Behind the Curtain of Rewind’s $19 Million Series A
Fundraising is a difficult process, no matter how many times you do it. And it can be even worse during a global pandemic, but that’s exactly what Mike Potter, co-founder and CEO of Rewind, had to handle as he raised the company’s $19 million Series A round. Here’s how he managed the fundraise, the metrics he looked at, and the bright side of raising during COVID.
Raising five rounds and only announcing one
Mike and his co-founder James Ciesielski raised a small friends and family round to get the business off the ground in 2015. They then raised a pre-seed round, Seed round, and what Mike calls a “Seed B” round in the ensuing five years. But Mike always wanted a quick and straightforward path to financially breaking even, so the rounds were tight, controlled, and the team quickly moved on after they closed. And none were announced.
“I never thought raising money was a measure of success in the business,” said Mike. “I cared about our customer growth and how the business was doing.”
Then came the COVID-19 pandemic. Mike said January and February 2020 were two of the best months in the company's history. March was very difficult, but the pandemic ended up benefiting them as a company that does backups for cloud data.
“As everyone took their business online, they looked for backup solutions,” said Mike. “That led to our business firing on all cylinders. Year over year growth was accelerating, our revenue was increasing, and all of our business lines were growing.”
This got Mike thinking about how the company could really scale. The company was already supporting over 20,000 customers, and Mike began to wonder if his conservative approach to raising money was holding the company back.
“You maybe get the opportunity once in your career to build what can truly be a VC-backed company,” said Mike.
After raising the “Seed B” round, Mike initially planned to raise again in early 2021. But VC money was flowing in 2020 and Mike was advised to push up his Series A fundraising to late-2020, which is exactly what he did. Within a few months, he’d secured his goal amount of $19 million led by Inovia Capital with additional investment from Ridge Ventures, Bessemer Venture Partners, and other prominent returning and new investors.Unlike previous rounds, Mike decided to announce the Series A.
The metrics of fundraising
As a metrics-driven leader, Mike spent a lot of time analyzing the business’ metrics in comparison to traditional SaaS benchmarks. In every case, the numbers suggested he had a venture-scalable company on his hands.
In particular, here are the metrics that Mike focused on:
Cost to Acquire a Customer (CAC): CAC remained relatively low despite the company’s growth investments.
CAC to LTV ratio: The ratio was “very good,” which hinted that further investment would help.
Rule of 40: A general rule of thumb in SaaS is if you take your growth percentage (for instance, 100% YoY), then subtract your burn rate as a percent of revenue (for instance, 60% burn), the number should be over 40. Mike said Rewind’s ratio was “well over 40,” meaning they could afford to invest more in growth.
Revenue growth: Top line revenue was increasing alongside customer growth.
Churn: Customers liked the solution and were sticking around.
When Mike crunched the numbers, everything pointed in the right direction for a huge growth opportunity.
Meeting 100 potential investors during a pandemic
Given the company’s strong financial position (they didn’t need to fundraise to survive or even keep growing), Mike was able to think consciously about what type of capital he raised.
After speaking with advisors, he received general advice that:
- Term loans are useful for acquiring new businesses.
- Lines of credit are useful for short term cash flow crunches.
- Equity financing is the best option for investing in people and growing a business.
“We went to our expert network, shared our goals, and asked them to tell us the best way to raise money,” said Mike. “The feedback we received was to use equity.”
With that in mind, Mike approached the round looking for strategic investors with expertise on their business model and go-to market plans, connections to major SaaS players or other organizations that might be a good partner for Rewind’s services, and a good relationship connection on a personal level.
“It became about finding people who have invested in or built businesses similar to ours,” said Mike.
But the pandemic presented an interesting challenge: everything had to be done remotely. While this made it harder to assess initial connection, he was able to overcome this challenge with sheer volume. In the end, Mike was able to meet with nearly 100 potential investors - all with Zoom - and found himself turning down a few cheque offers so he could focus on the best-fit investors.
“The fact that it was an all remote process enabled an incredible amount of meetings that otherwise wouldn’t have been possible,” said Mike. “Even if I took a cab from meeting to meeting and everyone was in the same city, I couldn’t have matched the quantity.”
A capital bonanza
Given the interest Rewind received during their Series A, Mike is already thinking about if - and when - Rewind might raise again. He’ll still look at the metrics to help him tell the story, but he’s not worried about the ability to find capital if the numbers are right.
“There’s lots of capital out there for businesses that are capital efficient, growing quickly, and have a large potential market,” said Mike.