How To Get a VC to Boomerang Back For a $5 Million Series A Extension

Fundraising is simultaneously one of the most rewarding and painstaking parts of being a founder. No matter what anyone tells you, fundraising is hard. It requires long hours, endless pitching and more “nos” than most people hear in their lifetimes. And just when you think it can’t get any worse, there’s now a pandemic-driven economic crisis in the mix, along with a VC winter. 

When the pandemic first hit in 2020, my company, Anvil, found its purpose in aiding small to medium-sized banks as they distributed loans to small businesses. Our paper automation platform allowed most companies to not only enter the digital age, but flourish in it. In June of that year, we raised a $5 million Series A from investors such as Gradient Ventures, Citi Ventures, Menlo Ventures, Restive Ventures and 122 West. 

As things continued and the “new” became the normal, we started noticing that banks move slowly. Deal cycles with banks took too long for a startup working with limited resources and needing to grow. Thankfully, around that time we noticed Anvil usage was growing rapidly with a new set of customers: fast-growing startups. These startups operated across verticals and were launching new products built on Anvil’s paperwork platform. But all the time we invested in trying to break into the banking industry meant we needed to fundraise — again.

Looking back, this moment of realization forced us to find clarity on the direction of our company. A Series B wasn’t for us, at least not at that point in time. And while we loved the work we were able to do with financial institutions, it wasn’t sustainable or realistic for us in the near to medium term. So we pivoted and focused 100% on our new customer base. After the pivot, our users increased 9x from roughly 1,000 to 10,000. Our entry product, PDF filling and PDF generation, saw the most staggering growth, and we’re now hitting close to 1.5 million PDFs generated or filled over API. 

As we continue building and expanding our product in the trenches of our Series A, here are three important learnings that helped get Craft Ventures to boomerang back to our cap table for a $5 million Series A extension — a $10 million total Series A — in 2023. 

1. Accept the symptoms and avoid the association

Once we realized things needed to change, we took a look at the markets for any and all potential customers. What we saw was much better customer growth in new tech markets such as HR tech, insurtech, real estate/proptech and even fintech. So we shifted our focus, and today work with customers such as Vouch Insurance, Carta and Jobandtalent.

We also stopped trying to force a Series B the funding market was obviously fighting against. In hindsight, our initial Series A may have been a bit premature — it was a great vote of confidence for the problem we were solving, but it’s pretty clear now that at the time we did not have a go-to-market strategy figured out. So we started talking to friendly investors more organically, sharing some of the wins we had and being honest about the challenges we foresaw. These honest discussions led to some great investor feedback, which helped us hone our pitch deck to be more focused on business efficiency metrics and customers. 

One of those investors was Brian Murray of Craft Ventures. He originally passed on our Series A in 2020 because he wasn’t sold on our GTM motion (and he wasn’t wrong). In the months leading up to our investment, he kept bumping into Anvil in the wild and was seeing our company pop up over and over again after we’d pivoted to fast-growing startups. He saw our new customer markets, the growth and volume at hand in 2022, and the opportunity to expand conversations with current investors for fundraising opportunities, and he ultimately came back into the Series A extension to invest. 

In this case, we weren’t out there trying to pitch ourselves to anyone with a checkbook. Instead, we made a genuine connection with someone who was interested in what we were doing and thought we were doing it well. He recognized our growth potential and perseverance, and that connection is what drove our entire extension round. Real relationships with investors who actually care and believe in your mission are what bring success. 

2. Investors will support your runway

There’s a stigma in the landscape surrounding extension rounds. People hear “extensions” and they immediately think they’re bad or a sign of failure in a company. But in actuality, an extension round could be the best possible thing for a business. Every founder, every company and every round is different. What works for one company may not work for another. 

Anvil focused on business efficiency metrics instead of just growth at all costs. Ultimately, when the funding tides turned, this put us in a very good position. We focused on building a good product, solving real customer pain points, and implementing good unit economics before they were in vogue. We believed that we first needed to survive long enough to properly solve those problems before we tried to sprint and scale the business.

The takeaway here is to “play your own game.” There will always be pressure to play someone else’s game, but if you stick to your values and do it for long enough, eventually someone — perhaps an investor — will take notice and appreciate it. Founders need to be honest with themselves about which game they are playing and the resulting type of company they are trying to build. You could build a company that is trying to outrun, or a company that is trying to outlast, but very rarely can you outrun and outlast at the same time. Personally, I think it is best to first outlast — especially during the discovery phase of a company — and then try to outrun. 

3. Be clear about your extension pitch

The most important thing you can do when pitching your company to investors is to have a strong and clear message. Make sure that your mission and values are apparent and deep-rooted in everything you do. You want them to know who and what they’re investing in, and know that new capital won’t change any of that. 

For us, the message was that we put in the time and effort to truly understand the problem and build the right solution, and we have a strong conviction that we are on the right path as evidenced by the customers that love us and pay us.

This foundation showcased to investors that we will persevere and have truly unlocked a new understanding of our business. It shows our commitment, our drive and, most of all, it shows that we believe in the path we are on and don’t plan on detouring just for a quick dollar.

An extension round might not be right for everyone, but it was for us. The timing worked out so that our values were aligned with the general sentiment of the moment. Raising an extension at this point in time gives us the opportunity to lean in just as everyone else is leaning out.

Mang-Git Ng is an entrepreneur who sees technology as a solution to the barriers posed by paperwork. As the founder of Anvil, Ng is building the internet infrastructure to enable all companies to automate paperwork. From data collection to document preparation and e-signatures, Anvil’s technology is powering the transition from an offline, paperwork and process-driven society, to an online, digital and technology-driven one. 

  • Originally published April 20, 2023