milk money, part three (the beginning)
This is it…the last post in the three-part series on meebo’s first round of fund raising.
As I mentioned in my last post, I’d met with a number of VCs who were interested to learn about what we were up to with meebo. Once we realized we needed to bring more people on the team, and hence needed to raise a round of funding, we chose 6 firms to formally “pitch.” We decided on these firms based on a mix of our perception in their level of interest in meebo, how much relevant experience they had in the consumer internet and communications space, and most importantly, personality fit with the people that I had met in the initial meetings.
Elaine, Sandy and I put together a PowerPoint presentation that covered things like industry trends, our growth, the results of our early meebo user survey (another one to come shortly…hope you’ll all help us out there!), and where we wanted to take meebo. A couple of junior partners had offered to give us feedback on our presentation prior to us pitching the entire partnership and we took them up on this offer!
Most VC firms have the famous (or infamous) Monday morning partner’s meeting. We didn’t (and still don’t) know much about what gets discussed in these meetings (wouldn’t it be nice to be a fly on the wall), but we learned that these are the meetings when companies are brought in to present to the whole partnership of the firm. These can be rather intimidating meetings (for us at least) as you’re presenting to 12+ people! They definitely don’t let you get through your presentation uninterrupted…rather, they shoot questions at you all throughout the presentation, with more to follow once you’ve gotten through your slides.
We were hearing from friends of ours in or near the VC industry (lawyers, bankers, etc.) that the VCs we had been talking to were calling around, basically background checking us. We were asked for formal references by only one firm…the rest seemed to take the back-door approach! We took it as a good sign that the firms had enough interest to check our backgrounds.
One question most of the firms asked was “where are you in other firm’s processes.” My sense is that VC firms like to take as much time as they can in reaching a decision on a particular investment, background checking it as much as possible. However, we also picked up that they would respond to competition. They wanted to make sure other firms didn’t execute faster.
After these partner meetings, some of the firms we’d met with gave us “term sheets,” while others had issues they wanted us to work through before handing us a term sheet. For those of you unfamiliar with the mechanics of VC funding (I sure was before going through this process), term sheets are typically 4-6 page documents that VCs give to companies that they’ve largely decided they’d like to invest in. The term sheet is non-binding and spells out the high-level terms under which the VC is willing to make the investment. It indicates how much money the VC wants to invest, at what valuation, and under what legal terms and conditions. The general process from this point forward is to negotiate and agree upon the terms in the term sheet, and then to have the lawyers draft the full set of legal documents based on the terms you’ve agreed upon.
Once we received term sheets from the VCs we had to decide which VC to move forward with. This was an excruciatingly difficult process for us. During our discussions with the VCs, we’d told them how much money we wanted to raise, and had indicated the valuation and legal terms that we felt were reasonable. We started with a reasonable set of terms…not a set we expected the VCs to negotiate down…as we thought it was important to keep our valuation reasonable in order to align our interests along with our investor’s. We also didn’t want to play the negotiation game…rather we wanted to come right out the chute with a reasonable offer and a great partner.
Most of the VCs came back matching the terms we’d asked for. Some exceeded them, others fell short. We decided to rank the VCs on four criteria:
1. Was there a strong personality fit between the people at the VC firm and our team?
2. Did they meet or exceed the terms we’d asked for?
3. Did we agree on where meebo should go in the future?
4. Did we agree on how meebo should get there?
You’ll notice that three of the four criteria are about people and personalities. We felt it was super important that we really loved the people we would be working with, and that we agreed on the direction meebo should go. If either of these principles didn’t hold, working with the VC over the next number of years (I think the average investment life cycle is 5-7 years) would be rather painful!!
After many hours of internal debate in which we each took the sides of various VCs, both supporting them and arguing against them, we decided to move forward with Sequoia Capital. The reasons were simple…we all really liked Roelof Botha, the partner at Sequoia who led the investment in meebo. We also had friends who’d worked with Sequoia in the past and these friends gave Sequoia a big thumbs up. We quickly came to an agreement with Sequoia on the term sheet and signed.
This was, at the time, rather scary. First, we had to tell the other firms we’d been speaking with that we were proceeding with another firm. I dreaded those conversations because we’d be disappointing people we really liked. Second, this was it. We were committing to Sequoia that our aim was to build meebo into a great success. No longer was it just us…now we had other people investing their money in us. That’s a lot of pressure!
Sequoia was fantastic between signing the term sheet and closing on the overall deal. Our goal was to be done with fund raising by the end of the year so that we could get back to fully focusing on building meebo. Sequoia did have a few due diligence questions that came up between sign and close (due diligence is when the VC firm does a bunch of research on your company, and overall industry, to make certain that they are comfortable with the investment). However, all of their questions were answered and we closed on the funding by the end of the year.
Sorry for the very long post! I hope that all of this was interesting or gives you all some sort of a guide to starting a venture of your own some day! If you have any questions, leave a comment and if there are a bunch of questions on a particular area, I’ll dive into that particular area in my next post.
Take care!
Seth
[ comments ] [past blogs ]
January 23rd, 2006 at 12:30 am
[...] milk money, part three (the beginning) [...]
January 23rd, 2006 at 1:06 am
Wow, very interesting. Starting a venture sure is complicated and seems a bit stressful. But if your business idea is as great as meebo then you’ve got nothing to worry about
Thanks for the insight on the business issues of meebo. I appreciate it a lot because i’m interested in e-business.
Good luck with everything!
January 23rd, 2006 at 1:18 am
great post. I was recently involved witha VC and boy you do sound familiar.
January 23rd, 2006 at 1:46 am
Meebo is the most useful online tool I’ve come across in a long time. Good luck squeezing money from it. For the time being I imagine you could even use AdSense. With the number of people that must use this service you might get some income there
January 23rd, 2006 at 2:01 am
want to submit
January 23rd, 2006 at 2:03 am
hi
January 23rd, 2006 at 2:52 am
Just one itsy bitsy question:- How does Meebo generate revenue? I see no ads and you guys generously allow us to use the service for free
.
January 23rd, 2006 at 3:00 am
As jags says the revenue question is intriguing, and as TeC said, thanks for the insights re. my own future plans. Clean and easy to use interface wouldnt, in itself, create revenue but I will waait with bated breath. Good Luck!
January 23rd, 2006 at 3:15 am
Great post !!!
January 23rd, 2006 at 5:20 am
Jags and Jack, from what i can gather a good amount of investment from a few “angel” donators
January 23rd, 2006 at 5:20 am
Congrats.Meebo is a neat site and good to see you guys getting funded.Though I dont understand ‘why’ coz there arent any ads …..
Secondly meebo has recently been banned at my office.Is there a way to work around it???There are millions of students and working candidates who would be happy if there able to access meebo again.
January 23rd, 2006 at 5:25 am
But TeC, one doesn’t start a business on the presumption that angels(donators) would help. You start charities and social service orgs that way. For starting a biz one needs a solid revenue model.
Wot sez you??
January 23rd, 2006 at 5:48 am
you’ve done great with meebo. lots of my friends at school use it because
it’s the only thing not blocked, where we can still read blogs and stuff. This web is really great because it gets lots of people together and it’s sweeeet.
Good Luck on future events.
January 23rd, 2006 at 5:52 am
hi,
i personally like meebo because it is not blocked as others. all the best for ur future and the future of meebo.
regards,
chandra mouli. s
January 23rd, 2006 at 6:23 am
seth…appreciate your openness and ‘plain talk’ description of the dynamics of the VC process….and now the REAL fun begins! continueed good luck with one of the most innovative products online…
….but a miscellaneous question: did you have to get any “rights” from the messenger services you provide access to?.. or how does THAT part work legally?…
January 23rd, 2006 at 7:04 am
Very interesting – thanks for taking the time to tell us about your experiences.
January 23rd, 2006 at 8:44 am
Very interesting story. Thanks for sharing it with us.
January 23rd, 2006 at 8:50 am
Im impressed with the story. part three that is …but Sequoia, have you clicked on the link…their website is kind of bland….just an observation…but good luck on the venture
January 23rd, 2006 at 9:02 am
Good read, very insightful. I enjoy the service, meebo is great! Looking forward to new versions and more functionality since you will be able to focus now
January 23rd, 2006 at 9:15 am
Thanks a lot for the inside peek into the VC funding process.
January 23rd, 2006 at 9:16 am
What is this
it’s strange
i dnt like it
its not my style story
sorry
luv yas
xxx
January 23rd, 2006 at 9:48 am
Congrats guys!
I remember during my tenure in the valley how all discussion amongst my friends and those in palo alto always turned to VC this and Angel that.. I still remember the day the company I worked for went public, the energy in the office that day was incredible.. It’s all a very exciting process and building something that really connects with meebo is like nurturing a living, breathing thing. You watch it and coddle it through kindergarten until eventually it evolves into a whole new set of problems to solve.
Bon Chance!
-Alan from DC.
January 23rd, 2006 at 9:56 am
fantastic insights in THE adventure !
keep going
January 23rd, 2006 at 9:57 am
español
January 23rd, 2006 at 10:23 am
Very interesting article on VCs. Thanks for taking the time to post. I look forward to additional entries.
January 23rd, 2006 at 11:06 am
i did read you r thing and i tell you something you suck
January 23rd, 2006 at 11:39 am
Congrats on funding.
January 23rd, 2006 at 12:06 pm
I heard about Meebo from a friend in December and i’ve been using it ever since. Meebo is a pretty useful tool that solves a lot of problems for people. I must confess that wonder how you guys intend to make money with no advertising, but i guess you guys know what you’re doing.
Please keep up the good work and know that you’re inspiring others!
January 23rd, 2006 at 12:12 pm
I’m glad that you keep everyone informed. Its like we’re your partners too! Thanks alot, keep up the awsome work!
♥Courtney!
January 23rd, 2006 at 12:35 pm
P, search the forums. There has been a good amount of such questions and there’s a few lists to go around security.
Jags, i’m only telling you from what i’ve read so far. I’m not *that* tight with the developers
January 23rd, 2006 at 1:07 pm
I know that you guys should start making up some Meebo apparel to sell. Something like “OMG I *heart* meebo, how bout U, LOL”. I don;t know, but its worth a shot to make some cashola.
January 23rd, 2006 at 2:25 pm
cool ……..congrats ..best wishes
January 23rd, 2006 at 2:51 pm
Love this page, also love you informed you keep everyone
January 23rd, 2006 at 4:08 pm
Insightful post. My day job is currently on the legal side of this process, so it was interesting to read from your end. So what’s next? As others posted, how will you generate revenue? But more than that, hiring people for what? What direction did you guys find common between Seq. and your team?
January 23rd, 2006 at 4:50 pm
Hey,
Everyone if u want to add me it is dancergrlhoufek_me246 add me and it would be awesome to have more peeps to chat with. If you have yahoo then add me it is dancergrlhoufek_me246 thanks.
Love ya
Bye
January 23rd, 2006 at 5:57 pm
stop or i will kill u!
January 23rd, 2006 at 6:26 pm
HOLA =)
January 23rd, 2006 at 6:58 pm
This suck its so pointless. iam sure my 7 year old son could do better
January 23rd, 2006 at 7:24 pm
Same query as others! What’s the revenue model???
I assume adverts once the site is more ubiquitous, etc.
Good Story! and Good Luck!
January 23rd, 2006 at 8:51 pm
Good Luck Guys, good project. i like it …
January 24th, 2006 at 1:56 am
Great compilation Seth. I am a newbie to Meebo and liked the idea of bringing different IMs to one space. I am very much pleased with your work. I am also reading your compilations and does provide great insight of your work. Thanx for sharing such a valuable experience. I might have missed the early boat but I still see the excitement. What is future/road map for Meebo? I wish u best of luck..cheers
January 24th, 2006 at 3:56 am
meebo asyik looh,
tapi belum ada fiture yg mirip di aslinya
itu aja kurang nya
oke!!
January 24th, 2006 at 7:42 am
fantastic posts – thank you for the insight!
January 24th, 2006 at 7:56 am
Hey Seth interesting insight into VC and the process you guys went through. And thanks for Meebo…without it, I would be IM deficient at the office…behind too many firewalls. Thanks
January 24th, 2006 at 8:51 am
Hi, was one of the few blogs which I read ( as the VC caught my attention). Got some new insides on the funding part. MEEBO is the only one not blocked in my College. Well justa lil curious on the future business model for generating revenues from your side? Are you also planning to foray into some new products or markets or just a existing product development?
January 24th, 2006 at 9:26 am
dis site is gud cos it means i can get on @ skool and talk 2 my peeps lol. thanks luv ya luv lauren xxxxxxxxxx mwah
January 24th, 2006 at 9:49 am
very intresting post.
January 24th, 2006 at 10:47 am
i really enjoy reading your blogs – informative and expositive as well. like someone else wrote here, it feels like we’re part of the process you’re going through. much fortune and happiness to you!
January 24th, 2006 at 12:52 pm
got milk
January 24th, 2006 at 1:41 pm
excelente la pagina, jajajajajaja, como me rio del administrador del sistema bloquea msn
January 24th, 2006 at 1:59 pm
I’ve worked in VC, and it was nice to see a ‘plain talk’ explanation of the fundraising process.
I’d appreciate an explanation of the rights you had to get from AOL, MSN, Yahoo, GTalk to alow you to be a portal for their services. Are there service agreements, use agreements, etc?
Neal
http://www.nealmueller.com
January 24th, 2006 at 3:03 pm
alrighty u suck ok
January 24th, 2006 at 3:04 pm
u r alright
January 24th, 2006 at 5:49 pm
make sure u apply for a patern on meebo.com ok!
January 24th, 2006 at 7:15 pm
congrats friends! u’re doing great!
just keep up the good work. meebo is brilliant …
January 24th, 2006 at 7:47 pm
this is your life error life going 2 fast on you
January 24th, 2006 at 7:49 pm
no hey here need yur friends people here
January 24th, 2006 at 7:50 pm
happy b day this day
January 24th, 2006 at 9:11 pm
hey guys thanks for the post I think that you guys are doin’ awsome and I hope to start my own buisness some day and I think reading that will help me
January 25th, 2006 at 1:15 am
hey u’ve done very great job.,
thank you for all.,
January 25th, 2006 at 7:32 am
Congratulations on the funding.
But i do not understand the revenue structure of this site (of this very usefull site). What is that the VC would gain by investing in ur venture.
I mean (as by some guys above) how do u earn ur bread without the adverts and i am sure u r not into this for the “Good of Mankind”
In all The site Gr8, The blogs Interesting and an awesome bunch of u guys
Have a great time.
January 25th, 2006 at 9:04 am
Zdrasty
January 25th, 2006 at 9:10 am
E isso ai o MEEBO e D+
Campinas -> São Paulo -> Brasil
January 25th, 2006 at 11:01 am
Heyy Dont know whut this is forr buttt supppp???
January 25th, 2006 at 12:15 pm
Isn’t it obvious?
The revenue model is selling pet food on the Internet.
Jeez, everyone knows you can make like a billion dollars from this sort of operation.
January 25th, 2006 at 12:17 pm
[...] « milk money, part three (the beginning) [...]
January 26th, 2006 at 8:07 pm
Sorry, is Meebo a legal service?
Do you get the permission from Microsoft, Yahoo, and others to use their messenger. If you do, how did you get it?
Do you mind sharing with us about this and your next post?
Thank you
January 31st, 2006 at 3:11 pm
Seth,
I loved your “Milk Money” series. I found the glimpse into meebo’s adventure in securing VC funding very fascinating. It’s not everyday one can read an insider’s view of the process.
Thanks!
February 1st, 2006 at 12:51 pm
You say companies invest into meebo .. does that mean they just give you money like that, in the hopes you succeed, or will you have to pay them back someday ?
Or am I just misunderstanding the meaning of “investing into a ocmpany” ..
February 7th, 2006 at 8:08 am
i m french girl, it’s very good but its not forbidden with my school
February 14th, 2006 at 3:30 pm
EEEEEEEEEEEEEE……..meebo é o melhor! rsrs
March 1st, 2006 at 9:30 pm
Tsk! Tsk!…kinda wierd but great site!!!
March 20th, 2006 at 1:09 pm
this is so weird but i think that i need to get a bf because life sucks without some action… haha
March 21st, 2006 at 4:59 am
hi want to talk to ya
ya sound great
March 24th, 2006 at 7:13 am
Good site design, very good…
April 4th, 2006 at 5:48 pm
I’m still not sure how Meebo intents on making money … don’t get me wrong I’m not having a shot at your personally or your work. If little banner ads appear on the bottom of the IM windows, that’ll be the death of it …
April 8th, 2006 at 6:12 pm
buy ambien
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April 17th, 2006 at 10:15 pm
Great article.But still I have doubts on starting my own s/w company, for raising the funds, because u have not mentioned what exaclty investors looks in Backgroung or profile checking before funding u, and how to get a s/w project.
Regards,
Kamal, India
April 25th, 2006 at 9:59 am
Hi Seth,
What an eye-opening journal of your fund-raising experience that you shared with us. I have not yet found any other websites that are willing to talk about their fund-raising history and avenues like you did, especially with plain english! I also have the same question as others did, how did you earn revenue from it? Also, do you have a deal with the IM software companies when you import their programs? I presume you would run into legal issues if you don’t? I am also thinking of building a web service but do not have the technical expertise. May I ask for your advice? Do you think hiring web developer or use consulting service such as this https://secure.sitesell.com/build/order.html be useful?
Thank you so much for your generous info! Keep up the good work!
Best wishes,
Isaac
February 9th, 2007 at 8:43 am
Hi!Say please where it is possible to take the base information. It is very necessary!
December 17th, 2007 at 2:51 pm
that was an interesting story =D
December 17th, 2007 at 9:01 pm
hi
December 18th, 2007 at 3:33 am
helloooo
December 19th, 2007 at 9:50 am
soy colombiana no entiendo pero nada de ingles, asi que no se que es lo que quieren
January 22nd, 2008 at 2:47 pm
Meebo is one of my favorite websites now.
it is very organized in a way.
i give it 5 stars!
May 7th, 2008 at 5:10 am
What an eye-opening journal of your fund-raising experience that you shared with us. I have not yet found any other websites that are willing to talk about their fund-raising history and avenues like you did, especially with plain english! I also have the same question as others did, how did you earn revenue from it? Also, do you have a deal with the IM software companies when you import their programs? I presume you would run into legal issues if you don’t? I am also thinking of building a web service but do not have the technical expertise. May I ask for your advice? Do you think hiring web developer or use consulting service such as this https://secure.sitesell.com/build/order.html be useful?
Thank you so much for your generous info! Keep up the good work!
Best wishes,
Isaac
air Says:
February 9th, 2007 at 8:43 am
Hi!Say please where it is possible to take the base information. It is very necessary!
khas Says:
December 17th, 2007 at 2:51 pm
that was an interesting story =D
k2chit Says:
December 17th, 2007 at 9:01 pm
hi
sabih Says:
December 18th, 2007 at 3:33 am
helloooo
diana gisela alvarez Says:
December 19th, 2007 at 9:50 am
soy colombiana no entiendo pero nada de ingles, asi que no se que es lo que quieren
Ashtonn Says:
January 22nd, 2008 at 2:47 pm
Meebo is one of my favorite websites now.
it is very organized in a way.
i give it 5 stars!
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