It’s a tough year for startups. Economic pressures such as rising prices and bank failures resulted in a lack of confidence in the market, making raising money to build a company a struggle, according to a report from Pitchbook. Angel and seed funding activity, for example, fell to a 10-quarter low, falling to $3.3 billion — a 53% decrease from the previous year’s first quarter, according to the report.
The competition is also fierce. With any downmarket, entrepreneurship increases, and so does competition, Hayden Blackburn, executive director of the tech startup incubator program Tech Fort Worth, said. .
“As you go out on that capital-raising campaign trail, you have got to work even more diligently to stand out and to cut through the noise,” Blackburn said.
The Fort Worth Report spoke with two startups based in Fort Worth that have successfully raised capital to learn what advice they have for entrepreneurs in their first round of funding.
All about people
Luke Hejl’s company, TimelyCare, has landed on the Inc. 5000 regional southwest list of fastest growing companies. In 2022, the company had a two-year revenue growth rate of 1,474%. This year, the company was ranked #175 in the Inc. 5000, with a three year growth rate of 3,015%.
The company, a telehealth business focused on college students, raised $1 million in its seed round in 2017, $4.2 million in its series A and $65 million in its Series B round.
That seed funding, Hejl said, was critically important for the company to hire their first employees — and to allow him and his co-founders to leave careers to build a business.
He believes the path to success for startups is having the right business model, being surrounded by key people and showing people that the company will be successful. Hejl, Chris Clark and Alan Dennington had different backgrounds before starting TimelyCare. Hejl was involved in marketing and founding other startup companies. Clark worked in sales and strategy within the pharmaceutical industry. Dennington was an emergency room physician and owner of an urgent care clinic. All those past experiences were important to the team’s fundraising success.
“I always take it to people, because the people matter so much to be able to have a compelling conversation about the capital that you want to raise,” he said.
For entrepreneurs raising their first seed round, he advises making a list of possible investors — from least likely to most likely to be interested in the company — and start with the harder ones first. Doing that allows people to practice and hone their pitching skills. Hejl recalls mistakes he made, including once pitching to someone in a living room and focusing more on connecting his pitch deck to the TV than on building a relationship with the potential investor.
“Just shut the laptop and talk about what you’re doing,” he said.
Another tip, he said, is to find the right adviser. Doing so provided Hejl the guidance he needed to scale his business and get connected to resources like legal counsel.
“The reason this all applies back to raising capital is it because you have to express confidence in the person who’s willing to open up their checkbook, to invest in what essentially is a lottery ticket,” Hejl said.
Making a product that’s valuable
Fort Worth-based advertising platform startup Simpli.fi raised $22.8 million in eight rounds since 2011, according to Crunchbase. In 2021, the company received an investment from private equity giant Blackstone, valuing the company at $1.5 billion.
Frost Prioleau, co-founder and CEO of Simpli.fi, said 2010 wasn’t a great time to raise money as a startup. Prioleau’s experience founding an ad company called Personifi helped. But finding customers who use and value the company’s product is an important step of raising capital, he said.
“In some cases, people need or want to raise money before they even have a product in the market,” Prioleau said. “And it’s certainly advantageous to get at least some sort of prototype of your product in the market in the hands of some customers, get their feedback and really try to leverage that feedback with your investors to show that you’re delivering a product that really provides a lot of value to the customers.”
Having a clear idea will help, too, Prioleau said. Investors want to know how their money will be spent. Having a clear idea of where the money will go and how it will progress business will help, he said.
Ultimately, investors are partners, Prioleau said. That’s why he said to make sure the investors are people who founders want to be in business with even when things aren’t going to plan.
“Find the right partners and people that … will be the right people through thick and thin,” Prioleau said. “And also ideally, if you can, people who will know the industry that you’re going into, and will be able and can provide some value, as you make critical decisions.”
Seth Bodine is a business and economic development reporter for the Fort Worth Report. Contact him at seth.bodine@fortworthreport.org and follow on Twitter at @sbodine120.
At the Fort Worth Report, news decisions are made independently of our board members and financial supporters. Read more about our editorial independence policy here.
Editor’s note: This article has been updated to correct the spelling of Frost’s prior company, Personifi, and a quote by Frost has been clarified.
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