The startup, the lawyer, the Quora question, and the $1.2M seed round
For Australian textbooks startup Zookal, the journey to a $1.2 million seed round started with a question on Quora. The young company's founders had exhausted their fundraising options in Australia, and they were preparing for a trip to Silicon Valley. Having reached out to a network of Aussie entrepreneurs in the Valley, they still found themselves with a grand total of zero introductions. By that point, in October, they'd already burned through the initial $200,000 in seed money they'd raised, and their prospects were looking dire. They were pretty much out of ideas -- except for one.
Zookal co-founder and COO Jon Tse posted a question to Quora. "What's the best way for a young startup with traction in an overseas market such as Australia to get in touch with Silicon Valley Angels to raise money?"
The sole response came from Inna Efimchik, a lawyer at a prominent Silicon Valley law firm. Her advice was simple. "Fly to Silicon Valley and start meeting people!" she wrote. "And don't be shy!"
Taking up that advice, Tse and his co-founder Ahmed Haider, the CEO, got in touch with Efimchik right away to see if she would be willing to meet. By the time Haider and Tse touched down in the US, it was the only appointment on their calendar.
In the meeting on their first day in the US, Haider and Tse gave Efimchik their one-page company summary and wheeled out their slide deck, which explained the startup's mission. Zookal lets its members trade and sell used textbooks, notes, and other course materials, while also providing job-placement and internship services, especially for international students. The two-year-old startup is much like Chegg, whose co-founder has invested in Zookal and sits on its board. Haider, a soft-spoken 27-year-old who found his fervor for entrepreneurship while at university -- from which he promptly dropped out -- says the textbook market in Australia is worth $466 million, while the economy around international students is as big as $15 billion. Zookal is starting off by focusing on Australia, but it plans to expand to Asia next. It already has revenues in six figures but is not yet profitable.
Efimchik agreed to distribute Zookal's pitch documents among her network, which led to a bite from one well-placed venture capitalist from Filter Capital -- a guy who happens to occupy a spot on the list of the 25 richest people in the world. (Haider didn't want to disclose his name, because the investor prefers discretion.) The investor was willing to meet the guys, but only if they would fly to see him in Los Angeles.
At this point, Zookal's -- travel budget was down to its last few hundred dollars. Haider and Tse weren't sure if blowing it on a flight to LA for an out-of-the-blue meeting was a wise investment. But they called home anyway and got the go-ahead from their co-founders. The next morning, they found themselves in LA. They would spend a total of eight hours in the city, seven of which were with the VC.
For the first five hours, the three drove around Beverly Hills, Sunset Boulevard, and other major LA landmarks, talking about nothing in particular. Having hauled ass all the way from Sydney and then got up early to catch an unexpected early morning flight, Haider and Tse were beat. They wondered when the guy was going to cut to the chase. At one point, Tse fell asleep in the back seat, unaware that the investor was asking him a question. They stopped in at Umami Burger for lunch, and later headed to the bar at Hotel SLS for coffee.
Finally, the investor turned to business questions. It didn't take him long to make up his mind. Eventually, he said, "You probably have a flight to catch." Before sending the founders on their way, he agreed to put up $1.2 million for the seed round. And that was that. Haider and Tse returned to the Valley slightly bamboozled, but exhilarated.
They went on to have another 40 meetings in their two weeks in the US, and entertained other funding opportunities. Ultimately, however, they decided to stick to the original promise from their unlikely first date in Hollywood. It wasn't until they got back home that they knew for sure the deal was going to happen.
"We came back to Australia and had a term sheet," Haider recalls. "We were like, "Wow, this is real."
Zookal, like its fellow Sydney startup Canva, had found that it's not impossible for an unknown Australia-based startup to bring in serious money from Silicon Valley, a part of the world and the tech industry that from Australia can seem almost mythical in its imagined impenetrability.
Sometimes, it's just a matter of meeting the right person -- or, perhaps, asking the right question on Quora.
[Image courtesy somethingtoreadforthetrain]