Ask A Founder: Startup Lessons Learned from Planitar’s Kevin Klages
Kevin Klages, Co-Founder and CEO of Planitar, raised a $500,000 seed round after four pitches to angel investors.
We sat down with Kevin as he shared what his fundraising journey was like, the startup lessons he learned, and his advice to fellow founders. Here is what he had to say:
HK: Tell me a little about Planitar. How did you and your co-founder Alex get to the point where you were ready to start fundraising?
KK: When Alex and I first came together, he had been working on our technology for a couple years. He had developed a camera system that is able to completely document space by creating 360 degree visuals, dimensional data, and area information that we translate into floor plans and room measurements. While we didn’t initially go into this thinking about the real estate industry, Communitech, a technology accelerator, caused us to refine our technology and launch it for the real estate market. That is when it really took off beyond our expectations. For background, we present our property data through iGuide, our user dashboard. In our first year we were really trying to get a proof of concept for our technology and had a goal of doing 80 iGuide properties that year but wound up closing out with just over 800.
At that point we decided we were going to create a company of it. We were already generating revenue on a small scale, and we knew we needed seed money to continue to grow. We put together a strategy around what we thought was required to scale the business and determined the capital needed to accomplish that. Then we went out and started looking for it.
How did you and Alex go out and start looking for funding? What was your approach to finding angel investors?
Initially, we had a couple of angel investors approach us after they had seen some of our early success who offered to give us money to help us build a business out of our technology. That investment ended up being the first portion of our fundraising that really instilled the idea in us that this could be a scalable company.
We then targeted angel investors we believed would really be able to help us beyond just their investment, whether that was through their relationships, industry knowledge or information. Once we had someone in mind, we would try to get an introduction. For example, there was one CEO we knew we would love to have involved so we told people in and around the community that we wanted to get in front of this angel investor. The introduction was made and he ended up making an investment.
Through networking we also found the angel investment group, Angel One. Angel One encouraged us to join Gust so we could share our financial details, forecasts, and all other documents with them and other potential angel investors making our document sharing process much faster and easier.
One of the most interesting things we saw, just generally, was the angel investors on the Canadian side versus angel investors on the American side. Canadians are extremely averse to risk. They are much more comfortable loading the bases with a number of single hits whereas the Americans are all going for homeruns. They are willing to take some big swings.
What was the pitching process like?
We were fortunate that we didn’t have to do a ton of pitching. I’ve heard stories that in order to raise a round of funding you might find yourself doing 70 to 100 pitches, but we were lucky in that we only had to do four.
When we first pitched, we were pitching in front of 70 or so angel investors. Once you get up there, you know you have five minutes to speak and you just start counting down until you can get off. You can know the material frontwards and backwards, but there is a fear in that raw nerve of exposing yourself to complete strangers, waiting for them to ultimately tell you if your passion is a horrible idea or not.
What happened after the pitches?
The response was amazing and we went forward to the deeper dive rounds where our investor interest grew to 17 angels when we only had room for six more. We had a team of advisors who advised us to keep our pool of angel investors relatively small – You want your investment figures large enough that you don’t have too many different angel investors coming in. We could have raised the round, but we knew we didn’t need it. We had a plan to be profitable by May 2015 with this amount of money, and we didn’t want to sell more of the company than was necessary at this stage.
What was the negotiation process like? As smooth as the pitches?
The pitches went very well. The negotiations were more stressful. We were fortunate that people were very warm to embrace our technology and our business plan, but when it came down to signing term sheets it got more interesting. I have done a number of business deals, but negotiating terms on an investment was a whole new ballgame. You take everything very personally. When you are involved in a startup, you feel as though any misstep could be the end. The world is riddled with fantastic technologies that fail, and when you are creating something you get nervous about making a decision that will put you in that pile. But through this, we learned the importance of having confidence in yourself, your company, and your technology and to go with your instinct.
Now that you can reflect back, how do you feel like you and the company have grown since you started your fundraising journey?
The differences between then and now are incredible. It has become a company, we’ve got fantastic investors and advisors, and have formed a truly great team. We set out with the goal of becoming profitable by May 2015 which we accomplished and are now starting our next phase of expansion further across Canada and the United States.
What advice would you give to founders who are just starting to raise money for their startup?
We had a very comprehensive strategic plan that addressed exactly what we were going to do, how we were going execute, and what the cost was before we even approached an investor. While they didn’t necessarily expect us to have everything, they appreciated that we were taking the business seriously and their money seriously.
Anything else you want to share?
Even though Alex and I have both been working for 20 years I don’t think anything could have prepared us for this. Raising money is not necessarily the funnest job in a startup. If there were any jobs in the company you could outsource that would be it. The moment you take someone else’s hard-earned money you have forfeited the right to sleep until they get it back. But, I honestly believe that everyone should learn about entrepreneurship if they have any interest in business. And this truly is a phenomenal experience. I can’t complain about any part of it.
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This article is intended for informational purposes only, and doesn't constitute tax, accounting, or legal advice. Everyone's situation is different! For advice in light of your unique circumstances, consult a tax advisor, accountant, or lawyer.