Around two years ago, when trying to scale my recruitment company BrainGain, I tried to raise a round of funding…and failed miserably.

It was a great story with a lot of learnings so I decided to document it all. I hope you enjoy the ride 🙂


After living in Bangalore, India for the better part of the year it was time to return home for Thanksgiving.

I had one mission on my mind – Raise money.

I had a business with some initial traction, a team, and a plan in place to build the software we needed. I got a pitch deck ready, had my virtual assistants do research on Venture Capitalists to reach out to, and leveraged my network to connect with whoever I could.

Amidst all of the previous madness, I had also managed to line up speaking opportunities at Harvard Business School, Wharton Upenn, Cornell, Rutgers and Arcadia during my trip back home.

The game plan was to raise $50k in convertible debt. At most, I wanted to give up about 5% equity, figuring we had a valuation of around 1m USD (which I was convinced standard for a seed raise in the US in the world of tech startups).

Meet Investor #1

By January we were already in talks with one investor in specific who seemed interested in funding the company. He was an Indian investor who I had known from my early days in India, so he had seen the entire evolution of the company from day 1.

A very close friend of mine also worked for him. She was an American girl who had contributed a lot to his company, so he understood our value proposition and had mutual trust. She helped to establish the initial meetings and keep things on common terms.

By March we had reached a verbal agreement that they were interested in investing in us. We began taking steps to set everything up.

Throughout this time, knowing that they planned on investing, they started spending money on us without ever signing any legally binding agreements

They paid for the incorporation of the Indian subsidiary – or at least to people who could get the process started for us. Then, they agreed to pay for our apartment, which would double as our office.

At this point in time myself, my co-founder and his wife, and our technical lead, all needed a new place to live. I wanted to have the investor cover our cost of living from the investment.

This was ok with them so they paid our deposit and then signed an agreement with our landlord to pay our rent every month.

Things were looking golden. They had already given us a financial commitment and were spending money on us, so there was no reason to believe anything would go wrong.

One day in Mid-April I went to their office with the intention of inking the deal down on paper, finally. Up to this point we had discussed 50k convertible debt. From day 1 I made it clear that this is what we were going after, and this was the basis of all of our conversations up to this point.

Everyone was on the same page, except for the person who was actually putting his money on the table (red flag I should have caught sooner) – BUT – he’s the hands off type of leader that gives his team a lot of responsibility to take care of everything, so once again, I wasn’t concerned.

When we sat down the script flipped very quickly.

Suddenly, he decided convertible debt didn’t make sense to him. He wanted equity. And a lot of it. Double digit equity, for $50,000.

This was not something we had discussed. I couldn’t believe how he could flip the script in such a dramatic way. I was pissed.

He tried to sell me on his “team”. How I would have access to his CFO and CTO and all of these resources that he had at his disposal…but these were resources I didn’t need. I needed to meet payroll. I needed cash in the bank to help us build software and grow the company. I didn’t need his team, I needed his money.

It quickly became evident that there was a conflict of interest. He wanted double digit equity for 50k and his “resources”, and I didn’t want to devalue the company and give him the type of equity that he wanted.

We were at a stalemate. It quickly became evident that we were living in an apartment, paid for on someone else’s dime, who didn’t plan to invest in the company.

Welcome to what would become the biggest headache of my last year.

The next few months became a series of back and forth meetings trying to salvage the deal. They had already contributed money to us without anything signed, so we were in a sticky situation.

They wanted us to move out of the apartment and pay them back for the money that had spent so far…which we didn’t have the money to do.

More importantly, we also never signed an agreement with them, so we weren’t legally required to pay them back in the first place.

Not only were we not receiving funding, but we were also now being forced to move out of our apartment, in a period of time when money in the bank was down to virtually zero.

It felt like just as we had the right momentum everything was crashing to the ground.

Investor #2:

We had another Indian investor who was interested in our company. He was happy to give us 50-100k, but didn’t like our valuation.

Stubbornly, I wasn’t willing to budge. All of my advisors and startup friends convinced me that a 1m valuation was 100% fair, and that I shouldn’t give up double digit equity in my first round of funding.

So, I turned it down and the conversation ended.

In hindsight it was foolish and immature to handle this relationship in the way that I did. I shouldn’t have been as stubborn as I was and should have been more accommodating.

I’m happy we didn’t raise (more on this later), but in this specific context I’m unhappy with the way that I handled the situation. I was a young overconfident (borderline arrogant) founder with 0 experience acting like a hotshot with a big valuation for a company that wasn’t even doing any real business.

I shake my head at the person I was less than a year ago and how I foolishly accepted the advice of people without properly questioning it.

Other investors:

While these conversations were going on I continued speaking with other investors. Unfortunately, most of them were giving us the same feedback over and over. Feedback that, at the time, I didn’t want to listen to.

If I had to summarize, it went something like this…

We were too soon, too early stage. The 20 placements we made wasn’t enough traction to validate that this model could work at scale. The evidence they needed wasn’t there, yet.

Then they said that we couldn’t raise money until the tech was finished. We barely had a functioning Alpha, and they didn’t want to fund its development. I’m also not a techie, so investors were skeptical of my ability to build a tech product.

Last and most importantly, time and time again VC’s encouraged me to go the lifestyle business route.  If we were making more placements we should be profitable, which meant we shouldn’t need to raise money. Recruitment businesses can be a cash cow, and if I kept my overhead low, I would be able to have a profitable business that I can run at my leisure.

Why include VC’s? To build tech? Build the tech slowly and focus on being a profitable company, this is way better of an option than working with VC’s. This was what 90% of investors told me.

In hindsight, all of these criticisms were true. We didn’t have enough traction, the model wasn’t scalable, building tech as a non-technical founder was risky, and if the business was ACTUALLY working, we wouldn’t need to raise money at all. They saw the red flags I wasn’t willing to notice in my blind persistence.

Conversation with a friend:

With all of this in mind, one day I had a conversation with a trusted friend and successful businessman. He gave me the same advice. “If you’re making placements you shouldn’t need to raise money. Stop focusing on raising money, it’s a distraction. Focus instead on making placements. If you can’t make placements, you shouldn’t be in business.”

This time, something about the way he said it resonated with me. It was true, raising money was a distraction. If we could make more placements we would add successful validation and, more importantly, become a profitable business.

When we did the math all we needed was 5 placements/month in order to be profitable. We were already doing 2-3, so it seemed reasonable to push that number up to five without any outside funding.

As a team we decided to stop pursuing fundraising, and instead focus on making placements. We doubled down on talking to candidates again, and became determined to make our numbers jump up.

Fuck outside funding, our new goal was profitability.

Investor #3:

Just as we decided raising money wasn’t the best route for us, an interesting opportunity came our way.

One day, a teammate of mine in Malaysia informed me that he had lined up a call with a prominent VC firm in Malaysia/SE Asia. Arguably THE most well known VC firm that invests in early stage startups like us.

He reached out about hiring and they were interested in taking a call with us. Both to see how we could hire for their portfolio companies, or become one of their portfolio companies.

I was also very excited about this prospect because I was (and still am) a huge fan of the person we established contact with. He had previously sold two companies, and had some awesome talks/philosophies that resonated with me. I was pumped for the opportunity.

When the time came for the call he picked up the phone and said, “hey sorry, I have no idea who you are or what your company does, not sure how this meeting got scheduled. Can you fill me in on exactly what it is that you’re doing again?”

Great start….

Nonetheless, I dove into the story of BrainGain, what our mission is, and how I was able to build the team. I nailed it.

He loved the pitch. I knew because he instantly started ranting at me about all of the ways I could expand the business and how relevant it was to so many of the problems he had experienced when hiring for companies in SE Asia. He loved our mission and thought we were taking a more thoughtful approach than our competition (whom he was aware of as well).

He agreed to take another call. More importantly, he invited me to come and visit him in Jakarta to solidify an agreement and see what we can do.

I instantly started coordinating with him to take a trip there. Within a month I had my flight booked and was ready to fly out to Jakarta.

I don’t think I’ve ever been more pumped for a trip in my entire life. I remember listening to Eminem “Lose Yourself” over and over for the 24 hours leading up to that flight, pumping myself up. Convincing myself that this was my moment to execute and bring the money home. To prove it to myself, to prove it to my team, and to prove it to the world that my business was valuable and we were taking good steps to bring my vision to reality.

Eventually I landed in Jakarta ready for action. I checked into my hotel and immediately started taking steps to meet with the investor. While we had tentatively agreed on a time, we were also keeping things flexible.

After a few hours of back and forth, we agreed to meet at his Hotel later that night. I arrived on time, he got me in the lobby, and we went upstairs to his room to discuss.

Sparing all of the details, the conversation went very well. So well that he gave me a verbal agreement he was interested in investing.

Only problem? The SEA fund was tapped out and they were in the process of raising their next round. He didn’t have any money to invest, at least at this time.

To give me a word of faith though, he went so far as to text the Principal of the firm to ask him if they could activate some funds from the US account. He wanted to give us money, and wanted to see how quickly we could get it done.

We agreed to have another meeting the next day. To go over some more specifics of the model and discuss some finer nuances of our plan so he could better understand our business model and plans for growth.

The next day I went to his place again and we had another great meeting. Aside from the business side, we clicked on an individual level as well. We were vibing in a great way. I left that meeting feeling very confident.

Finally we agreed to have one last meeting, but this time we would just have some fun. He invited me to tag along for a movie that him and some friends were going to see. I was happy to tag along.

I arrived at the restaurant and sat down at a table with him as he introduced me to his friends. I ordered a beer while he ordered some food. Then he turned to me and said the following…

“Listen, I like your business and think you guys are taking a very thoughtful approach to the problem you’re solving. I want to give you money, but right now all of our funds are tied up. Let’s keep in touch over the next few months as we raise our next round of funding. Once we complete that round, we can release funds for you. Until then, let’s keep working on fleshing out your funnel and seeing what we can do to get to 5-10 placements/month.”

I felt like I was back in sixth grade. It felt like a “It’s not you, it’s me” type of cop-out conversation. While part of me believed him, if I didn’t leave this trip with a deal in the works, it was unlikely we ever would.

Nonetheless, I amicably told him I understood and I looked forward towards building his trust over the coming months of working together.

I went into the movies and enjoyed the film. At least it was free 😃

Closing thoughts and considerations on Raising Money

We never went on to raise money. More or less a year after these conversations took place I was deciding to move onto new projects and start testing the waters of consulting and coaching. BrainGain is no longer my full time focus.

In retrospect should I have been less stubborn on the valuation of the company? Should I have just taken the 50k for 10% and called it a day? Taken the money and built what we needed to? I still struggle with that question.

On one hand taking that money would have alleviated our cash flow woes and helped to get everyone in the company paid.

On the other hand, I would have been paying salaries I didn’t need to pay, in a system that wasn’t working. The money raised would have been spent to support an unsustainable direction of the company. It would only have covered up the inherent flaws that i was blatantly ignoring, that would later rise to the surface in their own time, for the better.

In retrospect I’m grateful that I didn’t raise the money. By not raising money I was forced to take a hard look at the company and evaluate what was working and what wasn’t. It forced me to create new, more sustainable models. It made us leaner, more efficient, and more productive.

If I raised money I wouldn’t have been forced to learn these lessons in the way that I did. It shaped my now fascination in optimization and productivity. My passion was forged out of necessity to become better. If I didn’t create the systems we needed, we would have died. It was essential to our survival.

Im grateful for the experience. It was wonderful to learn in the way that I did. Everything works out for the best in the end, and I’m happy to have experienced my nightmare of a fundraising journey.

Also published on Medium.

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