The Series A fundraising process is notoriously difficult and many founders never reach this startup milestone. At Decent, they were able to raise a Seed round in 2018 then a Series A just over 2 years later in 2020. Let’s dig into what Nick's Series A fundraising process looked like.
Share a brief overview of your mission and vision for Decent.
Health insurance is too expensive for small businesses because they don’t have bargaining power, so Decent helps them band together to save money on their health insurance. Our mission is affordable health insurance for all, and we aim to deliver a more affordable and humane health insurance experience. Our plans have a Net Promoter Score of 79 vs. the industry average of 14, so that part is working so far.
What did you learn from your earlier fundraises that you were sure to not repeat?
In my first fundraises I was intimidated by investors because they had money. One of my earliest investors was the former professional poker player Phil Gordon, who is a fellow tech CEO and has become a friend. Phil is generous and wonderful, and I remember he invited my whole team to his beautiful ranch in Idaho. I was talking with another CEO friend of mine, Ben Huh, and I told Ben I was nervous about going to the ranch because I thought I’d mess up somehow, and we had this exchange which has stuck with me:
Ben: “Nick, can you imagine if YOU had a beautiful ranch in Idaho?”
Me: “Sure.”
Ben: “Well, what do you think you’d do with it?”
Me: “Well, I’d invite my friends out to visit … oh. OH.”
Investors are just people, and I love people. So I made sure to remember that this time around.
What did you learn from your earlier fundraises that you were sure to put more effort on or focus into?
I love working and delighting customers, and in the past I’ve treated investor meetings as a necessary distraction from company building. But the average venture-funded company is going to be around 7 years or more, and I realized going into our Series A that I was looking for dance partners who could help make Decent stronger and more likely to win. I was also choosing a board who could fire me if they didn’t like my performance. So I really ran a process this time, and got warm intros to a lot of different investors and took a bit more time to build those relationships. I can still get better at this.
What was your Series A fundraising process?
Fundraising timeline
We started fundraising conversations in late January 2020, and we signed our term sheet with QED in mid-April. So a little less than 3 months all in. Actually I just checked my notes and my first investor meeting was on January 21st, the same day the first case of COVID-19 was diagnosed in the United States. So the rise of COVID was a constant and unwelcome sidecar to our Series A raise - especially given the unknown unknowns it created for an early stage health insurance startup. Everything was done over Zoom, and to this day we still haven’t met any of our new Series A investors in person.
Investor targeting & outreach strategy
We reached out to several dozen top tier VCs, mostly via email intros from CEO friends in their portfolios and via my seed investors. Most of our existing investors wanted to put in more money and we had offered an insider round, so to avoid making it weird we got most intros from smaller seed funds who wouldn’t be in a position to lead a sizable Series A. These folks, including Charles Hudson at Precursor and Enmi Kendall and Anya Schiess at Healthy VC, were massively helpful with both intros and feedback and I’ll be a fierce advocate for them forever.
Meeting strategies
Every single meeting was via Zoom, and we did our best to sequence everything so we were at the same stage with everyone at the same time - though I messed that up by not having the materials and story tight early on, which I’ll share more about below.
Finding a lead investor
We’re happy that we chose QED. They were recommended by multiple folks at around the same time, and a friend of mine, Matt Oppenheimer, is a CEO in their portfolio and had great things to say about them, as did some other folks I love and trust. We included a slide with positive quotes from founders they invested in during our partner meeting pitch to them.
Closing term sheets
Once we knew we’d have multiple options, we did even more reference checking on QED until we felt confident that they were the ones we wanted to work with. I flew out of San Francisco the night before the first lockdown came into effect on March 16th. We negotiated terms a bit - and by that time COVID was really taking a toll so I was feeling stressed - and then brought the good news back to the other folks who wanted to invest to fill out the round. Like roughly 150% of startups who successfully raise a round, we were oversubscribed.
What 3 things were different about your Series A raise from your seed round?
- We delivered on the targets we’d send with the seed financing, so while COVID through things for a bit of a loop, I had traction to point to this time.
- We have a TEAM now. They are unquestionably the strongest thing about Decent. We have 5 former CEOs, and many more I expect will be future CEOs.
- We talked to a lot more funds. This was a bit stressful - it’s a lot of conversations to keep track of - but there’s something really powerful about seeing the sheer magnitude of the VC community. It makes you feel like no one conversation is make or break.
For more insights from Nick, we'll be sharing his detailed blog post next week.
