Building a Startup: Fund Raising (October – April 2014)


When you build a startup you have to chose between two directions: bootstrapping (make your business profitable as fast as possible without external money) or being venture backed (building product and gain traction as fast as possible and focus less on profitability). I could write a lot about advantages and drawbacks of these two paths but I’m going to make it short. At Cozy, we think that we need a fast growth to propose a decent alternative to Google/Dropbox services. That’s why we decided to look for VC funds. In this blog post I’m going to share the process we followed to reach that goal.

Investor structures

Before going further, let’s see the three major structures from where you can get funding.

Business Angels

They are rich guys who get together to invest money. Investing is not their main occupation. Most of them were or are entrepreneurs. If your application is accepted by them, one or two among them will follow your project and make you pass several interviews. At some point, they will consider you are ready to pitch in front of the whole club. Then, every member will tell how much money they want to invest in your company. They invest as individuals.

Micro Venture Capitalists

They are very rich entrepreneurs who invest their money alone or with one or two partners. Investing is their main occupation but they can still be considered as big business angels. They are are quicker to decide than VC and can provide you help even if they don’t chose to invest in your project.

Venture Capitalists (VCs)

A Venture Capitalist firm is a company that manages the money from big companies, government or  from very rich people. They are the one who can propose the biggest amount of money. Among VCs you have different kind: the ones that do only seed funding (500k-1M$) or only serie A (1-5M$), serie B (10-50M$)… There are the ones that invest only in e-commerce companies, the ones that invest only in medical company… It’s important to understand in which field a fund works. It’s almost useless to meet VCs that don’t fit in your money range or that don’t invest in companies like yours (it’s only good for networking).

NB: Geolocation matters too. Depending on their origin, funds won’t act the same way and words could have a different meaning (ex: in US a seed round can reach 10M$, in France the limit is 1.5 million).

Meeting VCs

Meetings VCs is hard. Cold emailing/calling is not efficient to meet them (unless you have very big figures to show, but in that case VCs come to you). So, the best way to see them is to get introduced by someone they consider valuable (most of the time several introductions are required).

That leads to another problem : where to find people connected to VCs? How to convince them that your project is awesome? Good news, the startup ecosystem is not so big! Bad news, you will have to network hard (and not work on your product by that time…).

To build your network, the simplest way is to be part of the ecosystem. For that apply to startup accelerators and startup events. Accelerators requirements are close to the one asked by the VCs, so it makes a good training to prepare your application for them. With Cozy we tried to get selected in Le Camping, Mozilla Web FWD and The Family. Le Camping rejected us (we applied too early, our project was not ready). Then we get selected for both WebFWD and The Family. They are both good but WebFWD was closer to the mantra of our project and offered us the opportunity to get introduced to the US startup ecosystem. So we chosed WebFWD. We learned a lot from that experience about every aspects of a startup. Moreover, we had the opportunity to improve our pitch in front of US coaches and VCs. Most of all, we met Pascal Finett, a startup mentor, who advised us to focus our business model on the B2B2C strategy (sell Cozy to distributors who will handle the marketing and distribution while we focus on the product). It helped a lot and made things really clearer for VCs and how big the things could become.

Once you pitch in meetups and once you get trained and introduced via startup accelerators your network grows. If you project is good and progress well, you will be introduced to several funds.
NB: Be patient, it takes a lot of time and requires a lot of efforts. And of course don’t forget to improve your pitch all along the process (be agile!).

Meeting Business Angels

Business angels work more in a traditional manner and are more accessible. The process is very scholar (fill a big form, make your interviews, accept their conditions and make the final pitch). BA clubs are very interesting to meet, since they are/were entrepreneurs too. They have a lot of good advice to share and their network will probably be wider than a VC one. The only problem with them is that they cannot put as much money as a VC firm. It’s ok for a seed round, for the the next ones you will have to focus on VCs.


The first step of fund raising looks a little bit like a recruitment: you make several interviews until you know if you are accepted or not.

At your first interview, you do a 10-20 minutes pitch. Then you answer to questions. If you’re pitch is not too bad, you have a good discussion and the guy will look very interested. Then… Nothing! It will be your job to ask for the second meeting. No need to say that you must have good news to give them before doing your follow-up. It could be anything related to growth, team, press… If it’s directly related to your business model it’s from far better. What will surprise you is that if you don’t have huge figures, VCs will almost ask you to bootstrap your company before considering investing into it.

NB: A good sign that you make progress is when they want to see the whole funding team.

A note about the second meeting. Most of the time  you will have tougher questions. Usually there is a “bad guy” who wants to upset you and see how you react when someone says bad things about your project. At that point you simply have to be bullet proof to questions. That’s why you will have to meet a lot of investors: the more interview you will do, the more bullet-proof you will be! See the interview process as an iterative one and make you pitch progress each time you discover new things that investors like!

At Cozy, we focused on building partnerships with established companies. We won several contracts and partnership promises. That was plenty of good news to share with VCs!

What matters

Two things will interest investors:

– What makes you business valuable and what will make your valuation grows.
– How the funding team is consistent over time.

You will find tons of advice on the web, but the one mentioned above are from far the most important things to communicate to VCs. BA will focus more on the second point, since they can see themselves in you. The first point is obvious, at the end they are here for numbers and they want to be sure to have a good return on investment. The second point is important too, specially for seed funding. There is a not so low probability that your business will pivot at some point. So they can’t invest too much on your idea and its first executions steps. That’s why they like to invest in the founding team. They want  to appreciate you and feel good by thinking they will work with you for the next 5 years.

Let’s resume: to convince then you have to:

  • Tell them why your valuation will grow at the next round.
  • Prove them that you are already accomplishing what you say.
  • Show them that your motivation is still high six months later.
  • Have a good long term vision. They want to be able to imagine that your are reaching the IPO.


If you succeed in being selected by a fund you will receive a term sheet in which they write how much money they offer for how many shares. You will discover the valuation of your company and the terms of the investment. Be aware of terms like full ratchet, double dip, bad leavers, time to look for an acquire, etc. They can be very harmful for your share ownership or for your exit money. So, you have to understand them fully before negotiating them. You will have to find a good equilibrium between your valuation, the amount of money you raise and these terms. The investor will let you only one week to agree on these terms. Contact all the investors that looked very interested. They will probably make an offer too. The more funding proposal, the better it is for your negotiation.

Once the term sheet accepted, you cannot look for other funds anymore. So you have to wait for the due diligence. If you didn’t lie about you company state, you should obtain your money one or two months later.

Common Patterns

  • VCs look always very interested in your project. If they don’t that’s a really bad sign.
  • A no is always temporary, if you have really big news, they are always ready to change their mind.
  • In their team, there is a guy who loves your project and one who tries to find flaws everywhere.
  • They are slow to decide.
  • Really interested funds decide faster.
  • They all know each other and they share information about you.

To Conclude

Looking for funds is a tough path. It will require a huge amount of work and energy. Try to be smart and take the opportunity of the many pitches to get as much feedback as you can. Another good tip: when a fund refuses to invest, it doesn’t mean that all of the team don’t like your project. If you have some advocate their, they will still be glad to help you. Don’t hesitate to ask them for tips and info about negotiation and pitching. That’s all, I don’t have much more to say, so, good luck to you!

NB: I’m the CTO guy. So, don’t hesitate to ask questions in the comments or by email. If you need more accurate information about the process. I will ask to my business partner who led the fund raising and update the present article.

What’s new with Cozy Cloud


That’s all for VC stuff! So what’s new with Cozy? We started small contracts with one French ISP, one with a domotic company and we are still building a partnership with one of the biggest hosting provider in the world (this is why we need funding). And by the way, we are still running experiments with La Poste to build a backup box that people could plug at home.

Product improvements

Aside of the fund raising we worked hard on the product. We released the first version of our platform (the Snowden Release is already famous all over the world), we improved basic apps like the contacts and the calendar managers and built a synchronization module for contacts and calendars (this what our user were asking for!). We published a first version of our file manager application and we made some noise with the release of the first web and open source bank manager (build with our partner La FING).

Today we are thinking on how to build the first web mail application that could be a decent alternative to gmail. Should we work with the Mailpile team? Should we build our own one? That’s a tough question!


The community keeps growing, we reached 500 stars on Github, earned 130 points on the Webdev Reddit channel and our IRC channel is always crowded. We got several contributions and now people from the community perform support.


We focused more on the retention part of the product (the fact that’s it useful enough to people so they keep using it). People engaged more with us, so we can consider that it is a success. By the way, thx to Khuram Malik for his advice about that!

Final Thoughts

Six last months were quite crazy, the product made big progress and the company is now hot among the French investor eco-system. Today, everything is ok: we are closing our first fund raising round and we have an active community of users and contributors!