience, the sale of News Republic to a giant Chinese tech company.
  • Episode 2, “Three Chinese lessons” What it really means to work for a Chinese company. The need to rethink how we interact digitally.
  • Episode 3, “Strategic Branding” How Done drew inspiration from the hospitality industry.
  • Episode 4, “The Design Sprint” A product in five days, from ideation to test.

Memory tends to be selective. In our line of business, that’s a blessing. I knew, somehow, that raising money for Done wasn’t going to be easy. But I had forgotten how hard it was. Just a month

I finalized our first round of financing. Modest, but sufficient given the kind of control I want to retain on the company. We are on a good track: we have a product, a great team, and a clear strategy. But going from the first call to the term sheet took me nine months of toil and rejection.

In Episode 2, I recounted how, while working for Cheetah Mobile after the sale of my previous startup, I got convinced that there was room for innovation in the applications and services we use on a daily basis: instant communication, file sharing, task management, and agendas. That was my vision for Done. An all-in-one app, neatly designed, minimalist, efficient and cool to use.

So there we are at the beginning of 2018, I’m starting to figure out the strategy to fund the project. I’ve been out of sight for nearly two years, working for Cheetah Mobile — trying unsuccessfully to reach the C level in a Chinese company — and creating the Signals Network Foundation to better connect whistleblowers and investigative journalism teams (read this story by Dan Gillmor).

The Signals Network protects whistleblowers, and needs your help

Thankfully, wearing the badge of honor of a decent exit (in our case, $57 million), opens a few doors. It is time for a warm-up lap with few VCs.

Meeting investors, even with a sketchy idea, is never a waste of time. These people see everything. They know where the money flows, what are the promising sectors. To me, they are advanced indicators of where technology is heading.

Of course, they have their limitations: a terrible herd mentality that will make them prefer being wrong with the crowd than taking the risk of being right alone. They also rarely take the long view and are obsessed with the hockey-stick curve, the “grow-at-all-costs” mantra, sometimes with costly blinkers (WeWork, Uber, the electric scooter business, you name it).

It takes me roughly three months to make my little tour between the Bay Area and Paris, meeting Benchmark, Bessemer, XAnge, Intel Capital, Creathor in Germany, Isai in France, to name but a few. About a dozen meetings. Always the same format: half an hour or an hour, usually starting with an agreeable discussion about market trends, then in 20 minutes, I pitch my idea, with the usual rundown: need, market size, uniqueness of the product, the money machine, and last but not least, the team I expect to assemble. Then comes the feedback. Always insightful. In short: great idea, the all-in-one app could be a game-changer, the priority given to privacy and security is a plus. But (there is always a but): the market is crowded, you will go after Slack, and more importantly, after Microsoft and Facebook. But it could work, they said, and if it does, it will be big.

If I had to give a grade, I’d say I got a B+. To me, that’s enough of a green light to move forward. I know how to assess the feedback, especially since I went through the same path, just a year earlier, probing VCs with a completely different idea, about a kind of Zillow on steroids, aimed at removing all friction in real-estate transactions in a scalable way, etc. At that time my tour yielded a mere D-. Project shelved.

Most of spring and summer of 2018 is spent recruiting the team. I am touched by the trust of my former News Republic crew. With the exception of one engineer — engaged in a great Augmented Reality project — all of them agree to join, adding more pressure on my shoulders. They quit well-paid jobs, they are young, some of them have just started a family.

By the end of the year, the team has started working in a nice loft in Bordeaux. The design sprint has helped us to define the product and test the prototype; we also did in-depth work on the branding of the product, as explained in Episode 3. We are fully equipped for a full-fledged quest for funding.

In the first months of 2019, I hit the road, fresh and joyful, convinced that this step will be wrapped up in three months. After all, I have successfully gone through ten bouts of fundraising, including a significant one in Europe, and my last exit led to a decent 3x return to News Republic investors. I had tested the water six months earlier. I have a good network in both places and even count some genuine friends within the VC community. I expect to raise $3 million in seed on both sides of the Atlantic.

How naive.

First, I discover the true significance of “seed money” and the subtle distinction between Americans and French. In France, you can get seed on an idea: the main way to finance your startup from scratch is through a state bank, BPI, which funds the tech ecosystem at every level. In the Valley, seed money flows only when a product already shows promising metrics. The funding phase before that is left to business angels. I know that I am missing this piece of the puzzle. I need to create a network of business angels.

Exactly that.

The United States has about 618,000 Millennial millionaires, according to a recent report by Coldwell Banker. From the top 10 zip codes where they live, eight are located in the Bay Area. In terms of sheer wealth, 93 percent of them have a net worth between $1 million and $2.49 million. About 15% are business owners, and half of them have investable assets ranging from $500,000 to one million.

That has some nice potential. I will skim through the ones I know… and their elders. Simultaneously, I will also probe the usual suspects in the VC crowd.

Let’s stop for a moment and look at the harsh arithmetic of venture capital from an investor’s and entrepreneur’s perspectives. First, they suffer from a timescale mismatch. A venture firm might have several active funds running concurrently, ranging from a few hundred million to several billion, that can have a ten years duration, while the entrepreneur will know their fate in a matter of six months after launch. Second, the gap is immense between the supply of pitches and the demand (or hope) for a fruitful investment.

On average, a mid-tier VC firm will receive 4000 startup projects a year and hold 120 meetings that will translate into 12 investments. That’s a success rate of 0.3 percent per contact.

Then, the success/failure ratio for the startup: roughly half of the companies end up burning most or all of their investment. 20 to 30 percent make some money, a few times their funding. And 10 to 20 percent are home runs with a return ten to a hundred times the VC’s investment (typically a unicorn exit), always after multiple funding rounds. As an example, Facebook started in 2004 with $500,000 from Peter Thiel, but raised $2.3 billion over 14 rounds; on the IPO day, it was valued at $104 billion and is now worth $588 billion. Zoom also raised $500,000 in pre-seed in 2010, went public in April this year at a $9.2 billion valuation and is now worth twice as much. These are the dream math of any investor. And keep in mind that 80 percent of startup don’t even make it to the funding phase.


In such a context, the entrepreneur must quickly learn to deal with rejection. Behind the glowing headlines boasting about a profuse round of funding there stands an incredible resilience.

Examples abound. Take Kathryn Minshew, whose career development company, The Muse, is now valued at about a hundred million: she was rejected no less than 148 times before raising $2.7m in seed. “There were literally days where I had a ‘no’ over breakfast, and ‘no’ over a 10:30 AM coffee, a ‘no’ over lunch. Disinterest at 2:00 pm, somebody who left a meeting early at 4:00. And then I would go to drinks and feel like I was being laughed out of the room”, she said on Reid Hoffman’s podcast Masters of Scale.

Another example is Travis Kalanick, who recounted to Brad Stone, author of The Upstarts: “Imagine hearing ‘no’ a hundred times a day for six years straight. At some point even your friends are like, ‘Dude, you need to do something else.’ To keep going in the face of what can be a lonely existence.” For Uber, it took Kalanick eighteen months to raise $1.3 million from 29 investors.

I experience my share of loneliness in 2019. Whether I am in France, or in San Francisco, or during the 10-hour trip between the two, the first thing I do when I wake up is to check my phone to discover multiple variations of rejection. Many “thanks, but no thanks”, some agree to meet obviously just to sniff around and be able to track our progress; sometimes a firm will say ‘no’… but a partner will reach out to make a small but precious commitment on his own. Several others said we are in… as long as X, Y, Z are onboard too.

Over time, the cruel entrepreneur’s arithmetic plays out. Funding a startup is the only game in which a 97 percent failure rate is considered a huge accomplishment: you contact 100 VCs; if you end up with one term sheet, you can be proud; two, that’s a remarkable performance, three and you’re a rock star. More than that, you are a liar.

While I’m on the road, expenditures keep piling. The staff goes from 6 to 11. While I’m not taking any salary, I need to put coal in the furnace. Altogether, I will put half a million euros in the company as I wait for signals from investors.

They will end up coming at the end of that year. I will get half a million dollars from a group of wealthy “angels” in the United States and Europe. Among those who agreed to be named, Thierry Vandewalle, partner for Europe at Isai, Benjamin Orthlieb, in charge of corporate development at Linkedin, and Eric Tholomé senior director product management at Google. All of them are investing in their personal capacity. To them and others who preferred to remain anonymous, I’m immensely grateful for their trust and their friendship. It was worth the pain.

— Gilles Raymond (with Frederic Filloux)

See you on January 6. We will be talking about Done’s social selling strategy.

The Hard Thing About Funding was originally published in Monday Note on Medium, where people are continuing the conversation by highlighting and responding to this story.