How do you get VCs to chase your seed round?

if you have to ask for a seed round you don't have Venture Market fit welcome to fundraising demystify the podcast where we uncover The Untold Stories of successful Founders who have raised Venture Capital to bring their Visions to life join me Jason Kirby your host as we dive into the hidden truce of the fundraising game we'll explore different strategies tactics lessons learned from these entrepreneurs who have figured out how to win the fundraising game in their own way whether you're a budding entrepreneur just getting started or an established founder looking to scale your business this podcast equips you with the knowledge and inspiration to conquer the fundraising landscape thank you welcome to episode 9 of fundraising demystified today we have Yen's noose the co-founder At wondergraph a next Generation framework to optimize front-end back-end and full stack developer workflows they've recently raised a 3 million dollar seed round and we talk about how Founders need to understand the VC game why Cold emails may not work and why Founders should focus on building a brand instead of cold Outreach and why you thinks the pitch deck isn't as important as most Founders think it is to which I partially agree in a lot of cases but let's go ahead and dive in and hear Yen story welcome everyone this is Jason Kirby founder and managing director of thunder.bc and your host of fundraising demystify today we have Jens joining us from Frankfurt Germany over at Wonder graph with just uh you know announced their seed round of 3 million uh welcome yes hi Jason thanks for having me yeah glad to have you um let's Jump Right In like let's tell the audience a little bit about your your background and what led you to starting oneograph yeah so I was a software engineer for about 10 years uh on on various different roles like just regular like I started with with app development I started actually very the very first steps of my career was a startup which completely failed like we were like super early but that startup was my entry point for actually learning how to program because I never knew how to program and there was no reason or I didn't go to university or or anything I was just uh interested in building a startup and someone had to build the the Android and iOS app and the website and so nobody wanted to to do it and so the obstacle because between us and creating a starter was I had to learn to program and then I I went on YouTube learned the stuff and that's how I how I failed my first startup but learned a lot about software engineering then I became uh uh like engineer in other companies and uh eventually moved up the ranks into management roles and and as an architect and uh they're in in some upper roles I just learned so much that eventually I wanted to build my own company and that was awesome so basically you self-taught yourself you know software engineering 10 years ago and have moved up the ranks not necessarily having like a computer science degree pedigree to kind of move out those ranks just hustling and making it happen uh and so kind of what led to the idea for for Wonder graph yeah so in my last job in I would say in the corporate world uh I was an engineering manager responsible for for three teams and one of our biggest obstacles there was that we had like I don't know a heterogeneous system of internal and and external services that we were using like a Content management system databases apis that spoke XML Json graphql grpc anything and then you had external Partners like AWS they also had rest apis and and uh we had external Partners who sent us data like foot of all data and financial data and all different data points and one of our biggest problems was how can you actually build an API on top of 30 other services and every system is different every system speaks a different language and uh yeah the the solution was to build a homegrown kind of API integration system and I realized this is not just a problem for us everybody has to somehow glue together things and the go-to solution is we write custom code and I think that's a huge waste of time and and back then like this is kind of five years ago I started monogamous side project back then I thought wouldn't it be super useful and and and a Big Time Saver if you could just talk graphql which is just a it's a query language similar to SQL wouldn't it be cool if I could just talk graphql to all my systems because then I don't have to build this manual gluing together layer I can just plug in all the systems and then talk to them and this problem is gone and that's that's how I started you know I was just just a a nerd I would say who was interested in interesting in in solving a technical problem at that point I didn't really think much about starting a company I really just started an open source project solving a problem and over time some people came to me saying like hey yes you have this this open source tool there's something missing like can you help me and then I helped them a bit and then some sometime later uh actually one and a half years ago someone came to me and said hey yens can I pay you 3K per month and you helped me and my team figure out how to get the most out of undergraph and you improve undergraph a bit and with that 3K mrr in the back I was able to to start the funding process for a seed run and then build a team and eventually turn a side project from a tech nerd into a company that's a that's a fun story and so I guess what so what's the timeline here from you know when you initially conceptualize the idea to getting that first you know uh mrr in the in the bank to going on raising so I think from because I I rewrote this a couple of times in the beginning but I I would say from from first idea to that first customer almost a year which by the way was one of the worst ideas you could ever have but I I wouldn't say I'm a good first time Tech founder but I learned a lot of stuff and um are you the only founder or do you have a team of co-founders yeah so I have I actually have three co-founders so being the technical founder I have one one guy Bjorn who I worked with together before he was my CEO back then and he's now our CEO so he he runs and operates the company he actually has experience in that uh then we have uh Dustin who's our Master hacker now that I'm not able to to code that much anymore and we have Stefan who's more like our uh so he's from Miami he's more like our I would say the extra word in the team he builds the connections he's responsible for for growth and for he's the kind of guy who who makes friends and I'm the the kind of guy who solves our problems it's good uh good complimentary skill set across the team and uh you so walk us through kind of you know the the fundraise so you guys just announced it not too long ago but in fact you were telling me earlier that you've actually raised and closed the money a while back so kind of tell us about uh the fundraising journey and uh the decision to kind of delay announcing it yeah so actually getting to to the seed funding it was extremely hard at the at the very beginning and I had no clue or we have no clue what we were doing and it was just a huge disconnect between us and and how VCS work and we had to learn so much uh we we got the money in the bank I think it was mid or a bit later last year and we actually made the decision to to defer the announcement because back then we only really had an open source tool and uh we wanted to build a SAS on top of that and we we thought why should we use or why should we announce this which will potentially give us some attention when we have nothing to sell so we we wanted to First have something to sell and then tell the world hey we're you know some people think you're only a real company if you have raised money I I wouldn't agree to that but the perception is there and and uh yeah I I don't know why why don't use the the seat announcement as a marketing activity uh it's something that I think a lot of Founders don't think about they're so excited to announce that they raise the money but they're not using that as a client acquisition tool you know if you're gonna put the effort in miles will try to leverage it I think you know commend that strategy and I think it's something that a lot of Founders need to think about of when is the right time to announce now that you got the money you don't have to stress so much you can focus on building and doing other things um so you kind of you kind of loosely went over that your fundraising experience is difficult like let's let's unpack that a little bit more you know you mentioned that you know it's kind of first time you know go to market there's a lot to learn and the VC ecosystem and your LinkedIn post you know that's a long ago kind of really shed some light of that it'd be great to kind of have you share the your fundraising journey and kind of like what were some of those you know lows of lows and you know kind of how did you figure it out yeah so I I think the the biggest issue we had was uh we thought hey we're smart we have a great solution we go to the VCS we tell our story it we're so good it we got funding and the reality is we are in the in the devtool space uh it is not extremely easy to understand what we do or what the impact is like when you go to a really large company and you ask a senior architect who works works on topics like apis he reads through our landing page in docs he will immediately see the value for Venture capitalists they they are not that technical architect at a large Enterprise they don't have that level Act of expertise and uh the the point is and you said this earlier before we we started the conversation some Founders try to to talk to as many VCS as they can I think the most important bit is to build relationships to build a network and to not see we see so much as someone on the other side of the table but more like finding the right kind of partners because we see specialize even within a VC company you have different departments or different responsibilities in in terms of what they cover and I think the most important bit is that you find someone who actually believes in your in your long-term game because like why do you want to or it's not that you it's it's very hard to convince if we see who doesn't immediately buy into your story so ideally you find someone who has a background or or their own experience that actually helps them immediately see like okay yeah that that makes sense let's figure out the check boxes because you want to get to that checkbox stage where it's really about finding the negatives in in terms of okay is there any is there any problem in the in the seller or or you know like do they have a weird cap table or like is there any big blocker do you want to get to that stage you don't want to get to the stage where you have to to bag or or anything or or like chase them or yeah the in the beginning you you know it's it's kind of like dating you try to you try to please people or you try to impress them or something when in reality what works better is you present what you do and you ask if they are a great fit if they understand what you're doing and you see if this is actually a relationship because you will be working with them together for many years so you better find someone where you think we're kind of working in the same direction because you're you're this is not like a one term a one-time event you don't get the money and they they go away they will actually meet on a very regular basis with you and ideally you find someone who who is not just giving you money maybe also some other benefits like connections or whatever they have and you should figure out like you know it's a kind of like a two-sided process like you should also evaluate what can they bring to the table and then ideally uh you you find someone where where values align where strategies align so talk about strategy talk about what they think or ask them what they think your direction should be to figure out are you actually close enough to each other to that that you want to be working with them because they they will have a board seat and they will be super annoying if you don't like them so uh yeah but the you know as I said at the beginning you're more like you think they are so powerful but in reality money at least a year ago and I think it's still not not untrue money is cheap what is very very hard to find is good quality founders with a good team with an okay idea like I I the more I work as a Founder the more I think the idea is not so important it's more like what do you do of it you know like is the team able to iterate and then sorry if I go on a tangent but um yeah and I think it's something that you kind of coined a term in your LinkedIn post a venture Market fit uh you know we all are familiar with product Market fit in terms of getting customers but kind of preparing your business and your idea to kind of be more of a venture Market fit and you know kind of establishing relationships as opposed to just pitching and you know trying to project and present uh as opposed to making it a two-way conversation I think is an incredible lesson for for Founders to learn as early as possible and sometimes even before they really start to build to just make sure they have what you kind of call Venture Market fit make sure you're Venture backable make sure you're building something that VCS find exciting or actively investing in because if you're not and you expect to go raise Venture Capital it could you could end up wasting a lot of time and be very unfortunate outcome um can you kind of expand on the your definition of a venture Market fit and kind of how you came to that conclusion yeah so you know there's this whole thing about product Market fit and and the the usual way how people uh YC and others describe product Market fit is if you have to ask if you have prior Market fit you don't have product Market fit so if you have to ask for a seed round you don't have Venture Market fit because the seed round will or or Reese's will come to you and they will just offer or ask you hey can I can I join you around or or something like that and at some point this actually happened to us and so I came up with the idea of okay when we see like it's weird but suddenly like 20 or more VCS overnight contact you and they they they are suddenly interested in in joining the round or or something even though it's too late but and and that's that's the weird thing um that's like you know it's again it's like dating if you if you are successful at dating if you have a great relationship you you show that to the outside people can see okay this person is successful they are confident the way they act and everything and we see smell that because they they have seen so many Founders and uh yeah they they know immediately in what kind of situation you are and so I think in in terms of venture Market fits what you need to understand as a Founder is is this eventual play or not like is this a hyper growth startup you want to build or is it not and if you are intending to build a venture-backed company then you have to play the Venture rules and that is there's like very specific criteria like you know people need to VCS they are looking for signals in their Market they are trying to figure out what is the next opportunity they are looking at various data sources like hack and news they are talking to each other uh they are looking on on Reddit and they they have all sort of systems and and data sources where they try to figure out okay what what is an interesting opportunity and if you want to to be Venture ready you should you know I ideally you don't have to code email them because for us that really never actually worked uh a lot of VCS they we called email them later on they came back to us they contacted us how how did it work we had very good blog posts we had some coverage here and there we were on Hacker News or somewhere and we had something interesting to read for them and that's how they contacted us and then we were able to to build that Network so uh what you actually need is you need to build a brand or you need to be somewhat accessible to them and make them interested in you and so you need to be working on that and I I think that's kind of yeah that's my definition of of venture Market fit figure out how how can you make that species email you and I think that's something that's like mind-blowing to a lot of founders of like wait you're saying that VC should be contacting me and yeah I think the ones that raise the quickest with the best terms and under the best circumstances with the least amount of effort are the ones that focused on building a great product that has Venture Market fit and the ones that struggle and have to put more of an effort into their fundraise or the ones that might not be at the Benchmark fit or haven't focused on being noticeable or getting noticed and uh you know getting the word out in the Chan the appropriate channels and as you say kind of playing the VC game and playing by their rules um I think that's a you know an incredible takeaway for for Founders to take into consideration and I also realize that you know maybe some maybe some Founders shouldn't be trying to chase venture capital and they should go bootstrap it and you know get it off the ground uh organically with a limited amount of Angel capital or self-funded so you know in your process you know you kind of talked about what you learned and you had struggled before you did the cold Outreach like how much effort did you put into the fundraise process before things started to click for you and kind of what was that that timeline from you know beginning your process not having success uh to the you know getting them getting the money in the bank yes I think the whole process took longer than six months and uh at the very beginning it was really a lot of cold Outreach until the point where like we have some conversations especially with with some European or German vs but that didn't let anywhere um and yeah we put a lot of effort into into uh getting those those emails contacting them and trying to to polish ours Our Deck the seventh time which in retrospect I I think I don't know the more I think about the deck the more I'm like at seed stage you almost need no deck at all you need something else and we can talk about that in a minute but um in our case I I I believe in luck and uh I mean you can set yourself up for luck you can you can adjust the odds in in your favor but in our case uh we were working with a technology called graphql and we found or an angel investor uh working at meta found us and uh for those who don't know Mata or Facebook invented graphql so an angel who understood graphql was looking for investment opportunities that were using this technology because he understood it and he looked at some other tools uh most of them were like way too big for them to to invest they found another project but that didn't really look like scalable in terms of venture and then they found us and they found us very interesting and I think so this Angel then uh brought a couple other angels and they also uh introduced us to one BC uh Aspen wood Ventures and at the end of the day that that was I would say our our uh yeah that was our ticket because we didn't have to convince them uh that's what we do makes sense they understood it because the angel was engineered and they had a very good uh relationship so there was a level of trust and uh this is what I meant earlier you need to find someone who understands what you're doing and then ideally someone with the background who who really gets it and then it it's not about convincing and we see that that uh is a good idea but rather convincing them that we are in the right team to pull this off and so you kind of mentioned something there of an alternative to a deck or you know spending too much on time on the deck and optimizing and tweaking it when you could have done something else what were you thinking there yeah so I honestly believe that if you have great kpis great numbers if you have good traction if you if you can show that your business Works everything else is really just you you can't everything else up but it's not so important so I don't think you need the the best deck in the world what you actually need is a good company or show that you're the right kind like depending on the stage where you are I mean if you're a seed if you're early stage you you don't have a good company but you might have a great team so show that you have the right kind of team uh if you have some traction show the attraction everything else if I look back now uh one year like everything changed like we matured so much we learned so much looking back one year at seed stage we weren't nobodies who like I don't want to say we had no clue but compared to today it's it's ridiculous at what stage you were so don't stress so much over the deck or something build a great company and present it in a way that it it makes VCS interested investing it's not that hard actually what's kind of been your inflection point of taking the you know that first customer that you got the three grand a month from uh and kind of growing from there like were you consecutively growing or did you kind of just get that one 3K and you went and raise money like what was kind of the growth trajectory for you guys uh during your Capital raise and and since yeah so I would say for a very long time it was very flat until the point where it's getting scary in in like the problem is our company is focused so we are our approach is open source and Enterprise first so uh like um I'm under NDA and cannot talk about so many things but we're really talking to the largest of the largest companies and those deals take a while and it is it is very hard to get in there it is very hard to build the company up until the point where they respect you enough and see you as a potential vendor so in our case I would say we we really chose one of the hardest things to bootstrap in in terms of getting from zero to something um but now we're kind of getting to the to the point where it's it's absolutely crazy and uh yeah crazy I don't know or like scary you mentioned the word scary and crazy is that growth or like what crazy in terms of what we have achieved with so little investment and and what accounts we're now able to get into and uh yeah like this is also something at the at the very beginning you have an idea of of what is your ICP and everything and it it turns out that suddenly some other people knock on your door and we we didn't anticipate that such big companies would would talk to us or respect us but um yeah we we are what we are and uh it's for me it's a the inflection point is when you don't have to you know there's kind of like two ways you can drive a company you can drive it by Vision you can drive it through customer or through real user stories like in not scrum user stories but actually build something that someone really really needs and they are a they are ready to pay money for that and uh for me really the this inflection point is that I I don't have to drive the company so much by Vision anymore like yes we still have a vision and we still have plans and ideas what we want to do in the future we have a like a big picture of where we want to go like you know we we keep saying GitHub for apis but in the in the short and mid-term timeline we don't have to guess what is the next best thing we're actually using uh uh our our customers to to steer like you know we we have like long-term goal Vision but short and Midterm driven by customer demand and I think that's it's just so much fun and it's so enjoyable that you build something and people immediately try it out and they see the value and they that's that's really where the fun in in startups uh comes nah it's amazing to hear and like yeah it kind of sounds like you know product Market fit is kind of where you guys are at now and really focusing on feeling growth uh which is an exciting part to experience um so congratulations on on the success there so I think I want to bring up that you know I think a lot of Founders especially abroad in the EU and other parts of the world that are not in the US would be interested in learning of you know kind of when why and how you guys set up a C Corp in the US a Delaware core kind of like the standard you know for most uh you know starters raising Capital but you're actually based it you know the majority of the team is based in Germany so kind of what was what was that decision process what was that you know flow and timeline of kind of setting all that up yeah so it's it's there's multiple reasons one is it's actually faster uh to get a text number in the US than in Germany like Germany is one of the most startup unfriendly countries like they they try to build every barrier they can to not get your taxes they they just don't want to it's weird um they they really want to have businesses uh abroad I I don't understand why but okay the other thing is through our age at Mata we very early on got introduced to the U.S investors we were building the relationship we were talking to them and we realized uh we actually want to build GitHub for API so it's going to be huge huge huge this this is going to be a unicorn or nothing and so we thought uh uh it's so hard to get German VCS to buy into what we're doing because they have like a different mindset we want U.S investors and so we we thought okay what's the easiest way to get a U.S investor how can we how can we remove friction and we were talking to them we were talking to the angels like there's some some special things that the angels can do with their retirement funds and and blah blah and yeah we we just made the decision uh you know what and instead of flipping the company later we just create the the Delaware C Corp we also have a gmbh but the gmbh so that's a German C Corp it's it's only a subsidiary for the American company that makes it easier for her because we have three founders in Germany so with the gmbh we can now just pay regular salaries and in Germany makes it easy and yeah we used stripe Atlas to set up the C Corp the process was super straightforward and I I can only recommend everybody who's who's aiming big just go with the delivery see code don't even try in Germany or don't even try in Europe it's just just go for U.S investors and then uh I think that's just a better Market a better ecosystem uh in general no I would definitely agree with you and I think one thing that I want to highlight to other Founders is that you set up the entity in the US and you made the foreign and well you're technically your domestic entity uh a subsidiary and that in my opinion is the correct way to do it a lot of companies I've met or work with that are based out of the EU will set up like a Dutch you know C Corp equivalent or like the you know whatever country they're in and then get a U.S entity as a subsidiary but that can create a conflict of control because then technically the PCS don't want to invest in the subsidiary they want to invest in the the parent Corp who has all the control so I think you guys approached it correctly did you guys get legal counsel do you guys just set it up yourselves or no no we we got legal counsel and we we thought about this a lot and you know we we were thinking like maybe not at seed stage but at series a stage definitely an investor they will want to invest into the IP of the company and who owns the IP it's our Delaware C Corp and and uh like investors want to invest in everything there is and so yeah I don't know for for I think it's really obvious you want to make things frictionless and you want to set up your company in the most straightforward and and simplest way and yeah if they like what you do and if your metrics are good and everything else then then don't create friction with a with a Bad Company structure yeah and if you don't mind me asking what did it cost in terms of setting it up that way was it a few thousand dollars tens of thousands of dollars I think it was a couple of tens of thousands yeah is that something you know be conscious of for a lot of startups to acknowledge it I'll be it it's the right move but you know there's a couple you know costs of money to to do it that way but uh you know again first thing to make sure you know make sure you have that Venture Market fit before you invest 30k to go raise I I can say one one thing to this um so the the people we work together with they were very friendly in terms of very early on they actually gave us a safe note so we could use their money to set up everything correctly and that's just a really good move from a VC because uh you can give a little amount of money as a safe note and that's then gets contributed to the to the uh to the seat and uh so we didn't have to take our own money to set up the company in the in the correct way and everything and uh yeah that's that's how you start a good relationship that's so okay that that's good to know so you didn't actually have it set up before you went to Market you had waited until you got the the VCS uh to the table and then had that discussion with them yeah uh okay so that's good to know because I think a lot of Founders are trying to decide do they do it first or do they do it once they have the the capital at hand so and that's a great solution you know do the same just to get the initial Capital so they can properly invest into the entity and everything you know in in our case it was kind of easy because we only really had an open source thing so nobody could really own that you cannot buy it all they invested uh into is us as a team and this idea and uh yeah that's and one customer okay but that's that's I think the yeah that's that's okay 4C yeah like the pre-seed seed stage I think uh you know those typical things but what it comes down to is just like does the VC believe in you and do you have and do you want to build it you know build that relationship with them and if that's the case these are table Stakes these are simple things that get worked out by lawyers and you know it shouldn't be what holds you back from from success success as a Founder so you guys raised you technically closed maybe what like nine months ago or something like that you know how does your your next several months look are you guys going back to Market to raise anytime soon and kind of what's the future look like for for Wonder graph um so we are currently in the late game of closing some very very interesting accounts uh hopefully they will allow us and then the future you will you will hear about that in the next couple of months um with that we will have optimized our our kpis and everything and I think we we will then be at the point where we start raising uh the next round and what do you anticipate doing differently this time and you're going into the next round as opposed to the previous round so what completely changed in in the I I would say like the situation today is different because um we built a network of VCS and we try to figure out who are the VCS where we would say those are a great fit they understand what we're doing Unfortunately they couldn't join the last round um but we still nurtured those relationships we we updated them from time to time on on our progress where we are and everything so it's not that we have to code email anybody anymore it's more like hey guys here's our update here are our new customers this is how we're progressing and we're now taking next steps because we're getting to this in this point and the team is too small and we cannot we cannot match the demand or or whatnot and so it's I think it's it's much easier because we we have figured out a lot more about ourselves and uh yeah yeah I think that's kind of especially for you for series a it really comes down to like hitting that certain metrics and being bench you know having that Venture Market fit at that stage but one thing that you're you're doing that I advise all founders to do is maintain the relationship uh even for the people that passed or you know said it's too early or whatever excuses they had if you liked them or thought you might be able to have a relationship with them maintaining that uh that Rapport while you grow and providing those updates could make it a much easier raise the next time yeah you come around so um some great advice so um yeah as we as we wrap here you know what uh what would be some advice that maybe you haven't talked on uh to this point that you would give to to Founders looking to raise their their seed ground so I actually think that the best advice I can give is to to technical Founders because I'm a technical founder as well and my my number one advice is to to take a step back don't Focus so much on the tech Focus much more on the customer they go to market and building a business that is interesting for for Venture capitalists and you know I really love to support other Founders and I I love to talk to them about their stories and everything and now with with like I'm still early myself but with my level of experience I can now sense in about one minute if I have a good technical father in front of me or someone who's fell in love too much with their solution and they are you know you ask them like hey what are you doing and they keep talking about their product and features and and blah blah blah and it's really boring and um you can immediately see like okay is this a person are they focused on the customer and what problems they solve and and uh like you know like hey yes I I built this amazing go have you ever heard a technical founder who who was who was sharing how he has built an amazing go-to market like every you know everybody is talking about their product and what they do but how do you actually sell you know you you can't just build a a Wonder governor and people will not come like nobody cares about you but so what is your strategy to marketing how are you unique what's your approach to to go to market that's so much more important like think about distribution and I think this is what most technical funders get completely you wrong they they keep building and keep writing code and they they they think they can hire someone to do the distribution and it's just no it doesn't work it's you you need to figure that out and um yeah so ultimately this is also what will make it's super easy for you to raise money because if you if you really solve people's problem and they pay you money for that it doesn't really matter if you have one PHP file or I don't know some weird serverless architecture or something if you get people paying for your stuff it's so much easier to raise money so I don't know follow simple advice from Steve Jobs be obsessed about the customer find the great solution find a way to Market that because Apple had a really really great brand and I I love listening to Steve Jobs and um yeah that's my advice I that you you got me triggered thinking about uh or two particular Founders I've recently spoken to that are running into this exact problem I look forward to getting your your uh your podcast into their hands I think that's going to be uh pretty impactful as you know they're technical Founders and love their product and they'll be it it's awesome but they're not focused on gdm or you know kind of like how they're going to get those initial customers so um you know yes it's been a phenomenal time hosting you on the show where can our listeners learn more about Wonder graph or or follow your journey yeah so you can follow me on on Twitter it's Jensen underscore D E I tweet from time to time uh you can also go to wondergoth.com uh just check out the product our our whole product is is open source so you can also check out github.com wondergov see what we have there and if you're if you're uh uh a startup or if you're an Enterprise company and you're working with a lot of a apis I think when the graph can be very interesting to you and you yeah just check it out maybe join our Discord we can have a discussion or hop on a call and uh yeah it was a pleasure being here on the show thank you Jason ah thanks so much for joining us we'll make sure to include all those links in the show notes and uh you'll look forward to following your journey thank you so much for joining us thanks