This interview with David Lifson, co-founder and CEO of Postling, was conducted and condensed by me, Mattan Griffel. It’s the first in a series of interviews I’m doing called the Founder’s Funding Series, in an effort to shed some light on the process of raising money for your startup.
I first met David when a mutual friend introduced us and I later read about how he raised $200k in 6 days for Postling. So I reached out to interview David about what that was like, and he happily obliged.
Q: Do you remember the first time you decided to start a company? That wasn’t Postling, right?
A: Yeah it was a company called Waffl, which was Esty for Bed & Breakfasts. In the last couple weeks of my time at Etsy, I decided to go to Ithica for a weekend with my girlfriend and stay at a bed & breakfast. Long story short: I couldn’t book a room. They don’t do online reservations at these places because they’re mostly run by older people. So I thought, “Damn! Someone should build an Etsy but for Bed & Breakfasts.” But I put that idea aside and when I quit Etsy I started looking around for a regular job. That was November 2008 and it was like the death of the stock market no one was hiring.
Then a friend from college who I hadn’t spoken to in 3 years saw on Facebook that I was looking for a job. He reached out and asked, “Do you want to start a company?” So we met up for dinner, I pitched him three ideas, and he liked the bed & breakfast one the best. He asked, “How much do you need to get it going?” I told him, “I don’t know, probably $5,000 a month.” He said okay, wrote me a check and gave it to me right there.
So for three months I would meet him and get my $5,000 check. But at the end of the third month he said, “Dave, I’m really disappointed. You don’t have a website yet. You don’t have any customers. You haven’t even picked a name yet. What the hell are you doing? This is my last check.” And then he cut us off. That was a really great wake up call for us because at the time we hadn’t understood the difference between work and progress. We had plans, lots of plans. We had specs, we had database schemas, but we didn’t have anything that real customers would use.
Q: So what did you learn from that experience about the process of developing an idea?
A: Well we abandoned Waffl three months after launching it and switched to Posting. And the reason was customer acquisition. We hadn’t through how the hell we were going to get in front of people. If we had built a model I think it would have been obvious to us before we had even written a line of code. It’s like, “Well to make this work we’re going to need to charge this much money a month and we need to acquire this many people a month. How the hell we are going to do that? There’s no way? Okay next idea.”
We got the idea of Postling from from the bed & breakfast people, actually. They’re the ones who told us, “We’re overwhelmed by all this social media stuff. Put it all in place and we’ll pay for that.” And thought, “Okay, you’ll pay for something? We’ll build it.” And so again it was six weeks from idea to launch: we launched August 1st 2009.
Q: What kind of entrepreneurship lessons what did you learn from that experience?
A: Don’t spend a lot of time planning. Once reality hits, it becomes a very different thing. However you should build a business model. Don’t worry much about the business plan because there are so many assumptions there it’s kind of waste of time, but building a spreadsheet is really important and something we didn’t do. What the spreadsheet does is tell you what numbers need to happen such that you get a business that’s worth your time. Like… it only works if we are able to charge more than $20 a month… or it only works if we are able to acquire more than a 1,000 people a month. Whatever those assumptions are, you need to find out what your limits are so you can ascertain if it’s worthwhile.
Q: What were some lessons you learned from the process of startup funding?
A: We already had all the documents figured out so we knew that we were going to raise on equity, not convertible debt. We knew that we were going to raise at $1.4 million pre, and that we were raising $350,000. We knew that we were going to give ourselves 60 days to close the round. Because we had all the things figured out, all of the usual negotiations and wishy-washyness was off the table. It became very black and white: Do you want to invest or not? And the reason why I was so non-negotiable is that we already had the first $130,000 committed on those terms.
Q: What kind of advice would you give to an entrepreneur in process of funding a company?
A: Don’t ask for money. Investors aren’t interested in funding you because you’re going to run out of money if they don’t. You have to put yourself in the mindset of the investor: why do they invest us? Most angel investors do it because they have a lot of money and they set aside a certain amount to invest in startups because it’s fun. It’s an asset class just like stocks, or mutual funds, or treasury bonds. And so since investing is a hobby for them, it’s very emotional. They want to be a part of an adventure. So what you need to do is convey to them that you’re doing something amazing and you’d like them to be a part of the process. And that the reason why you are choosing them is specific. You want them because they have certain experience or certain connections, whatever it is so they can feel like they’re actually helping and that they’re not just dumb money. You really have to project a lot confidence and strength and say,”Our numbers are great. We don’t need you. But if you want to be part of this, we can make some room.” You’re trying to create scarcity out of nothing and it’s really a hard dance. These people are smart. They made the money because they are smart, and they have a really good bullshit sensors. But there is a way to do it.
Often that means you have to start raising money before you need the money, because once you need it everyone can smell that. And then they’re thinking, “Why should I give you money if it’s likely that you guys are not going to raise enough and therefore go bankrupt anyway?”
Q: What advice would you give people in the earlier stages, maybe those who are at a job thinking of starting their own company?
A: When people think about starting their own companies they spend a lot of time creating a business plan and thinking about all the mechanics of what they will do once they quit. I think what they fail to do is properly validate whether or not their vision of the future is one that’s both profitable and possible. Because how you get there is probably going to be different than what you thought. The point is: is the promised land worth getting to? And do you have the means, the people, and the talent to figure out how to get to the promised land? If so, how you get there actually doesn’t really matter so much.
That’s what I would think about: does your vision of the future work? And make sense? And excite you? And be the thing that you want to give up the next three to five years of your life to do? And do you have the team and the right skills to do that? If so, then don’t really worry so much about how you’re going to do that. Because you’re going to be wrong. Reality will hit your business plan and you’ll realize, “Oh man, I was totally wrong about that.” But if you have the right faith in your vision then you can get through that. Too often people think about tactics and that’s the part that actually changes the most.
Also when people try to work full-time and do their start-up on the side, it almost never works. Part of it is psychological. You’re not making yourself vulnerable enough to really make the sacrifices that are necessary. It feels like you’re making sacrifices. Your life sucks because you’re working two jobs. But in the end I just feel like the necessary amount of focus and determination and passion really only comes out if you’re doing this full-time. The last thing is that investors will almost never fund you if you still have a job. Because they’re thinking, “If you don’t believe in this enough to quit your job, why should I give you my money?”
Postling’s CEO talks startups and what you need to think about if you want to start your own internet startup.