Max Hodak Writings

Raising Transcriptic's seed round

December 2012

This article is a postmortem of my experience raising Transcriptic’s $1.2M seed round from Google Ventures, FF Angel (Founders Fund), Mark Cuban, and more than sixty others via a unique AngelList/SecondMarket partnership. Transcriptic is a platform for biology: a system where, rather than carrying out your protocols by hand as the vast majority of basic research is done today, you can simply send them to us for execution on our automation. It’s a concept I’ve been thinking about for several years, and incorporated in February 2012.

\$0 - \$100k

The hardest money is always the first $100k. Successful fundraising is largely a matter of momentum: it starts out very difficult, and then as commitments accumulate you eventually reach a tipping point where new investors start pitching you for the opportunity to participate.

To get over the first hurdles, I started with people I knew. The very first money in came from Max Skibinsky, a friend whose previous startup, Hive7, sold to Playdom (now Disney). I also started talking to Google Ventures and Founders Fund, where I had friends from before Transcriptic. The second investor to actually close, though, was Mark Cuban whom I didn’t know at all before being introduced via email for the purposes of Transcriptic. Working with Mark was very easy: after I received the intro, we traded about five emails back and forth, and then our lawyers spent two weeks on the investment docs. Though he didn’t come in until later, Naval Ravikant was similar: after a fifteen minute meeting he said, “okay, I don’t do this often anymore, but you can count me in. Send me the docs.” Dave McClure of 500 Startups, too, committed after about 20 minutes. (In fairness, all three were working off of good intros from people they already trusted.) One thing that stood out was how un-pitch-like those meetings were. I remember beginning to pull up a slide deck for Dave McClure when one of his partners asked, “What are you doing? You don’t pitch Dave. Just have a conversation and see where it goes.” I tried to honestly and plainly explain what we were doing, if tinted by my perspective as the eternally optimistic founder behind the idea. I don’t think there’s any way I would have gotten the same results through an oppositional “pitching” format.

At the other end of the spectrum, we had one investor who appeared in June and was “very interested” that I had to finally tell five months later that we weren’t going to be able to make room for them. They watched the valuation cap rise twice and nearly $800k in additional money come in, and still sat there being “very eager” to close.

Google Ventures and Founders Fund both wanted to do the deal, but because they are institutional funds neither could just say yes as easily as an angel investing their own money. Having multiple contacts at each fund to ping when things slowed down helped make sure the process never stalled. It may have been fine regardless, but it was unlikely to have hurt.

In addition to GV and FF, I met with eight other big Sand Hill Road-type funds. Of those, only three had really strong life science practices. The life science groups weren’t used to writing \$250k checks (one asked me during a first meeting whether I’d consider taking \$5 million instead of \$250k, not out of overwhelming enthusiasm but simply because they couldn’t do a deal for much smaller than that). I went into this process with the mindset that I’d raise a “traditional” Series A, giving the vast majority of the dilution to one fund that comes in and plays an active role in the company: that meant a life science firm. None of those three life science groups wanted to outright pass, but neither were they up for doing a seed deal like this. This largely fit with my expectations, and I’m happy we effectively started the dialog for next year this early.

Of the other four, if they didn’t participate in our seed round I assumed it was unlikely that they would participate later. They ended up passing – when raising money, it’s inevitable – but were mostly good conversations. The most frequently cited reason given was, “it sounds great, but we know nothing about this industry.” In my mind, that’s one of the more valid reasons to pass on a deal.

(Yes, I know 3 + 4 ≠ 8. There’s one exception fund in all this, which is primarily digital but I’d still love to work with down the road. Lesson: there are always exceptions.)


After Naval invested, we felt pretty good that we weren’t a completely underfunded company, so we took a little while to focus on product and make sure that development was on track. At the time, this wasn’t so much an explicit decision; it just simply happened given how our fundraising was going. In retrospect, we accomplished a lot more in the last four months after having gone back and focused on product for a while in the middle of fundraising.

We eventually prepared an AngelList profile and published it. Team AngelList sent it out to 3,503 investors on 20 September, and as of 15 December 1,476 have viewed our profile. That circulation (which was a direct “Team AngelList has shared Transcriptic with you” email as well as trending in two weeks’ digests) generated approximately 100 inbound emails (only 51 apparently clicked the “Request Intro” button on AngelList), which led to around 30 follow-up phone calls. The process raised our profile and people began learning who we were for the first time.

AngelList was successful for us from a fundraising perspective, but there’s another corollary here, which is to not worry about going “public” too early. When stealth mode actually works, it’s because no one cares who you are. If you have a huge breakthrough you’re trying to hide, the cat is going to get out of the bag anyway. (This isn’t to say that you shouldn’t still have trade secrets or other confidential information; of course every company does. But don’t worry about hiding your mere existence from the world.)


At the beginning of October, AngelList came to us pitching an integration they were going to do with SecondMarket where investors could invest directly out of their SecondMarket brokerage accounts. It was promised to be a completely hands-off, simple way to fill out some of the rest of our round.

I said, “okay, sounds good, I guess,” and Naval at AngelList set the wheels in motion. I asked some of my friends what they thought and they basically all said, “Max, that sounds like a terrible idea.” I said, “yeah, but you said that about the entire idea of Transcriptic for the first few months,” and ignored them.

In the beginning, things were a little bumpy. Since neither AngelList, SecondMarket, nor (obviously) us had done anything like this before, this wasn’t unexpected. The biggest problem was that the investors I’d already met through AngelList already weren’t interested in participating through an indirect vehicle. They didn’t see the value in it; it seemed weird, unusual, and all kinds of other things they didn’t want to bother with. I pushed for a little bit since it was more convenient for me, but in the end decided that it didn’t matter and just let them close directly with the company. Still, almost 150 people converted from AngelList over to SecondMarket to check out the deal, and around 60 ended up placing and funding orders. The final wire from SecondMarket was $147k.

(As an aside, somehow it never occurred to me to mention to our lawyers that we were doing this experimental-crowdfunding-like financing thing. They found out near the end through a random conversation with another client of theirs. They were pretty unhappy about this, but it all turned out ok.)

That last point comes with the caveat yet in the statement that nothing bad has come from the SecondMarket financing yet. So far, I’m definitely happy that we did it, though. SecondMarket themselves were very helpful and supportive, the legal background turned out to be pretty solid, and it generated a bunch of goodwill, without even mentioning the cash raised.

Announcement Press

Finally, when all the money was in, we sat on the news for a bit. Since no one outside the company other than our parents really cares about Transcriptic yet, this wasn’t hard.

The primary reason for doing a PR push was recruiting. To do this, we targeted tech press like TechCrunch, Pandodaily, and Gigaom instead of life science industry media that could target customers. I didn’t submit a link to Hacker News, but was pretty excited to see that someone else (who I didn’t know!) did. The result was some pretty good coverage, led by Sarah Lacy:

and a few hundred tweets. The Pandodaily title was a bit baity, and it was a little disappointing to see a glib, passing off-hand comment turn into the title, but the article itself was fantastic so I have no complaints. (An email from someone helping with the PR: “Good coverage. Less narcissistic hyperbole next time. That’s not how real company builders talk.” Ouch. It’s hard to have a real conversation with a writer while still being really careful about every word you say.)

The basic process for getting the coverage was:

I think I was supposed to send out the press release via a wire service, but since I had no real idea what I was doing when it came to PR (the only way I made it this far was by relying on the Google Ventures PR team), I realized a few hours before the articles were set to go out that I didn’t know how to do that. It turns out it takes several days to set up a PR Newswire account, so I didn’t bother. I doubt it had any impact on the coverage we received. This is ironic because the writers all complained about the 7:30am ET embargo time, which I’d been told to use because of wire service cutoff reasons. Oh well; sorry!

In the end, we ended up getting a much stronger response from customers than we did from potential additions to the team. Weird. Hiring is hard.

Now back to the job of digging ourselves out from under the expectations we’ve set.

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