Great read. Tweaking your business model to get it right is certainly hard. I'm on the 3rd 'pivot' of my business. I'm curious - why did you decided to build an API and what other directions were you considering at the time?
We were running concurrent experiments - one focused on easy payments for small businesses (think ecommerce version of Square, with tools like invoicing & storefronts), and one focused on an API for crowdfunding sites.
Small business payments got earlier traction, but the economics of it weren't sustainable. (it cost us about $400 to acquire a customer that had a lifetime value of ~$250). We iterated for a bit to see if we could significantly lower CPA or raise LTV, but only made marginal gains.
Our API was started as more of a skunkworks project. It took a little longer to build traction, but it grew like wildfire (double digit monthly growth since launch, sustained over many years). Once platforms integrated it, they stayed, and they grew really fast. So not only were we adding new customers, but they were all growing month over month as well.
Last year, we made the decision to shut down our small business products, and invested further in our API, expanding it to marketplaces & those building SMB software as well.
Can you explain the basics behind your process for speaking to investors after demo day? Did you just compile a list of people to speak with, or was there networking involved at YC which led to the right people?
Sorry if this sounds basic. I've read a lot of articles, but the process of talking to investors still seems hazy to me.
First, we compiled a list of the best possible investors (for us, Max Levchin was on the list given his PayPal background) and found ways to get to them. (warm introduction is best, but not always possible)
We also were very open to meeting people along the way through recommendations. For example, one of my good friends Nils Johnson knew Eric Dunn very well and recommended that we talk given his deep payments background. This conversation was what ultimately catalyzed our seed round.
I think cold emails to investors rarely work. What you really want to do is build a network of folks who believe in you. Hopefully some of those folks have money to invest, and others who don't can help add new nodes to the network.
I too am in the finance space and my networks are concentrated in NY and Chicago. However, because I want to take a more product-centric approach initially, I feel like I should be talking to people in California instead. Just one problem: I don't know too many finance people in California.
Is the short answer to just fly out there and do my best to network within the span of a few months?
What I might recommend is spending a few months out here building some real relationships with smart people who are genuinely interested in your business. If you've got a quality concept & product, then good people will take notice. But it's a long process, measured in many months (maybe a year).
Note that YC is probably the most effective way to short circuit this, since it provides a strong signal of quality and helps open a ton of doors - but most importantly it gives you a large, smart & well connected peer group with whom to build relationships with.