The DenseLayers Story, Episode I: The Pre-Seed Fundraise from Hell

Background

Towards the end of February this year, I decided (or rather, a friend pushed me to decide) to bring DenseLayers back from the ashes and work on it full-time.

I was in a pretty bad place at the time — my first business had been unsuccessful. And not even in a spectacular fashion. It had been squirming in darkness for over a year, gradually losing blood, dying a slow, painful death, clinging on to “hope” till the very end. I didn’t lose any money on it, but I probably could have quit 2 years sooner. Two years of youth that I won’t get back.

(Note to reader: if you’re an entrepreneur, don’t let your business die that way. Go out with a bang if it comes to that.)

The decision to go all-in on DenseLayers was not easy, and I had to do a lot of explaining at home.

Since I had no money, and because my family wouldn’t tolerate me going through another unstable period of financial struggle, I decided to raise a small amount of funding. With all my insecurities, I still believed that DenseLayers was an investible idea — for the right kind of investor — and I also decided to use the fundraise itself as a “proof of concept”: that if I couldn’t raise the BARE MINIMUM of $15,000 within a couple months for my idea (low bar, I know), then I had no business building a startup right now. There was either a problem in my idea, or in my abilities as a founder, or something else.

In short, this pre-seed fundraise was trial by fire for the remainder of my life/career (and my self-confidence) as an “entrepreneur.”

Here are the challenges I faced in getting funding for a project like DenseLayers:

1. Idea/prototype stage; no traction to speak of (a grand total of 0 users)
2. The prototype looked terrible (didn’t even put “lipstick on the pig”)
3. Solo founder with no track record of building a tech startup, or even fundraising for it
4. Weak network (lots of people who could give “advice” but not write checks)
5. Not an attractive, juicy market (“research scholars” doesn’t really scream gimme-yo-money)
6. Completely new concept (high risk; too many assumptions that had to be right for it to work)
7. Unclear business model (I’m yet to figure out *exactly* how we’ll monetize the site, and whether it will work)
8. No certainty around the product vision (didn’t know what we’d be building in the future; it could go a few different ways)
9. Company wouldn’t scale quickly (scalable models already existed in some form, and had failed)
10. Unsure of my pitching strategy (I had no idea what I was even doing, and very confused)
11. “The market had dried up” (I was told there wasn’t much money around anymore)
12. Location (I was based in India, working from home, and pitching investors outside India – I was told that this would further impact my credibility)
13. No rich friends/family (I couldn’t ask friends/family to give me money, because I don’t mix my business and personal life)

To say that my prospects looked bleak to people around me would be an understatement.

But I was still optimistic.

With regards to fundraising, there’s a funny quote from Dan Peña: “There’s always someone out there who’s willing to fund your doofus deal.“ It’s very simple, but sage advice.

People invest in all kinds of crazy projects, for all kinds of reasons. They may actually think it’s a good investment, or have a personal interest in the problem you’re solving, or just want to support you, or have a passionate dislike for your competition / the industry you’re disrupting and help you say Fuck You to them, or they may just want to look cool because it would raise their status at a cocktail party.

A lot of very successful companies have been funded by the unlikeliest of people. Consider the first Starbucks — Howard was rejected over 200 times before he started getting his first external investments. One of those was $100k from a local doctor!

There’s always money available, somewhere on the face of this planet. You just have to look for it, long and far enough.

And I was confident that I would find it, because of the following factors that were IN my favour:

1. I was desperate (I felt like my whole life was on the line).
2. DenseLayers has a big vision — it’s one of those “moonshot” ideas which, if done right, would solve a huge problem that could have a history-defining impact on society. And some people prefer to fund moonshots. It’s also a “cool” idea, dealing with breakthrough A.I. research — not something anyone would feel embarrassed about funding.
3. DenseLayers may be a very new idea, but I had spent years refining and validating it. I knew my industry inside-out, and I had a logical solution.
4. I’m a solo founder, but I am an engineer — I could build the prototype myself, and didn’t desperately need a team to make progress. I also have experience working in Silicon Valley at some pretty cool companies, so I didn’t feel like my background would come under any question.

Lessons Learned

I will not disclose how much I ended up raising, and from whom exactly (too early to say), but it was far above my minimum of $15k. I can share my slide deck on request.

Here are some more takeaways and hard-earned wisdom:

1. WHO you’re pitching is as important as WHAT you’re pitching. I didn’t reach out to typical “finance” people or professional investors. I mainly pitched people who might get excited about the problem. They didn’t care about DenseLayers becoming a unicorn; they cared about the actual thing I was building.
2. If someone’s grilling you on the details too much (being devil’s advocate and pointing out holes in your idea), then they’re not a believer. They likely won’t invest in your project in a million years, and probably lack the money to do so anyway.

   End the meeting asap (say “it sounds like this isn’t a compelling investment for you, would you agree?”), and don’t ever pitch them or talk to them about your idea again.

3. The best investments and outlier successes are often terrible, downright stupid-sounding investments. They’re no-brainers in hindsight, but not in foresight. Think about:
   • DisneyLand — sounds like a cocaine addict’s hallucination
   • Most original Hollywood movies are a gamble
   • Airbnb — “we let strangers open their homes to other strangers” yeah sure
   • SpaceX and Tesla — would you have invested in either of those at the idea/pre-seed stage?
   • Twitter — seriously, what the fuck? Also no business plan.
   • Facebook — MySpace had a 100M user lead; and FB had no business plan.
   • Google — Yahoo existed already, was a huge company + Google had no business plan.
   • Netflix — the founder literally wrote a book called “That Will Never Work”
4. Don’t ask people to give you advice on the NARRATIVE of your pitch — especially if they’re not an “ideal” investor / mentor for you.

   I did several “practice pitches” to improve the delivery of my pitch. And I would happily incorporate people’s feedback into it, until it became unrecognizable.

   Finally, a founder friend of mine (who’s building a moonshot aerospace company) told me this: “Every person you talk to will give you some advice, but it’s all a crapshoot. In the end, YOU have to do what you think is best.”

   It’s like going around a restaurant with your noodle soup and asking people “how to improve it.” If you do everything they advise you to, you’ll end up with un-drinkable soup.

   The only thing you should ask for feedback on is NOT “whether they believe what you’re saying” (it doesn’t matter), but only whether you’re communicating with CLARITY and CERTAINTY — that is, they understand what you’re saying and can repeat it back to you.

   If they don’t like your pitch or don’t think the business will work out, don’t sweat it.

Next time some well-wishing friend tells you how bad your idea is, just think to yourself, “this person would not have invested in ANY of the biggest tech startup successes of the last 50 years.” Don’t hold it against them — they’re just trying to be helpful.

Look — 90% of new businesses fail anyway. Predicting that a business will fail makes you correct by default, 9 out of 10 times. Easiest prediction you’ll ever make. It doesn’t take a genius — on the contrary, when you look at it this way, naysayers sound kinda stupid. Find the person who thinks about how to make it work — that’s much more valuable.

The only time someone’s critique is worth listening to, is if they identify a fundamental, systemic weakness in your idea’s foundation. A plothole, if you will. Plotholes don’t sound like, “I don’t think there’s demand for it” or “I wouldn’t use it” or “that already exists” or “I don’t think it’s investible.” When someone really drops a plot hole on you, it will feel more like the carpet being pulled out from underneath.

Chris Sacca passed on Airbnb because “if someone gets murdered in an Airbnb, the blood will be on the company’s hands.” What would you say if you got that feedback from an investor?

How I went about it

Won’t go into endless detail; here’s the short version:

• I exhausted my non-existent network of “investors” very quickly.
• I couldn’t get many people to “intro me” to investors either. When your idea sounds bad, nobody wants to attach themselves to it. 🙂
• I had to do it the old-fashioned way — cold emails.
• Made a long wishlist of investors and investor types, and went about it.
• I also hired an intern/freelancer — on a success basis (meaning, he/she would only get paid if we succeeded in raising a certain amount) — to help me handle the operational parts of the fundraise, such as data gathering, etc.

Truth be told, my fundraise was NOT a spectacular success. I ran out of motivation very often, and at times, my “intern” had to encourage me to keep believing in my own idea. I probably also made a lot of mistakes that Future Me will find funny or embarrassing down the line.

In the end, I raised enough to carry us to our next fundraise, but not enough to not have to worry about money at all for the next 2-3 years and build the “dream team” I wanted.

And that’s okay — all that matters to me (right now) is getting to live another day, build something I believe in, and keep fighting the good fight. This fundraise gave me that runway.

Now go out, start pitching, and get your money!