My name is Scot Chisholm and I founded and led Classy — a SaaS giving platform that powers the fundraising efforts of over 10k nonprofits. 

We started Classy as a fundraiser for charity because my mom had cancer when I was growing up — we were trying to raise money for the American Cancer Society. 

We ended up hosting a pub crawl in Mission Beach, California, and raised cash at the door.

The success of that inspired us to do more fundraisers. We did athletic events and concerts — our biggest concert was a 5k person show with Matisyahu and Bassnectar. 

We started getting more traction and the organization grew, but we were not a tech company yet. 

Around the same time platforms like Kickstarter and GoFundMe were entering the market and we decided to pivot.

We became a SaaS platform entirely focused on charity and built the suite out to include events, recurring giving, international giving, and then CRM and marketing type functions over time.

One of my roommates gave us the first check for $50k. His dad had passed away from cancer and he used some of the money he received from that to invest in the company.

In 2011 we went through an incubator/accelerator and were able to get about $150k of angel investment from that.

After that Salesforce Ventures gave us $500k to start and they expanded their position over time to over $5M.

Bullpen and Hinge Capital invested in our Seed and Series A round, which was also about $5M.

We did an $18M Series B led by Mithril Venture Partners. Our partner was Paul Leggett who’s an amazing human — he ended up being one of the best investors. I couldn't recommend him more highly. 

The thesis before the Series B was that we had a repeatable sales process and we were growing 100% year over year. 

When they invested, we had a couple million dollars in ARO. We weren't huge but investors saw the economics and they decided we had figured out our initial go-to-market. 

That led to a very big Series C — in the tens of millions — with JMI because we were gaining so much traction in the middle market nonprofit sector. Each step of success pulled us further up the market.

This led to a bit of a rough patch because we were not aligned with them as investors. We essentially had to raise money to buy them out so we could move forward as a company. 

Once that happened our business took off again. Our valuation 5xed in 18 months. We raised a $125M Series D with Norwest Venture Partners — I’d highly recommend them as investors too.

Eventually we were acquired by GoFundMe.

In the beginning we were running a very lean operation and raising just enough to prove that our model had traction.

Eventually the majority of the capital we raised was used for internal sales teams and inbound marketing efforts. 

As we moved further and further up-market we were getting more leads from our content marketing efforts.

Find people that are passionate about what you're doing and the problem that you're solving — don't just scattershot a bunch of investors. 

Try to find people that have worked on a similar problem before becoming a venture investor.

We learned the hard way how difficult having the wrong partner can be. 

I would advise founders to do due diligence on the investors at any firm you allow onto your cap table — do not get distracted by the size of the offer.

It’s more important that other founders that the firm has invested in have positive things to say about them.

If they give you a fair valuation, good deal terms, and are good to work with — that’s best.

In the beginning no institutional investor would give us a chance because we were servicing the non-profit space with a non-profit technology company.

We ended up raising in $25k chunks over 3 years all from angel investors in convertible notes — this was before SAFE notes.

We eventually got some interest from Salesforce Ventures and that really changed everything for us. 

The reason why they were interested was because we had built an integration between Classy and Salesforce CRM. 

Investors were starting to understand how big the nonprofit and higher education sectors really were from a business perspective.

Platforms like ours were becoming their next massive sales channel.

In the early rounds of funding we must’ve received over a hundred 'no’s. 

No investor would touch us with a 10-foot pole because we were servicing the non-profit space. 

They didn’t feel like there was any real business opportunity. A lot of investors were confused whether or not we were a non-profit/charity.

The biggest thing for our space was that the typical investor wasn’t really familiar with the non-profit space — along with the pains and challenges that someone running a non-profit was facing. 

From day 1, it was a steep learning curve from the other side of the table and it was up to us to educate the person on the market. 

90% of the meetings would be spent talking about the market — but it wasn’t just the size of the market.

It was also the basics such as ‘what is it like to run a fundraising operations of a non-profit,’ or ‘what do they do day-to-day’, or ‘how does this project help them’.

It's important that you think of fundraising as having two different “closes”. One is getting the term sheet and the other is the actual close. 

The term sheet close means you want to put more in the term sheet than less. You want to pre-negotiate a lot of the main terms there. 

You don't want them to have TBDs and a single sentence for important terms — you need them fleshed out. The harder you push for terms upfront, the less room they have to renegotiate once the term sheet is signed.

By the time someone says, “here's a term sheet”, you can spend some time negotiating that. Once you have it it's all about speed. The longer it takes in due diligence, the higher risk the deal is not going to happen. 

If you have to get your house in order right after you sign the term sheet — that's not going to help you. That may take a couple of months to finish — they're likely going to get cold feet.

We ended up making a bad decision in going with this firm — JMI — a private equity firm at heart disguised as a venture firm. 

They had invested in ServiceNow, which, like us, is San Diego-based — that was actually the main reason we were attracted to them 

They had been courting us for two years. There was a relationship — along with the ServiceNow connection — but we had also been talking to everyone from OpenView to Sequoia. In the end, we decided to go with JMI.

It was a big mistake because they treated us like we were a mature private equity-backed company.

When we didn't move upmarket quickly enough, they decided that the management team and I had to go and began pushing us out of the company.

They stopped any additional capital, halted the option pool, and wouldn’t let us grant options to any new employees. They essentially cut us off completely and tried to bleed us dry.

We weren’t going to let that happen, so we raised enough capital from insiders to buy them out completely — which is almost unheard of.

We bought them out for basically what they had invested. They wanted double or triple, but we just kept grinding them down.

It was a really difficult situation. I tried to raise money externally, as there was additional interest from other VCs, but once they understood the circumstances, they didn't want to get involved.

We had to convince our insiders to provide $25M just to buy them out, and that money wasn’t going to the balance sheet — it was straight out the door.

There were points where we couldn’t make payroll.

There was one story where someone committed ~$75k and then sort of backed out. 

They weren’t returning our calls so we drove to San Diego from LA to track them down. In the early days, it was that kind of anxiety level for several years.

When I advise founders on fundraising, I say that the moment of least leverage is right after you sign a term sheet. The reason is because you just locked in with that investor and they will pepper you with a bunch of questions. 

You are then in a defensive position. You're basically just hanging on because they're not necessarily coming at you hard to renegotiate the deal — but that can happen.

I’d say to not chase valuation. Get a fair valuation and do diligence on the partner of the firm you’re receiving potential investment from — even if the firm itself has a great track record.

I would also tell founders that there’s immense value in the early struggle and constraints without having a lot of fundraising too early in the process. 

If you were given a $200k check instead of $20M for the same company in the same space, and you had to work within those constraints, being super creative and scrappy, you might hate your life for a while. But I would bet on that company over the one with a $200M check every single time.

You don’t need to force pain upon yourself, but consider smaller rounds, think about bootstrapping for longer, and fundraise only when you’re at a critical juncture and truly need the cash.

Paul Leggett and Mithril Capital — Mithril gets a funky rap because they're so contrarian; when everyone zigs they zag. 

Ajay Royan — the lead partner — oddly understood the giving space extremely well. Paul had a financial background and he really understood the business model. We hit it off with both of them from day one. 

Our Series C was a disaster. Paul was one of those people that stood by me through thick and thin. The Mithril guys are unbelievably founder friendly. 

There was a point that I was trying to quit, but they wouldn't let me. They weren't always happy with me, and we had our healthy disagreements, but it was always in a supportive way.