When you choose to adopt a position of transparency you have to share the good and the bad. And today I am sharing the story of how a $100k USD investment in my startup Task Pigeon slipped through the cracks. Although I lost $100k
this doesn’t mean that you shouldn’t try your own investing, there are financial advisors that might be able to help you learn how to invest $100k.
In fact, I originally wrote this post about four months ago and was about to hit publish before deciding to engage with the investor one last time. So in a way this is a story about two failed deals….
It was back in March of this year that an email popped into my Linkedin inbox. It was from a US based investor and he got straight to the point. He wanted to connect and asked if I was looking for additional funding.
I almost didn’t reply. I thought it was yet another “investor” who was actually a consultant in disguise and wanted to try and score some dollars for creating a pitch deck or making intros.
But something about his message seemed different. I wrote back and shortly after we had lined up a time to speak in greater detail about Task Pigeon and what he was proposing.
The Pitch & The Deal
Right from the get go the investor was excited about the potential for Task Pigeon. In particular, he liked our long term vision of creating a marketplace of on-demand freelancers who could handle tasks you and your team had insufficient time to complete.
In addition to speaking about our long term vision I covered how I had bootstrapped Task Pigeon to date, had recently been seeing a solid increase in user numbers and engagement and had managed to get Task Pigeon to where it was on a minimal budget.
Before our call had wrapped up Brad* (I have changed the investors name for their privacy) committed to investing $100,000 on the spot (subject to due diligence to confirm our user numbers and other metrics I had discussed in the call).
There was a slight catch though. The $100,000 would have to in turn be invested in product development using his software agency.
Now I understand for a lot of people this would be an automatic deal breaker. It’s not a typical $100k investment. It is tied back to a service provided by the investor, which is certainly not as good as cash. I 100% get that. But after thinking about it for a period of time I decided that in this instance it wasn’t a deal breaker for me. At the very least I was open to continuing the discussion.
This was in large part due to the fact that I am a non-technical founder so even if it was cash this money would have been spent on development any way. Secondly, they would bring an added level of professionalism and guidance on technical decisions that needed to be made as the app scaled. As a result we continued to engage via both email and phone.
Progressing The Deal
The one thing that immediately struck me about Brad was his professional approach to the process. Part of the due diligence process actually involved Brad and his team preparing a comprehensive product road map and development schedule based on our conversations and information I provided.
The scope of the document and insight it provided would probably be worth a couple of thousand (my estimate) if you had engaged an outside consultant to prepare it on your behalf and really did tie together the product roadmap, future direction of Task Pigeon and the investment required to make it all happen.
This all gave me confidence that things were progressing well! In fact, it was this document that sold me on Brad and his team. If I had been on the fence about whether this would produce a positive outcome I was now firmly in the camp of “let’s do this”.
At the same time we mutually bought up the need for additional funding to compliment the investment Brad was looking to make. While the numbers varied during our various calls it was in the vicinity of $25,000 to $50,000 USD.
In my mind this money was to go towards things outside the scope of product development for the core app such as content marketing, improving the infrastructure we use for the app, additional tools and services for a better onboarding experience, etc.
The Point of Difference & The Structure
Raising money is a bitch. It’s certainly not easy and with the few investors I was able to engage with there wasn’t the appetite to back Task Pigeon for the additional funding I needed at that time.
Now full disclosure here I know Task Pigeon was (and still is) very much early stage. The investors I spoke to here in Sydney were all great people and met with me a number of times. In fact we continue to meet regularly to keep up to date with the ecosystem and what we are each working on.
In addition, as I mentioned above I had viewed this additional money as being in part earmarked for other aspects of running the business (i.e. marketing, etc). During the regular discussions with Brad, which were now occurring on a weekly basis, it became more apparent that he was looking for the majority of these funds to also go towards product development.
While I believe we both agreed that $100k wouldn’t cover all of the future product development needed at the time I didn’t feel we needed $150k upfront for software development. I also thought that $100k on product development without additional funds for marketing would be an ineffective use of funds.
As a result this point of difference obviously put the deal in jeopardy but we both progressed with the view of making it work. Ultimately, it would be a moot point anyway as I was unable to find the additional investment from other investors anyway.
Trying To Salvage The Deal
It’s actually a lie to say I lost the entire deal. That’s not factually correct.
What actually happened was we looked at a scaled down approach. If Brad needed $50,000 to match his $100,000, would he be able to invest $25,000 to get us from A to B. Then we could leverage that traction and get from B to where we actually wanted to go.
I wasn’t naive. I knew this deal was different to what we originally discussed and proposed terms that would compensate for the additional risk.
As a result our conversation continued.
In the end however the amount dropped to only $5,000. The idea being that Brad wanted to invest $5,000 to update our User Interface and then monitor the progress of that before committing further.
Why I Said No
This news, plus the nature in how they wanted to structure the deal (with an option) made things all a little too difficult in my opinion. Especially for such a small amount of money.
In addition, while this had all been taking place I had already been investing in getting the design of the new User Interface developed and felt I was part the way there already.
As a result I committed the additional capital myself and walked away from the deal with Brad. My final email, was polite but clear in that I believed the only way forward would be if the investment from Brad’s side was a minimum of $25,000.
Unfortunately, I never got a reply after turning down that final offer so never really received additional insight or feedback on how he took my decision.
Or so I thought….
The Deal Is Resurrected….
Now here’s where things take a pause.
I had written this article a few months ago. I was ready to hit publish but didn’t want it to come across as “burning bridges” (that’s not the intention of this article. It’s merely a reflection of my commitment to transparency in building Task Pigeon) as a result I reached out to Brad one last time.
As always he was very professional in his response. He was open to speaking again and seeing where things were at.
Like last time our call was very positive and Brad was once again interested. I reconfirmed the last point in my email, that the investment would need to be a minimum of $25,000 for this to make sense at my end. In the call Brad confirmed he already had approval from his board to invest up to $30,000 so this shouldn’t be an issue.
A couple of days after the call an outline of the deal followed.
It didn’t exactly reflect what we had discussed over Skype.
Unfortunately he wanted to split the deal into stages. With stage one being a $15,000 investment. Half of which would be contributed from his end. The other $7,500 USD would be on me.
The Deal Is Dead Again
This killed the deal for me.
After the first deal fell over I had committed more money personally to update and release the new UI. This was the last of the “bulk sum” of money I had. I can keep Task Pigeon running each month, but didn’t have another $10,000 Aussie just laying around.
I had been clear with Brad on this point as well. Prior to the first deal falling over I had let him know any money I had, I would now use to fund the new UI personally and re-iterated this in the first phone call once we decided to revisit the deal.
I don’t think it was that Brad wasn’t listening. He just had a process and preference for seeing their investment matched by another third party (whether that’s the founder or another investor).
Once again our discussion didn’t progress further. I of course replied, thanked Brad for his time and outlined how I wouldn’t be able to commit to a deal like the one he proposed.
We finished on good terms and very much aim to keep in touch with one another.
Reflecting On The Past
Looking back I still believe there were positives to be gained in bringing Brad and his team in. I also completely understand that he wanted to see additional investment to match his in some capacity but feel that there was other areas of the business that also need investment beyond just product development.
From a company perspective I believe it would have allowed us to accelerate development of Task Pigeon and take it to another level. But I will still get there. It will just take a little longer than I had hoped (or planned for).
I remain positive about the future of Task Pigeon and believe that we will eventually reach a level where Task Pigeon is an attractive investment option for cash investment from local Angels.