How do you pitch a business that doesn’t yet have a product, or even a prototype? For serial entrepreneur Roger Dickey, it’s about selling possibility, with an emphasis on his track record of innovation.
As a prolific angel investor, Roger knows that big ideas aren’t enough. Investors look for founders who can build strong teams and deliver tested, on-trend products. Once he nailed down a pitch that worked, he captured the imagination of investors from his previous startup as well as VIPs from Silicon Valley, Hollywood and the Pro Football Hall of Fame.
Roger’s latest venture, Untitled Labs, is a “search lab” focused on the consumer space. It’s a “full-time, funded effort to systematically launch and test business ideas until a promising candidate for a company is found,” Roger writes in his launch announcement on Medium.
It’s his third foray into the search lab concept. His first lab, Curiosoft, launched social game Dope Wars in 2007, the precursor to 2008’s mega-viral Mafia Wars. His next lab, Liquid Labs, spawned “liquid workforce” platform Gigster in 2014.
Inspired by venture capital search funds, a search lab has some similarities to studio models and incubators. But it doesn’t fund or create any independent companies. Instead, its small, super-flexible internal R&D team tests ideas until one emerges as the winner.
“We’re experimenting with ideas,” Roger says. “So far, we’ve raised about $3 million to run five to 10 prototypes with a team of five to 10 folks. When we find an idea that we think works really well based on early metrics, we’ll shut off everything else and focus the entire team on that one idea. Then we’ll raise a Series A.”
Here’s his blueprint, including his biggest mistake (hint: priced rounds are awkward), and the reason why he’s going after fewer investors this time ‘round.
Even angels iterate
“The fundraising process was, to be honest, a little stressful,” says Roger. “Because I didn’t really know how to position it. I’d never raised money for something like this.”
He and his team previously raised for Liquid Labs, but they centered the pitch on an actual product, which they called Get Experts.
“It’s hilarious — we had this janky web application that hardly worked,” Roger says with a chuckle.
“We went in to pitch Sequoia and they graciously laughed us out of the room. They’re amazing. You’re an amazing firm when you say no to people, but they still come away having had a five-star experience.”
Now a few years older, wiser and bolder, Roger’s tactics were different for selling Untitled to investors. “This time, I told people, ‘I know how to experiment. We have no first idea. We don’t have anything built. There’s no team — just me. I’m going to build a team, and we’re going to go experiment.’”
It took a few tries to perfect his pitch.
“At the first pitch meeting, I started by saying, ‘here’s a big list of ideas,’ and I just read down an unstructured list. That was a little confusing for investors. They didn’t really know what to do with that.”
With the second firm he pitched, Roger took a new approach: “I planted a flag and said, ‘we’re doing one of these ideas. We’re doing this one first and maybe there are some others.’”
The problem with that, he says, was that his pitch still lacked specificity. “We were neither here nor there. We didn’t have a real company or product. So that was kind of a fail.’”
By the time he met with a third firm, he got it right.
“I narrowed it down to three themes and I said, ‘look, I’m not going to pitch you on a whole idea list. There are three things I believe about the world, and I want to go study these. Within each of these themes, here’s a specific idea. I did pitch one idea per theme, but I spent more time talking about the themes and the team I was going to build, based on my background.”
That was the kicker, he says. “We saw a better success rate with that pitch.
“I didn’t really talk to that many people,” he notes, adding that they got “a lot of quick ‘yeses’” from investors who had funded one of his previous companies.
Attracting A-list investors
Building on those ‘yeses’, Roger persuaded a few Silicon Valley heavyweights to invest.
Leading the seed round squad was Founders Fund, the playground of acquisition-exit billionaires like Peter Thiel, Brian Singerman and Ken Howery. But Roger was really attracted to the firm’s newer blood.
“I really love, and wanted to work with, Cyan Banister,” he says. “And they just added Keith Rabois, which is incredibly exciting news.”
Other notable entries on Untitled’s roster include football great Joe Montana, who’s the established seed-stage force behind crowdsourced beef startup Crowd Cow and cannabis venture Caliva.
Enter stage left: Ashton Kutcher and his fund A-Grade Investments. Its portfolio includes Spotify, Airbnb, Shazam and Soundcloud.
“Ashton invested in Gigster and was very helpful. He even came into the office and did a fireside chat with me and the team” Roger says.
The price is … wrong
How does Roger contrast and compare raising money for his previous company Liquid Labs versus Untitled?
“It definitely was different,” he says. “We raised it as a price round, which I wouldn’t recommend. It was more expensive and took more time than it should have.”
Roger tried to complete the round in a one- to two-week period. “It created some time pressure for folks to make decisions sooner,” he says.
But settling on valuation after fundraising was an “awkward process.”
His early investors agreed to fund the company without a valuation, but that wasn’t ideal, he says.
“Afterwards, I had to go back and say, ‘by the way, here’s the price.’ Most stayed in, but they had questions. I think it would’ve been better for us to lead and set the price earlier.”
Roger recommends that startups in his position fundraise via convertible note instead. “That would have alleviated a bit of stress,” he says.
But when the rubber meets the road, he’s woke about his privilege.
“It’s really hard for me to provide more advice that would be valuable because I’m in a fortunate position, given my track record,” he says.
Digging into deeper pockets
“There’s such a healthy Series A, Series B ecosystem that there’s not really any signaling risk if you get an entirely new set of investors in those rounds,” Roger says.
For Roger, target investors had deeper pockets than the ones he tapped for Gigster, a company that had approximately 25 angels in its seed round.
“I wanted a smaller group of people with more skin in the game for Untitled,” he says. “We have about eight investors … we needed people who could write half-million dollar checks.”
Why catch a few big fish instead of a net full of small ones?
“If everybody’s written a $50,000 check, nobody really cares if you fail. They’re not going to help you. You’re still selling 15, 20, or 30 percent of your company to investors. That’s a part of your cap table you can never get back.
“This time around, I wanted to bring on people who felt motivated to be helpful.”
Nathan Beckord is the CEO of Foundersuite.com, makers of the leading fundraising CRM and investor database for startup founders. Foundersuite has helped entrepreneurs raise over $1.2 billion in seed and venture capital since 2016. This article is based on an episode of Foundersuite’s How I Raised It podcast, a behind-the-scenes look at how startup founders have raised capital.