The SaaS Fundraising Death Zone

TL;DR: the ecosystem of early-stage investors (angels, seed and VC) has a structure and set of incentives that creates ideal (or even necessary) points in a SaaS startups life for raising capital. Unfortunately, changes in the ecosystem have created what I call a “Death Zone” between Seed and VC tiers of investors which can seriously affect the ability of a SaaS startup to raise the capital they need to grow, and in some cases, survive. For most SaaS startups, the death zone occurs where they are doing between $50K and $200K in MRR: the startup is too big to raise from Seed funds, but too small to raise from VCs, and because it is counter-intuitive, it is a major risk to SaaS entrepreneurs running successful, growing startups.


Building a SaaS company is hard but rewarding. After bootstrapping AffinityLive for its first few years (very very difficult), I decided that the time was right for us to engage with investors and raise capital to accelerate our growth further. Fundraising is always hard work, but I didn’t realize until I was well into the process that I’d made the mistake of trying to fundraise at a time in the business’ life that I’ve since come to call the SaaS Fundraising Death Zone.

This post is an attempt to help other SaaS founders out there not repeat my mistakes, because while our outcome has actually been really awesome, the probabilities of success were much lower and the effort required to get a great outcome was a lot higher than it would have been if I’d known this information a couple of years ago. I hope this post is helpful, and feel free to share it with other founders you think could benefit from it (Twitter, Facebook, mailing lists, etc).

Early Stage Investor Types

Before explaining the Death Zone, it makes sense to summarize the different types of early stage investor active in the ecosystem. This is just my experience and perception, but since these observations underpin my lessons learned, it makes sense to spell them out here.

Angel investors are those early stage folks who mostly write $25K-$150K checks out of their personal funds to back a company early. They’re usually people who’ve had a good exit from the industry or have risen in it enough to qualify as an Accredited Investor – they’ve got their own nose for picking winners and often their main payoff is the emotional satisfaction from investing (paying it forward, giving back, being able to share the excitement of the early stage journey from a front row seat) – early stage companies are so risky most Angels would get better financial returns from playing table games in Vegas. As a very small time angel investor myself (through Startmate) I treat every check I write as a donation in the balance-sheet of my mind.

Seed Funds
Seed Funds are those early stage investors who mostly write $750K-$1MM checks for companies that have shown some promise and have achieved more traction or have a more compelling team/vision/opportunity that allows them to bypass (or combine) angel investors. They tend to raise smaller funds (anywhere from $10MM around $100MM, but they’re raising more too) to invest in startups, and most of the time they’re backing companies based on their belief of their ability to get to a Series A.

Most of the time these Seed Funds are newer and as they prove out their track record they raise larger and larger funds which let them write bigger checks and graduate into “VC Funds” land – you could argue that some of the names below are already there.

Prominent examples of these types of funds are SoftTech VC (2015 fund was $85MM), XSeed (2012 fund was $60MM), 500 Startups ($100MM in 2013), Illuminate Ventures and Costanoa Ventures ($135MM in 2015).

VC Funds
VC Funds are the folks with the big firepower – they raise many hundreds of millions, sometimes into the billions from their investors to then put to work investing in startups. Names like Kleiner Perkins ($525MM fund in 2015), Sequoia ($700MM in 2010), Andreessen Horowitz ($1.5B in 2014), Accel ($475M just for early stage in 2014), Greylock ($1B in 2014) and Benchmark ($425MM in 2013) are prominent in this category.

These funds invest in companies they think can be IPOs and billion dollar exits, and while some of them do seed investing (often writing $500K checks alongside others) they really get into the game and place their bets at the Series A stage (all the partners I’ve spoken to at these firms who do seed investing just to get the inside run on the Series A) and then follow on (or join in someone else’s party) in Series B and later stages.

OK, now we’ve gotten that out of the way, let’s look more closely at SaaS companies, and more specifically, the rule of thumb around how they’re valued.

SaaS Valuations

Valuations are a funny thing – the true answer is that a company is worth what someone will pay for it. In early stage SaaS, however, when there’s a lot of uncertainty but there’s some proof points, a good rule of thumb is to consider the valuation of the business as being 10x annual recurring revenue (ARR). Applying this rule of thumb, if you’re doing $50K in monthly recurring revenues, your current rule of thumb valuation $6MM.

Now, if your SaaS business is growing fast (more than tripling or doing 200% a year in revenue growth), you can expect to see this multiple move up to 15x-20x. If you’ve tapped into something super lucrative and frictionless (Zenefits, Slack) you’ll see these multiples go a lot higher because investors are happy to overpay now if they’re very confident you’ll be worth that higher price very soon. While we all like to obsess about outliers (and aspire to be one), it makes sense to look at the more general case of a successful SaaS business that has solved a real problem and is doubling revenues year on year.

The reason for bringing up valuations is that the process of raising equity funding involves “selling” some of the company to new investors (although mostly by issuing new stock, so the company gets the money, not existing shareholders). You might think that raising $2MM for a company that is valued at $6MM is much the same as raising $2MM for a company valued at $40MM – you’re just selling a smaller percentage of equity – but you’d be wrong because investors have different needs.

Incentives for Early Stage Investors

For everyone in the early stage except the Angels (and sometimes also them), there’s a very strong incentive for an investor to buy 15%-20% of startup when they invest in a funding round. In fact, from talking to dozens of investors and many more entrepreneurs about it, the percentage is actually the fixed aspect in the investing formula – increasing the check size just increases the valuation, but the percentage is the piece that is fixed in place.

The reason for this is that investors know many of their investments are going to be duds and return nothing at all, some will return nicely, and occasionally they’ll get a massive home run which makes almost of the money in the fund. It is known as a power-law, and Peter Thiel and Marc Andreessen do a great job explaining it. The consequence of this arrangement is that investors want to make sure they have a meaningful piece of each company they invest in (they believe each one will be the home run when they invest, otherwise they’d pass) so the returns are great if they’re right. They’re also conscious of their own time in selecting and then working with/helping a startup they invest in – if they only have 5% of a company, they’ll be a lot less excited to work alongside those founders than they would be for a company they own 25% of.

So, if the percentage is the thing that investors doggedly stick to and the valuation rises and falls with the check size (amount they invest in that round), why is there a death zone? Well, it turns out that check size is in many ways defined by the size of the fund and funds aren’t nearly as flexible as we’d like.

Fund Size and Check Size

The early stage business model for a fund (Seed or VC) is pretty similar – the fund raises money from Limited Partners (LPs) who are looking for a return on their investment – usually they’re wealthy family offices, college endowments, pension funds, etc. When the LP invests in a fund, they’re handing over their money for a period of 10 years (roughly). The fund then invests that money in startups, front-loaded often into the first 3 years, and then “follows on” with the successful businesses to keep their percentage as high as possible through future rounds of investment.

Seed Fund Check Sizes

To use a specific example, let’s look at a Seed Fund which has raised $60MM (to keep the math easy). With a $60MM fund, the investor is basically saying they’re going to invest $20MM a year for the first 3 years (leaving the back 7 for the companies to “exit” and return the cash through an IPO or sale). In reality, though, they’re not spending $20MM each year – when they invest they keep funds in reserve for each investment so they can “follow on” in future rounds and maintain their stake. While the ratio of first money to follow on reserve for each fund varies a bit, from the early stage funds I’ve spoken with the ratio tends to be around 1:2, or one third up front, two thirds for follow on.

This means of the $20MM per year they’re trying to commit for the first three years of the fund, they’re actually writing $7MM in new money checks, and keeping $13MM to follow-on with the future rounds of funding for the successful companies.

Dividing this $7MM through, if they’re doing 8 deals a year (two a quarter is a good rule of thumb), they’re writing an average $875K check, meaning they’re probably tapped out writing checks much past $1MM for their first money in.

VC Fund Check Sizes

Now let’s look at a VC fund like Greylock Partners. They have the same fund lifespan (10 years), but they’re working with $1B (which is up from the $500MM fund they raised in 2005). This comes out to $333MM a year in the first three years of the fund’s life. These bigger funds aren’t putting all of their fire-power in at the early stage, but given the big multiple returns happen there it is probably fair to assume they’re putting half of their fund into early stage investments ($166MM a year), and using the 1:2 ratio between first round and follow on reserve, this means they’re needing to put to work $55.5MM a year in early stage deals. Assuming the fund is doing 8 of these Series A deals a year, they’re having to write a check of $6.93MM for each of those deals for the numbers to fall out. Looking at actual data, the average Series A round was $6.9MM in 2014, so this isn’t a bad general guess (and anecdotally prestigious firms like Greylock don’t fit into the average so the thought of them writing $7MM+ checks as part of above-average Series A deals makes a lot of sense).

You might be thinking, “well, these guys have a lot more money to play with – so why wouldn’t they do a deal where they buy 20% of my awesome startup for $3MM, spending half the money they do on average? That makes us a bargain!” In practice, this doesn’t happen much because the VCs know they have limited bandwidth and they really need to shovel this money from their LPs into startups to make it all work. If they were to invest an average of $3MM in a deal, they’d have to work twice as hard for their management fees – and they didn’t buy that place in Jackson Hole to leave it empty for months at a time.

They could of course write the same big check with your startup at a lower valuation, but then they’d be taking 40% of the company – crowding out the other shareholders, especially the ones who need to work their butts off for the next 5-7 years to get the company to an exit, which is why only predatory investors do this in the early stage.

Now, while it isn’t necessary for a Seed or a VC firm to be a slave to these averages (they might keep less in reserve to follow on because they’re on a tear and know they’ll be able to follow on with the next fund they’re out spruiking now), and there are certainly many exceptions that prove the rule, the size of the fund certainly does define the parameters of the partners when they’re writing checks – Jeff at SoftTech isn’t likely to write a $10MM check to a startup he really likes because that means sinking almost 12% of the current fund in one bet.

Looking at the fund size, check size, incentives and SaaS valuations together exposes the SaaS Fundraising Death Zone.

The Death Zone

When a SaaS startup is very early (little product, no revenue, showing promise), Angels will often invest on a convertible note, essentially an IOU which the company converts into investor shares at a future financing round. Commonly these rounds are in the neighborhood of $500K from 10-20 individual investors on a note often capped at $4MM (which gives an implied valuation of $4MM for the startup and means the angels collectively will have 12.5% of the company when they do a priced round).

Once the company has some traction and proof points, they’ll want to go beyond the prototype engineering team and invest money into acquiring customers. To do this, they’ll often raise a round from a Seed fund with more firepower than Angels can provide. Given Seed funds will want to write around a $1MM check, and because they want to target the 15%-20% ownership stake, the pre-money valuation at the Seed stage will likely be not much more than $6MM – which using the 10x ARR principle means the startup will be doing $50K in MRR if they’re doing well, or a lower amount of recurring revenue is their growth rate is awesome.

The company then puts the funds from their Seed round to work and builds the revenues up to $200K in MRR. Using our 10x rule of thumb, this gives them a pre-money valuation of $24MM, and a check of $6MM will give the investor at the Series-A a 20% stake of the business (post money). They then keep on building, raising money on the way as they need, and then either get acquired, go public, or completely screw it up and die.

The problem is the gap between $50K in MRR (where Seed funds top out) and $200K in MRR (where the VCs start to do their Series-A deals) – and it is a gap I’m calling the Fundraising Death Zone.


Entrepreneurs who try and raise between these two points are at a significant disadvantage – they’ve basically got four difficult options.

  1. You can accept the rules of the game and raise $1MM from a Seed fund at a lower valuation than they’re worth (the $6MM cap which still gives the Seed fund the % ownership they want). A lower value means more dilution (you can only sell equity once), but the Seed fund really can’t write a bigger check and if you need capital, you might have to take what you can get.
  2. You can convince the Seed fund investor to lower their percentage requirements. This isn’t easy at all and involves great salesmanship by the entrepreneur to convince the Seed fund investor that having a smaller percentage of a massive winner for a check size they can write is better than having 0% and missing out on the winner entirely because of their fixation on maintaining a certain percentage.
  3. You can convince the VC investor to give you a valuation your business don’t deserve (now) and raise a big round, which is the more common scenario if you’ve got something great going for you (reputation, team, media buzz, VCs or their portfolio companies use the product themselves, etc). This can however be a poison pill in the medium term because you need to earn the valuation you’ve been prematurely given, and then earn a future higher valuation to ensure you don’t end up with a down-round.
  4. You can convince the VC to write a smaller check, increasing their relative workload. This also requires a lot of salesmanship and the only way to really make this happen is to make it clear you’re coming back for a bigger check in the near future at terms that will be favorable to them (the balance of a check size they want at a not-crazy valuation).

Now, this doesn’t mean fundraising in the Death Zone is impossible – it just gets a lot harder. Professional investors are spoiled for choice in the early stage with lots of companies crossing their path, and when something doesn’t fit their pattern of valuation, stage and check size, it is a lot easier for them to pass and harder for you to build competition in the deal.

The real problem with the Death Zone is that it seems counter-intuitive – surely a company that is doing $120K in MRR can raise money a lot more easily than a company doing $50K in MRR? It is more than twice as successful revenue-wise, has been de-risked more and it is a lot harder to fake $120K in MRR than it is to get to $50K with some clever but unsustainable growth hacking. Investors must be a lot more into a company doing $120K than one doing $50K!?!? While it doesn’t make sense for entrepreneurs, the needs of early stage investors and the limits on the check sizes they will write means often this isn’t the case at all.

This counter-intuitive nature is the big risk for SaaS entrepreneurs. It makes logical sense to think “hey, we’ll hold off from fundraising now until our numbers are better, we’ll get a better valuation from better investors”. But the reality is, if you blow past $50K in MRR, you’re going to want to make sure you’ve got the internal resources to more than 4x the size of the company or else you’re going to face a shitty or much more difficult path to successful fundraising – especially if you need to raise capital in the Death Zone.

I hope this has been helpful – if you’ve had different experiences or have a different perspective, please share them in the comments below!

America’s Greece(s)

In summing up the situation in Europe, the APM’s Marketplace show today made an interesting point: while the US and the EU both have a Monetary union, only the US has a Fiscal union – in short, the Federal Govt in the US raises taxes from all over the country, and then distributes them in ways that involves a transfer of income from one state to another.

It got me wondering – which states are America’s Greece(s)? While the situation with Puerto Rico is in the news right now because of their unsustainable debt burden (making them more like Greece to be fair), I got to thinking – which states are “givers” and which states are “takers” on an income and expense perspective.

To answer this question there is a great Wikipedia page which lays out the data from the IRS against the data of US Federal Government spending by State.

The problem was, the data dealt in raw numbers of millions taxed and spent, and while it also included ratios based on Gross State Product (GSP), but I was really interested in the per-capita net tax or subsidy state by state. So, combining the data from a few of these sources, I put together the per-capita numbers.

The results were really interesting, including:

  • The average person in North Dakota has the most amount spent per person ($77,040) by the Federal Govt. I don’t know whether this is farm subsidies (I’m told their crop insurance pays out even if they don’t bother planting), or if it is the result of a lot of money spent manning missile silos, but either way it is pretty breathtaking. Their fairly small revenue per person means each human in North Dakota costs the rest of America $66,782 per year (on average).
  • The average person in Utah has the least amount spent per person ($4,573) by the Federal Govt. That’s pretty impressive, and they’re followed not so far behind by Kansas and Nevada – so when those voters in these red states vote Republican and claim they want small government, they’re not being hypocritical.
  • Washington DC has the highest per-capita paid per person ($40,117), and the second highest spending per person ($40,296). This makes sense since there isn’t a “state” in the middle taxing or spending, but it is interesting the folks who write the rules pay themselves well out (often out of the Federal budget) and manage to get back just a little more than they spend.
  • The Carolina’s are very different fiscally – while they’re southern neighbors, North Carolina is a net contributor ($1,260 per person per year) whereas South Carolina is the second biggest taker from everyone else in America with a net receipt of $10,518 per person per year.
  • When it comes to Federal tax receipts, the poorest state in the Union is Mississippi ($3,678 per person), followed by West Virginia ($3,721 per person), with New Mexico ($4,199) the only state in the top 5 not from “the South” (#4 is South Carolina at $4,603 and #5 is Alabama at $4,906).
  • Former manufacturing-heavy states with “Rust Belt” populations make up a third of the top 9 biggest deficit states (#4 Indiana, #7 Wisconsin and #8 Pennsylvania).

While the climate isn’t nearly as nice, there’s a serious shortage of islands and no sea, without these heavy fiscal transfers, North Dakota would be America’s Greece.



Got other observations from the data? Would love to read them in the comments!

E3 Visa Renewal in Vancouver

TL;DR: renewing your E3 visa in Canada is possible, but there’s a bit of a quirk that means rolling the dice. This an outline of how I did it in Vancouver in late June 2015.

Almost four years ago I wrote a long and detailed blog post going through the process of obtaining a visa to live and work in the United States known as an E3 visa. Still restricted to just Australian passport holders, the E3 visa class allows people with a university degree and a job offer in a role that utilizes their qualifications – and because there’s 10,500 visas available a year, and less than half of that number were granted in 2014, it is pretty much a sure thing if you’re eligible, the employer doesn’t screw up the (pretty simple) Labor Condition Approval (LCA) and you convince the consular officer you’re a professional (have a degree) and the company and role is the real deal.

One of the few downsides of this visa (which compared to the misery American’s put other professionals through with the H1B visa is nothing at all) is that it is only good for two years – if you change employers or the two year period comes up, you need to get a renewal visa, known as an E3R (the R being for renewal). There’s no limit on the number of times it can be renewed, but each one is a pain.

Practically, the E3R is the same as getting an E3 visa for the first time – you need a new LCA, you need a new DS-160 (the visa application), and of course a new appointment with the consulate to hopefully get them to approve your visa; it is practically lower risk than your first time through (as with all bureaucrats, State Department officials find it easier to approve something someone else has already taken the chance on approving first – stick with the herd, don’t get fired), but still means running the gauntlet. Oh, and of course, the renewal has to happen at a US consulate, ie, not in America*.

The challenge, of course, with your E3R is that you have to leave the US, and since you’ve already got an E3 visa you’ve probably got a place to live (and thus rent or a mortgage to pay) in the US, a job that will miss you more (since the first E3 happens before you start work, so they don’t miss you yet) and probably a bunch of other stuff (friends, commitments, a girlfriend/boyfriend/dog/cat/Tinder-hookup) that will miss the fact you’re out of the country for a while. So, getting it done with as little cost, time and hassle as possible is a priority.

This means it is a lot more desirable to get your E3 visa renewed a little closer to “home” than flying almost half way around the planet – twice – to get your visa renewed in Sydney, Melbourne or Perth. My friend Lee published an awesome post about how to get it done in Mexico City, but I decided I’d try my luck getting it renewed in Vancouver, Canada.

LCA Application

The LCA application process/system hasn’t changed since my first post about getting the LCA in late 2011. To help further, the LCA website shows you a list of all of the previous applications you’ve submitted, so if your role has hardly changed and your employer hasn’t changed, you can download your old application in PDF format and speed the process up with a copy and paste.

Note: the 2 year term for your visa commences the date your LCA is granted. Note that you now can’t book your visa appointment until after you receive your LCA, so it is a balancing act to get the LCA request in with enough time before you want to travel so you can get it early enough to get the appointment time you need but not too soon that you burn months of valuable E3 validity.

DS-160 Application

The DS-160 application has been enhanced significantly since my first blog post, and is vastly improved. It is probably one of the most impressive online government application forms I’ve ever used, and is completely different to every other experience you’ll have with US government.

The DS-160 application is an application built on top of, and uses a lot of smarts and logic to get you a completed application without any confusion or grief – note though that as soon as you tell it you’re doing an E3 visa, it will want your LCA confirmation number (hence needing to do that first), and you can’t get an appointment without a DS-160.

One critical piece of advice: make sure you make a note of your Application ID from the first screen after you choose to commence a new application. If your browser crashes (as mine did) you’ll need it, and when you’re tracking the visa approval after your appointment you’ll need it too.

The Appointment Process

Booking an appointment is also pretty easy, but there were a few wrinkles that caused me a lot of grief – hopefully these tips will save you the same pain.

The State Department does a pretty good job of showing folks how long the wait for a visa appointment is at this website. When I was looking into getting my visa renewed in early June, the waiting time was 8 days for Non-Immigrant Visas (the type you want for an E3). At the time of writing, it at 17 days.


Since my visa wasn’t expiring for over a month (early July), I thought, awesome, this will work a treat! I went and booked my flights from SFO to Vancouver (the strangely coded YVR) for late June (flying in on Thursday, appointment on Friday morning, spending the weekend being a tourist and flying back early the next week) and thought, right, this will work out well. But, the most important piece of information I didn’t know is that the visa waiting times the State Department disclose don’t apply to people coming from a third country to renew their visa.

Given its proximity to the United States, US consular offices in Canada are a popular place for non-Canadians to visit to get their visas issued/renewed. To give the Canadian’s a chance at getting appointments in a timely manner, the appointment system treats non-Canadian residents very differently – but I didn’t find this out until I’d booked flights and made arrangements!

When it comes to booking your appointment, the first thing to do is go to – at the time of writing, this will redirect you to a website that looks like the image below. Fairly obviously, you click “Apply” if you haven’t already gotten into the Canadian’s visa appointment system (your email address is unique to this system).


The first page is a static page which aims to route your request properly. I ticked the box saying I was a non-Canadian citizen residing in the US – it doesn’t really matter though, because these first questions are just to try and route you to the right answer.


The system then warns you that Third Country Nationals (TCNs) might have to wait longer and that a visa might not be granted by the US.


Once you’ve passed this point, you need to enter a couple of details and choose a password, as well as accepting the standard terms and completing a captcha. Easy enough. Then comes the fun part – filling in the specific details for your application (DS-160, visa class and more).


It is the last radio button on this form that makes all of the difference. If you tell them you’re traveling from another country to apply for the visa in Canada, your appointment time will stretch out – in my case, from 8 days to 8 months!

Given I had to renew my visa by early July, and it was currently early June, and I’d only returned a couple of weeks earlier from my quarterly trip back to Australia and didn’t fancy spending $2000 on flights (northern hemisphere summer is high-season for most airlines), I figured I’d roll the dice and tell them I was not traveling from another country – I ticked no and booked my appointment for June 27th.

The last confusing piece in the process is choosing where you want to get your passport and the visa mailed to if it is approved. The drop-down list of places is suburb/city names, which probably make sense to someone in Canada, but since I’d never visited before I required a bunch of Google Maps searching to find out what the heck each one was (since there was no “Vancouver” option). The closest location to downtown Vancouver is Burnaby, BC.

After completing the form and paying the fees (which include the courier fees for Loomis Express, a subsidiary of DHL), all I had to do was wait and stress about the fact I’d claimed to be based in Canada when in fact I’d flown in the day before my appointment.

Entry into Canada

Flying into Vancouver was easy (and really pretty), but I do have one word of advice when you get to Customs/Border/Passport control. When they ask what brings you to Canada, do not tell them you’re there to get your US Visa renewed. This is a very bad idea – basically, the Customs lady took 10-15 mins of going through all my visa paperwork to form her own opinion on whether I’d get a visa from the US guys or not, and there was a very real possibility she could have denied me entry and told me to head back to the US.

This is because, from a Canadian perspective, if the US said no to my visa renewal, I was now going to be Canada’s problem. So, tell them you’re taking a few days off to explore their beautiful city/country for a holiday – you’re a tourist, plain and simple. They’ll then stamp your passport (under the Visa Waiver program, Aussie don’t need a visa and you can stay for 90 days in Canada) and you’re good to go.

One other small point about Vancouver – they’ve got one of the neatest metro systems in the world. It is called Skytrain (much of the track is elevated) and since the mid 1980’s this thing has run super reliably because none of the trains have any drivers! Very very awesome, and super convenient to use when getting from the Airport to the City, and then from the City out to Burnaby when you go to pick up your passport.

Attending the Appointment

Because I booked my appointment 20+ days out (when the wait time was just 8 days) I got a very early appointment – 7:30am. In addition to your Passport, your DS-160 cover page, your LCA and your employment letter of offer (and potentially your degree, but I didn’t bring mine), you’ll need to bring two passport sized photos. I didn’t see this in the instructions for Vancouver’s appointment, and thus I joined a line of folks at a photo place across the road who didn’t realize it either.

Additionally, do not bring anything bigger than a lunch-box – the storage lockers they use are only suitable for small purses, phones, etc. I had to leave my smartwatch downstairs too – if you bring a bag (I bought my laptop bag) you’ll need to go to one of the cafes across the street and pay them $5 to stick in the corner for you (they make no promises as to its safety – all care, no responsibility).

You line up outside to get checked in. Would be cold in Winter!!!

You line up outside to get checked in. Would be cold in Winter!!!

When you check in and hand over your switched off phone, etc, you’ll queue up outside (this must be really unpleasant in winter – it does have a roof though to keep the rain off) and you then get bought through in group of half a dozen or so to be metal-detector scanned, etc.

After you get through the metal detector, you join Line A where an officer who’s sitting behind a counter (as opposed to glass) goes through your paperwork and makes sure you’ve got everything you need.

This was the big risk in my case – my appointment was clearly for someone who had not traveled from a third country to get this appointment, and he was asking everyone their legal status in Canada. When my turn came, and he asked me my status in Canada, I said “I’m here under the 90 day Visa Waiver Program”. My hunch/hope was that this legitimate legal basis for being in Canada would satisfy the requirement (even if it was a bit sneaky). I didn’t offer anything further – no “I flew in yesterday”. I think he asked where I was staying to try and establish legitimacy, and the fact I’m a bit of a maps/geo nut helped because I said “Oh, I’m based in Yaletown” (a local district, highly recommended by the by) which also helped him decide I was in Canada legally and thus wave me through.

A girl who was in the queue downstairs around the same time as I was from Europe and she’d left her work permit card in her bag (downstairs, back out through security, and across the road), so she had to go down and get it out and come back before the Line A guy would let her go to the next stage. I think it was the Line A guy who gave me my “number” from a ticket machine like you get at the DMV/RTA – this number was my number for the rest of the appointment process.

The Line A guy took my passport and DS-160 wrapper form and passed it back to some folks behind some serious looking glass in a control room type thing, and told me to go to Line B (right next to Line A). The people in their control room did whatever they did (perhaps a desk-review of the passport, etc?) for what probably took 20 minutes or so (they spent more time in mine than anyone else’s, which was a source of concern), and then they call your number (roughly in the order that you were in) and then you take it down the back of the room to Window C (where a guy does the biometric fingerprint capture).

Since the E3 requires a consular interview, you then queue up again and wait to go upstairs (can’t remember which floor, but it was a fair way up in the elevator) and then you wait up there for your turn to go to the window and have someone ask you questions about your work, employer, education, role and the rest to determine if they’ll grant your visa.

In my case, the interview went pretty smoothly and the guy told me my visa was approved, but there was one problem – the State Department’s global system for granting visas had been offline for over two weeks, and they had a pretty insane backlog. He couldn’t tell me when the visa would be printed and put in my passport because their computer systems in Vancouver hadn’t yet been “cleared” to do their job at that point (Friday the 27th).

So, while the return date wasn’t known (and that was a worry), I felt super relieved the guy in Line A let me go through even though I’d ticked the box saying I wasn’t traveling from a third country to get my US visa in Canada, and the guy upstairs said my visa application was approved!

Tracking your passport

From the appointment onwards you track progress using the same website you used to book your appointment – by entering your email address and the password you chose in that step, you’re able to track where you are at in the processing process.

While your visa is being processed (before it is released to the couriers), the blue Canadian visa-info website will actually direct you to track progress using a different system which is tied to the original DS-160 application system. This system uses the DS-160 Application ID you got right back at the start of your DS-160 process to tell you where you’re up to.


Once the visa is “Issued” the website will show you the tracking number for Loomis and you can focus tracking your passport.

In my case, the backup in visas because of the tech problems meant I was expecting to be waiting a few days longer than usual to get my passport back. However, at one point I checked the DS-160 website (Monday night) and saw my status had changed to Administrative Processing. When this happens, it usually means you’re facing a delay of weeks (the website says it normally gets resolved inside 60 days!!!) – and obviously, as I’m sitting there in Canada without a passport I was pretty panicked about this state of affairs! The good news is it only sat in the Administrative Processing state for a day, and then by Tuesday night its status had changed to Issued. Phew!!!

When the visa is issued and delivered to the courier (Loomis Express) the website will give you a tracking number, which you can then track with Loomis directly. In my case, it didn’t quite work this way – July 1st is Canada Day, and in addition to most businesses being closed, the Loomis website decided to take the day off too – from 7am until 11pm (my first and last checks that Wednesday) the website timed out with a 500 error and I couldn’t track my passport at all.

The good news was that come Thursday morning, 6 calendar days and 3 business days since my interview, my passport was showing up in Loomis’ systems as being at their Burnaby address and ready for pickup.

Picking up your passport from Burnaby

Returning to trusty Google Maps, I saw that the Loomis location Burnaby wasn’t too far from Lake City Way skytrain station. I headed down to the Granville skytrain station, bought a 2-zone ticket (they’re good for 90 mins or so) and rode the 30 mins or so out to Lake City Way station. Given these trains have no drivers, if you’re lucky you can get the front seat – pretty cool view and way to ride a metro!


If you do this, the main thing to know is that you have to get off the Skytrain at Commercial-Broadway station, walk along a passenger walkway back towards the city for 5-10 mins, and then board a train on another line in the direction back to downtown (Waterfront station) to get to Lake City Way station the fastest. The reason for this is that the trains leaving the city travel in one direction around a loop, finishing near Commercial-Broadway – the Lake City Way station, though is near the top of the loop, so by changing trains and direction, you save 20 mins of extra travel time by cutting out the largest part of the loop.


When you get out at Lake City Way station, you’ll want to walk up the road called “Lake City Way” for half a mile or so and turn right onto “Express Street”. Note that you’re probably one of the few people who go to Loomis Express on foot – the road, pictured below, isn’t at all pedestrian friendly, with no footpath and a lot of trucks going back and forth. But with no Uber or Lyft in Vancouver at the time of writing, I figured it was better to take on this challenge than support the taxi cartels.


The reason for the passport photos (that I didn’t bring originally) at the appointment is made a bit clearer when you pick up your passport – inside the package at Loomis Express is one of your passport photos so the courier guy can check it really is you.

So, a little before 11am on Thursday July 2nd, I had my passport and new visa!

Recommended Timing

The recommended timing for doing the Vancouver visa renewal (if you decide to) is as follows:

  • Week 1 – apply for your LCA. Note that the date the LCA is granted is the date that your new visa expires, so don’t get your LCA until you’re ready to then go onto getting your DS-160 (which you need to then book your appointment).
  • Week 2 – get your DS-160, and book for your appointment. Your LCA should only take a week to get approved (if you’ve done it right) and the DS-160 is just a process (no review/approval required there) so you should be able to get your DS-160 and appointment the day you get your LCA back.
  • Week 4 – attend appointment. Assuming an appointment delay of 10 business days, you’re probably going to be waiting until into Week 4 to get your appointment.
  • Week 5 – passport and visa returned. The Consulate says that it should take 3 business days for your visa to be approved and issued which tallies with my experience. If Canada day hadn’t occurred I would have had my passport back on Wednesday after a Friday appointment. If you have an appointment on Monday, you should have your visa back in your hand on Thursday.


In conclusion, it is very doable to get your E3 visa renewed in Vancouver (and since a renewal is functionally no different to getting one for the first time, new visas should also work fine). However, the fact you have to lie on the appointment application form to get an appointment in a reasonable time means that doing so is pretty risky; I think I got pretty lucky with the Line A guy waving me through after I told him my legal basis for being in Canada was the Visa Waiver program. If the Line A guy doesn’t let you through you’ll end up being turned around and you’ll need to book a flight to Australia (or Mexico City) and apply to an appointment there to get your visa processed (with no refund for the Vancouver appointment you got turned away from).

The other factor to consider properly around the process is costs. My two reasons for choosing Vancouver over Sydney were time and cost. The flights to Australia take a day each way, and the cost at $2000 or so is a lot more steep than $350 return to Vancouver from SFO.

However, if you can stay with family or friends when you’re in Australia, you’re avoiding the costs of hotels or AirBNB accommodation in Vancouver. I ended up paying around $1300 for accommodation (Thursday to Thursday), which makes the price difference pretty small ($1900 for flights and accommodation), and because of the Canada Day and backlog delays I had to do a change of date on my return flight which had costs as well making the Sydney vs Vancouver cost difference all but disappear.

While I definitely came out ahead on time (and being on the same timezone as my US team when we were announcing our fundraising round was really beneficial), in my case the benefits of Vancouver were positive but not as overwhelmingly as I thought that’d be. If I was paying Sydney hotel prices though (more than Vancouver prices) the Vancouver option would be a long way ahead on the cost side of things.

Hope this helps other folks who are running the gauntlet – would love to hear people’s own experiences in the comments below too!

Saying Thanks

I’ve had a bunch of people email me and ask how they can say thanks for the advice. If you’d like to say thanks and you don’t already have an account with Uber or Lyft, feel free to say thanks by using my invite code (below) and you’ll be helping me out with extra credit and getting some credit to start with yourself too:

  • Uber: 9xybb
  • Lyft: GEOFF304


* There is one exception to this, which is where you nominate to have your visa assessed and approved on-shore with USCIS – the downside of this is that it is like a really long visa interview which leaves you unable to leave and re-enter the United States while it is being determined, a process which I’m told takes something like 6 months.

Why the “raise as much as you can always” myth is so pervasive

After announcing our first institutional round of funding for AffinityLive last week and highlighting why we deliberately raised a small round of capital, a number of entrepreneurs reached out asking the same basic question: why is the belief that raising as much money as you can any time you can so pervasive to be almost established law? While it is fair to say that often it is ego, pride and as us Aussies would say a “pissing competition” that makes entrepreneurs put their own and their companies best interests to one side and raise all they can, the ego payoff wouldn’t be there for achieving “success” if it wasn’t such an article of faith. In this post, I try and get beyond the behavior of the entrepreneurs responding to the desire for external validation, and instead try and understand why raising as much as you can is validation at all.

All I can offer is one perspective, but as someone who’s been around the Silicon Valley scene for a number of years with many friends who are investors, service providers (landlords, attorneys, recruiters) and of course the media (I couch-surfed at Mike Arrington’s place back in the day, and MC’ed the Techcrunch Hackathon for a number of years), I hope this perspective is at least helpful in understanding the reason so many benefit from maintaining this belief – and it makes perfect sense if you think about the way these critical groups influence the narrative and behavior of the startup ecosystem.

First of all, there are the investors, whose job is to invest other people’s money into successful startups for a great capital return. One of the big trends we’ve seen has been the dramatic rise in the size of the funds these investors are raising (or the total funds under management).

These investors are raising bigger and bigger funds for three reasons:

  • Record low interest rates mean investors are increasingly looking to alternative asset classes (like venture investing) to try and make returns.
  • The fundamentals of the tech sector mean the sector can offer great returns (fairly ubiquitous broadband in the developed world, smartphones in billions of pockets around the world – it isn’t wild or crazy to see more opportunity than risk).
  • VC partners get paid around 2% a year to manage the funds they raise, and 20% of the gains they make for their investors, which incentifizes them to get more money in and put more money to work – even if their investments are duds, 3x the funds under management means 3x the yearly salary, risk free.

The consequence of these bigger funds is they have to either write a lot more checks per year (which requires more partners sharing the spoils, or the existing partners to work harder, neither appealing), or they write the same number of checks and just make them bigger checks. Whichever way they jump (and most opt for the later), the result is more money needing to be shoveled into startups – hence the desire to cultivate the belief that raising more money is always better.

Service Providers
There’s a saying that in a gold rush, you’re better off selling picks and shovels to prospectors than actually prospecting for gold. In the current tech boom, there are countless lawyers, recruiters, real estate brokers, landlords and innumerable other professionals cashing in mightily, selling picks and shovels to us entrepreneurs.

Of course, the ability to raise rents, charge fees and book more work is predicated on the clients actually being able to pay – and like any smart player selling picks and shovels in a gold rush, they’ll get paid in cash please, not a percentage of the gold the prospectors might bring home.

While these folks don’t have as much of an active role in perpetuating the belief that more money raised is always better, they’re certainly very happy to help you spend it and post-justify the need to raise all that extra money in the first place – and their marketing spend can have a very direct effect on the economics of the third group, the media.

The tech press also plays an important part in perpetuating this perspective of the more money raised, the better. Aside from the newsworthiness of it – “Company X raises eye-popping amount of money” – the tech media are in a pretty tough spot when they cover private companies: they can’t report on revenue (it is private), growth (it is private), customer churn (yep, private) and a multitude of other things to create drama, comparisons or a commentary on who’s winning in the market.

The result is a comparison on the one thing that is commonly disclosed: the amount of funds raised. This means that this one metric is how many people who write articles (and more importantly, those who read them) are forced to reflect and compare.

There’s another subtle dimension as well, which surrounds how the tech press make their money: events. As revenue from advertising continues to come under pressure, the tech press are printing money with their conferences and events. These events draw sponsorship and millions in ticket sales, and result in more exclusive content from speakers and interviews. The sponsors and many of the 3000+ ticket holders are, of course, investors and service providers paying $3000 a seat for a 2-3 day conference. So, maintaining the focus on funds raised in the tech press helps keep the world going around.

I’m not claiming for a minute that there’s a conspiracy at play here – it’s just my attempt to understand why the view of “raise as much money as you can as often as you can” is such strong, prevailing advice. There are, as mentioned in the previous post, lots and lots of very good times where raising as much money as you can whenever you can get it is good advice – but this is my attempt at understanding why the advice is so universal when it really shouldn’t be. There’s just too many parties who influence the continual movement of the merry-go-round for it to be any other way.


Why we don’t work with recruiters

After getting a bunch of great publicity (thanks Techcrunch, SMH and many others) over the last few days following our funding announcement, I’ve been inundated by recruiters reaching out to let me know about the great candidates they have.

The reply to all of them is the same: we don’t work with recruiters.

I’ve got a bunch of friends who work in the HR and recruiting sector so this isn’t a professional slight, but more a wake up call for the many bottom feeders out there trying to professionally pimp.

There’s two reasons for this: candidate motivation and agency conflict.

Candidate Motivation
Firstly, if someone really wants to work with us and be part of an ambitious startup revolutionizing how the millions of small and medium professionals out there manage their client work and businesses, there is a very easy way to tell us – email We also have a great Careers page listing lots of positions and we’re always looking for great people.

If someone would truly like to join a company like ours, the channel really couldn’t be easier. In this context, a recruiter isn’t adding any value on this end and so we don’t think it is right to spend 15%-25% on top of that person’s salary feeding the recruiter for holding back a candidate like they own them and only making introductions to those that want to pay the pimp fee. We’re a startup, cash is our survival lifeblood to achieve our mission, and I’m sure candidates would rather have that money spent on perks they’ll will appreciate and enjoy.

Agency Conflict
There’s a concept I learned in business school called Agency Conflict that’s a really big issue that is at the rotting heart of many industries. Also known as the Agency Problem or the Principal-Agent Problem, the short version is that someone (or some group) charge another person (or group), known as the agent to be responsible for safeguarding their interests. Agency conflict occurs where the agent has a different incentive or motivation than the person who’s trusting them to look after their interests – whether it be the CEO who says no to a great take-over offer because they want to protect their job at the expense of the shareholders, or the financial planner who recommends an investment over another because it pays a better commission (which has regularly ended in tears).

In the case of a recruiter who’s emailing someone like me telling me they’ve got some great people who would love to work for our company, this is a really big deal and presents a moral conflict I’m not prepared to enable. If you’re *really* working for a person, then you should be obliged to do what’s best for that person. Holding people back (either by not telling them about a position, or by mentioning “people” but refusing to then make an introduction or sending redacted resumes until you get a commitment to make a cut on their first year salary) is classic agency conflict – the recruiter is putting their own financial interest over the interests of the people who are trusting them to be helped.

Now, of course, the recruiters emailing prolifically offering “their people” over the last week might indeed be going back to their clients and saying “hey, these guys don’t work with recruiters, but they’d probably be a good fit, but you’re on your own if you want to apply” – I really hope they are, so they can sleep well at night.

Some folks will understandably be thinking “well, hang on, how are recruiters supposed to make money then?” I don’t know what the answer is. Since they’re working as an agent of the person looking for a job, then perhaps the candidate should be paying them for their services – or at least telling them they’ll come across dozens of great jobs they won’t be passing back to the candidate or making introductions on because the agent is looking after themselves first. Or perhaps the answer is to have a general “finders fee” whether it be paid to a recruiter who makes the connection or an internal team member who recommends a successful candidate. I don’t know – I just know our response to recruiters offering “their people” is going to be the same – we don’t work with recruiters who put their own interests ahead of their client’s.


Why we raised a small round (and why you should think about doing it too)

Today we announced we’ve raised a $2 million dollar round of funding for AffinityLive. More than three years after our launch, this is the first institutional money we’ve taken; until now, we’ve built a crazy-ambitious product and worldwide client base through bootstrapping.

Over these three-and-a-bit years, we’ve grown the business to have millions in annual recurring revenue, a team of 40 amazing people across our two offices in San Francisco and Wollongong, Australia, and thousands of incredibly active and addicted users who trust AffinityLive to run pretty much their entire business every single day.

So, it might seem strange to folks who follow the startup scene that we’ve only raised $2 million in funding. Raises of $2 million are more commonly associated with startups who have an idea and some validation but no real product yet, much less revenue. So, what’s the deal with raising what is, comparatively, a small amount of money?

The fundamental reason is that we didn’t need to raise more to execute on our plan over the next two years – it is that simple. However, the fact that this even needs to be spelled out highlights what I’ve increasingly seen as an article of blind faith: the belief that raising as much money as you can whenever you can is a great thing.

While this advice is certainly true for some companies and entrepreneurs at some stages, I believe it isn’t right for most companies and entrepreneurs at most stages. Note that I’m focusing on the interests of the company and the entrepreneur here – not the interest of the investors (who are rationally self interested in perpetuating the “take all the money we’ll give you” model).

I’ll try to illustrate why the ‘raise as much as you can whenever you can’ model is often really bad advice with three analogies.

Raising money is like buying dinner


When you sit down to dinner, one of the first questions you ask yourself is “how hungry am I?”. If you’re only a little bit hungry, you should only buy an appetizer – even if the restaurant is offering you a deal on a 9-course degustation menu, getting a lot more food than you can eat is crazy. Some people convince themselves they’ll take it home for left-overs, but how often does it just get wasted in your fridge?

The lunacy of this approach becomes even more stark when you consider, in this analogy, you’re not buying the massive meal you don’t need with cash, or even with funds you’ve borrowed: you’re buying it with your equity! You can only sell equity once – so the idea of using the most expensive form of capital in the world to buy a meal you can’t eat without making yourself sick is super crazy!!!

The counter to this argument you’ll often hear (and always from investors, whose job it is to sell you money) is “fill your canteen when you’re at the waterhole.” This can be great advice for startups who face really uncertain or competitive markets (the amount you have to spend on marketing to win can double or triple overnight if your main competitor chooses to try to outspend you) or for businesses that aren’t yet generating revenue (no matter how you cut it, more money buys more time, and things always take longer than you think).

So, the key is to first of all honestly ask yourself how much you need to execute on your plan, ie, ask how hungry you are. Then you should resist the temptation to order up big just because you can.

Spending money is like getting fat


As anyone who’s tried to lose weight will tell you, it is much much easier to put it on than take it off! The same is true for companies – once you’ve increased your spending, it is very difficult to reduce it. While increasing the rate of spending (more people, bigger offices, more servers) is natural and healthy as the business grows, the risk for companies that raise big buckets of cash is that they don’t just get taller – they also get fatter.

A few weeks ago, I had a chat with a very successful founder who’d achieved a great exit. It turns out for most of their growth he’s been a bootstrapper; after a few years of hard slog, the company that was spinning off cash, growing strongly, and because of their gritty history, was run in a very disciplined fashion.

Eventually, after numerous approaches from investors imploring them to take money, they decided to raise a $10 million round. He regards this as one of the biggest mistakes he ever made. “Within 12 months, we’d blown over $4 million of it and had nothing to show for the money we spent.” They blew $300K alone on “executive recruiters” for four senior roles, only to have each hire turn out to be a dud. Even worse the culture had changed from one of discipline and taking on the world to one of comfort and entitlement. My friend explained how sad it was to realize that they’d lost the tight, high-performing culture they had, and how re-imposing that discipline was really really hard for everyone. He knows they only lost their way – and millions of dollars – because they had a bundle of money burning a hole in their pockets that they “let themselves go”.

Raising big rounds is like stunt driving


In an environment where entrepreneurs are expected to raise more money than they need, the natural consequence is higher valuations – which you would think is a great thing for the founders, right? A big valuation at exit is obviously awesome, but outsized valuations on the way through can be a disaster.

As illustrated brilliantly in HBO’s Silicon Valley a few months ago (Season 2, Episode 1), raising a lot of money at a big valuation can end in disaster – when you go to raise a lot more money later (which you’ll probably need to do because you got fat), you’re going to need to execute perfectly to earn the next big valuation (and so on in a repeating process through to exit).

The entrepreneur who’s raised too much at too high a valuation becomes the stunt driver, with the company the stunt car. Dramatic and death-defying, the stunt driver risks it all to justify the valuation the didn’t deserve last time, and to reach for the next valuation and big raise before they run out of money. This challenge of skill and luck is entertaining to audiences (the media, the public, envious entrepreneurs) and hopefully gets a great return for the promoters (investors).

But, if the stunt driver crashes out or hits a wall – perhaps there was a bump in the road they didn’t see, or there was a change in the conditions (capital markets) that caused them to crash – the audience sigh and go home, and the promoters call their insurance company or look to one of their 20 other stunt drivers to perform tomorrow. However, the stunt driver goes to hospital and the car is written off and sent to scrap, and while the audience and promoters are back to it the next day at the fairground, the stunt driver isn’t making it back for a while, if at all.


The main conclusion is to make sure, as an entrepreneur, you focus on doing the right thing for the company. Don’t optimize to get a big splash in the tech press (they don’t have a lot to compare private companies with, so funds raised has become the go-to). Don’t optimize for the biggest paper valuation you can get (because the valuation top end will be for preferred stock holders who get their money back first). Don’t optimize for the fanciest brands or the most Hackernews cred. Because the truth is that all of those things are the fleeting sugar-hits of entrepreneurship – you should be optimizing for the success of your company, and that means raising what you need (with some buffer for uncertainty) and not more just because you can.

Inside Sales Idiot Nominee – April 2015

While the email campaigns are still as constant as ever, it has been a couple of months since I noticed a true face-palm email campaign.

Thankfully, the idiots at Varazo sent us a gold medal Inside Sales Idiot email this morning. Feast your eyes on this beauty!

Aside from the comical references to a Virtual GoToMeeting invitation and reference to the fact we can send email to them “24 hours, 7 days, 365 days, including holidays”, they also dove straight into their pitch with bullet points on a grey background and no attempt whatsoever to communicate value to the recipient. Idiots.

Inside Sales Idiot April 2015