Wed, Apr 7 2010

Quirky Secures 6 Million Dollars In Capital

By ben kaufman at 10:38 am

Starting the first week of February, Mitch and I set out with the goal of raising $4-5 million in capital to beef up Quirky’s infrastructure so that we can continue building a great team and designing fantastic products. Today, less than eight weeks later, we’ve closed Quirky’s Series A round, adding $6 million to our war chest. Click here to see the full press release.

Great outcome? No doubt. But what inspired us most about the fundraising process was not getting the deal done — it was going through the process of hearing reactions, push-back, and analysis from the venture community.

After hearing the Quirky Pitch, the venture community quickly self-segregated into the following categories:

The “Softys”: I started calling a specific group of venture capitalists “Softys”. These are the guys that have become so accustomed to investing in tech start-ups, virtual goods companies, etc. that the simple notion of  a company carrying physical inventory, shipping goods worldwide, and dealing with brick-and-mortar retail is well beyond their understanding, let alone investment.

Softys responded with intrigue about the Quirky community and process, but quickly fell off the wagon when we dove into the operational complexity surrounding the logistics of getting products physically produced.

My favorite quote was:

“You’re A Little Bit Too Much Of A ‘Real Business’ For Us”

… not a quote you’d expect to be attributed to a top tier venture capitalist.

In short: Softys would rather sell virtual sheep on Facebook.

I’d say about 75% of the venture community fell into the Softy bucket.

The Low Ballers: These were the firms that were interested but did not value the business in a fair way. I’d say this was around 10-12% of the people we met with.

The Players: These were people who were really excited about what we were doing and valued the business fairly. This characterizes about 15% of the people we met with. It was at this point that we started to get really focused on finding out as much about them and their style as possible. This was in an effort to find…

The Right Partners: The right partners were people who were not “over their skis” in terms of trying to understand the Quirky business. The right partners just “got it”. Besides being interested and valuing our business correctly, they had a deep understanding of consumer products and consumer brands. Last but not least, they were people Mitch, I, and the entire team felt comfortable working with… which was a tall order.

We are very excited about our partners. Jim Robinson 4.0 (a.k.a. jDrive) from RRE Ventures took the lead, along with participation from the fine folks at Contour Venture Partners, Lowercase Capital, a fantastic group of CEOs and entrepreneurs participating as “Angels”, and of course, old faithful: Bo Peabody from Village Ventures, who has been an investor in all of my projects over the past four years.

Here’s what I’ve taken away from the process, and hope the Quirky team/community takes away as well: 80%+ of the investment community doubts us, and consumer product companies in general. With a good amount of 00′s in the bank, a killer team here in the office, and a huge number influencers all around the world, let’s prove them all wrong.

Let’s prove them wrong and build a truly amazing business here at Quirky. And perhaps more importantly, let’s prove them wrong so that the investment community stops being scared of “real businesses”. They need that.

Time to rock. Congratulations, everyone.