Sam Wilcoxon is the CEO and co-founder of a startup called Lorem based in New York City. Ask Lorem is an on-demand marketplace to connect business owners with freelancers who can help them setup and customize WordPress, Shopify, MailChimp, and 100’s of other popular software tools they use on a daily basis.
Caya: Thanks a lot for joining us on today's AMA. Our guest today is Samuel Wlicoxon from Ask Lorem. We're just having a really interesting conversation on the hurt and the hoops and the perks of raising money. So, I asked him Is this fantastic company that works as a bridge between companies and freelancers on a pre-filter list. I'm sure I'm explaining this very badly, Sam. But, thanks for joining us today.
Sam: I'm so happy to be here. I'm Sam Wilcoxon. I'm the CEO and co-founder of Ask Lorem. We're a startup based in New York City. We've been around for about two years. Happy to be here!
Caya: This is an AMA session. We want people who are watching us on the YouTube stream, who are following us on the Slack channel to ask any questions and then use this opportunity to ask Sam about his business progress. I have personal questions on my own around the fundraising experience and so I'll get started with that. But everybody, just feel free to jump in as soon as you have something to ask. Obviously, go check Ask Lorem and don't what it is. OK. The first thing we were talking about was it was your round. You guys have raised what we're calling a pre-seed and a seed round 3.6 million dollars total. Yes. So my first question: where were you when you raised these rounds? Where were you in terms of product revenue when you raised your pre-seed and now that you recently raised your seed-round?
Sam: We started off building a product and going to bootstrap. We did that for about eight months and then we kind of we got it to a place where we felt like we were ready to fundraise. We actually went out and really relied on a lot of our network to get meetings with VC's. We essentially completely struck out. We approached these meetings as "hey, we're going to come in there and tell them what we're doing. We're so excited they'll be excited. And as we leave the meeting they're going to cut a check and we're going to walk out victorious. “That was extremely naive and also extremely unsuccessful. After about two or three months of lots of slow and fast denials, we took a step backward: "Whoa, what are we doing? We must be doing something wrong here because this surely is not working."
That's actually when we decided to apply to TechStars. We applied to the TechStars accelerator we ended up going up to Boston and doing that accelerator. Essentially what we realized is that we were playing a game that we didn't know the rules of. So raising money it felt like this complicated thing that we didn't actually have the skills or knowledge to do well yet we were expected to do it. We really wanted to tax service in order to learn the rules of the game that we were actually playing. That ended up being much more successful. The TechStars program its three months. They're trying to teach you like how to properly raise money. What is the formula to raise money?
That proved much more effective for us. Rather than going into these meetings and expecting to have them write as a check on the spot, it was much more about how do we build relationships with this venture crowd over time such that then what can we actually say. Now we're fundraising there's kind of this pre-existing relationship. A lot of data points that they've seen over time such that they trust us.
They have invested in our story and they're in a much better position to say "Yeah I actually really want to bet on Sam and Charlie and the team for the next 10 years because I trust them and I think I think they're going to be fantastic." TechStars was huge for our of understanding how to how to raise money. We went through the TechStars program. They give you 100 K at the start of the program. By the end of the program, on demo day, you get up on stage everybody gives their five-minute pitch. We actually received our first term sheet at 6 a.m. on that day. So right before we went on stage, we got a first term sheet. We were able to close that first million dollars as kind of a free seed, in combination with 100 K in the week right after Demo Day. That was our first round.
Caya: Insane. How did you guys manage to bootstrap being New York? It's obviously an expensive city. Did you do consulting on the side?
Sam: I graduated from college from Brown doing Computer Science and went on to work at two startups here in New York, as one of the early software hires for both those companies. So one was TEPCO building a tech talent search engine and the next one was XStudy, building an AI-personal assistant that schedules meetings for you. For both of those companies, I really saw it as: "How do I join an early team? How do I take notes and learn as much as I can from these founders?"
I got to work with fantastic teams, fantastic founders working on really interesting problems and really get thrown into the deep end as an engineer, so upscaling on the training side but also learning just how to run a team. Also learning how a startup really works from the inside. I did that as a day job for two and a half years, and all the while I had actually been working on side projects nights and weekends with my co-founder Charlie. He was working at startups as well. Those were our day jobs and then nights and weekends we would get together in my room, I had wall to ceiling whiteboards. We had this thing a Google Doc where for years we were just throwing ideas in there and then each week we would pick one out. He's a designer more of a business-minded, more product technologist. We took one out and prototyped. We built it. We showed it to our friends, to anybody who would listen and essentially kill. We were trying to find the idea that was going to get us to quit our jobs. And so we did that. We literally did that for two and a half years.
We came up with a lot of bad ideas and killed them. Lorem was literally an idea on that list and we pulled it off a list. He had a background as a freelancer I had a background as a freelancer as well. His parents were small business owners. When we actually first started working on Lorem we looked at the website builders' face: Squarespace, Shopify, Wordpress... we actually saw an opportunity to build a better Squarespace, to build a better Wordpress, and that's actually the first idea that we went off to try to solve.
That is the idea we actually quit our jobs for and in which we worked on for the first six months. We saved money like you wouldn't believe. During our times at our day jobs such that when we quit, we knew we would have at least a year of the personal runway.
Caya: People don't believe me when I tell them this but it's really hard to raise money with just the idea. This validation process, this scratching the ideas or testing it out, at least in my experience investors expect you to have done that by the time you get to their meeting. I've seen it. It's not completely false. I've seen companies raise money "idea stage", but it's rare and usually it's founders that have a lot of experience before and investors are buying because they're they know them or because they have a good track record.
Sam: You have to have money for doing it right. We really took the time to find the right idea. To fast forward a little bit, we worked on that idea for six months and we showed it to hundreds of people and the response over and over again was: "Hey, this is kind of mediocre. But what I would actually prefer you to do is help me with my search. Help me with my Shopify. Help me with my MailChimp. My HubSpot, My Google Analytics. Help me use all these tools. Don't build me yet another tool." That's when we took a step back and we said: "if you look at the exponential rise in DIY and SAS software targeted at the small business, there are over five thousand products, software products targeted at this customer to make their life easier. Why would we want to build five thousand and one?" No. We're going to ride their wave. So again to fast forward to finally answer your question: We went into TechStars. We did a bunch of different things different under different names to raise money. The key things we did: One, invest in relationships. So that meant essentially meeting with VC's not under the context of "we're fundraising right now". Actually very explicitly "we are not fundraising right now".
We just want to get to know you. Essentially with those meetings is pitching them the vision, talking a little bit about our traction but really just kind of getting to know them and then putting them on the mentor update lists. So that's an email list. We must have had 50+ names on there and we would send them an e-mail every two weeks with our traction, asks and thoughts, what we learned in those last two weeks. I'm sure they hated us by the twelveth e-mail they are like "you should definitely not be sending emails every two weeks that was overkill". But really what we are doing is putting the dots on the line and we were super transparent. If we would miss our numbers, we'd say it. You actually want to show them that you're missing so that they trust you when you make it. It's really about trust. Just getting them to invest in a story. They're investing in me.
When we press the "We're fundraising button", now we have a much more captive audience, right? When we decided to start fundraising, we were doing an equity round, not a convertible note on this plan. The game you're playing there is that if it's an equity round you don't get the money unless you raise all the money. You can't just close early on 300K, you know? "We didn't get to a million but, can you still give us the money?" You got to get there. Essentially the round is either oversubscribed or not happening. Either you've got to your number or it's not happening. The way we thought about that is: how do we rack up what we described as conditional commitments to make that number over the number we plan to raise? Which was a million.
We went out and talked to a ton of angels and a ton of smaller VC's and particularly. We went after the angels and the followers first in order to create momentum and pressure for the leads to flip. The way we did that is going to an angel or following a follower VC and saying "look, we really like you guys. We'd really like for you to invest. We know you typically invest 50K or whatever it may be. What's standing between you and making that decision?" That feels a little bit unconventional I like asking the VC "why won't you invest?". But really what we do is try to pull that out of them and so they'd say "Oh well, you know it's really important that you get a really great lead V.C." OK, fantastic.
"So assuming we do that, would you invest?", And they say "no we also want the valuation to be below $6MM, tops." Great, fantastic! "What other conditions have you got?" We would keep asking until they had nothing left for us. We would rack up a list of maybe six to 10 things that were in between them and making the decision. And we'd say: "cool. Fantastic. So assuming we do all of those crazy things that you just ask for, would you invest?" So you get them to conditionally commit. You don't have to write anything down, we're not expecting that term sheet but just say yes. Essentially then taking those amounts and doing that over and over again until we got to call it about 500 and then going to some of VC's and say: "hey, look we're already at 500 and Demo Day is in three days. This round is going to get done. So if you want to be in this round you need to jump in." Kind of creating that call it momentum to get that lead VC to actually flip to a yes. Essentially that's what we're able to do by Demo Day morning. Getting out that VC to commit 500.
That means we're going. Now we have $1MM and then going back to this group and saying "hey guys, this round is oversubscribed. We actually haven't done all the seven things that you asked for, but we have the million here. We have this amazing lead. Do you guys still want to be a part of this?" And every single person said "yes". You see their conditions fade away, very quickly.
Caya: I think this is insane advice man. Thanks for sharing. To match this with the story you were just telling us about the product. Where was the product at this point?
Sam: It was the Lorem it is today. We were doing about $10K a month in gross transactions and our cut is 20%, so $2K a month in revenue.
Caya: I think that's an insanely useful reference. I think a fantastic strategy on how to get those commitments. I'm assuming your Problem slide goes somewhere along the lines of the struggle it is to find a freelancer on freelancer.com or Upwork or one of those platforms. Because it is a painful experience. Is that the placement that the platform is trying to replace?
Sam: Yeah. This was another insight that we had on the first fundraise. We tried to talk to VC's like they were product people and so we would pitch them all the features and why our product was better than other people's. They're not product people.
If you talk to them like product people, if you build your slide deck like it's a product you sell features, you're not going to get them excited. We pitched them on the macro trends around our ecosystem. We told them: "Look we have very little traction. We have a crappy prototype but we are chasing this enormous problem and really our slide deck looks like these two macro trends going on. You look at the DIY and then look a freelancer economy and look at the trends and look out 33% of the US workforce to strike three months last year. I don't think a single one of the VC's who invested actually use the product.
Caya: I'm sure my investors have not used my product either and that's really that's I think that's the case for most of them. I agree it's more than those larger trends. I had one last question for you which was about your background as an engineer versus your role now as a CEO. How much time you still have left to code? How much are you involved in the product itself versus just the company route?
Sam: That's been one of the biggest growing up moments for both my co-founder and me: going from the people who do the work to "We've hired this awesome team to let's empower them to do their work". I actually promised them two months ago that I would no longer code. So we've hired an awesome team. They're better programmers than I am. I've tried to be extremely intentional about actually leaving the room when they start talking about coding and architecture because I know I just want to I want to chat but it's not my place anymore.
Caya: I've I felt that when I got more disconnected from the product because it just there's sometimes too many people in the room. So it's one thing you have to learn when you have to like just leave them to it and just trust them. Last question: Where do you go from now? Are you planning to expand on other freelancer services?
Sam: We've really focused on helping you build a website. That is the core vertical. We've been intentionally vertical because you have to have the supply side to do this work. If you support everything it makes tough. We do see a future in handling more digital marketing and more design and all the offshoots of the website.