My name is Sriram Gollapalli and I am the former COO and CTO of iLab Solutions – a research management and product selection tool provider to academic labs, hospitals, and other research organizations.

I started iLab with a high school friend and his colleague, who was a researcher at a Harvard lab.

We discovered that the lab was run very inefficiently. After some more market research we discovered that this problem was endemic to research labs in general.

Prior to my time at iLab, I was a consultant at Deloitte focusing on healthcare tech.

Our last round was a pre-seed round of $250k at a $2M post-money valuation. The process lasted from the beginning of 2007 to spring 2007.

We had self-funded for the first 6 months and had burned through our savings.

We decided rather than go into credit card debt, we needed to raise enough money to test our idea in the market.

One of our earliest investors helped us come up with a reasonable raise amount and valuation.

Our goal was to get to product market fit and revenue before we had to raise again.  

We needed the money to fund minimal living expenses, direct expenses for travel to our potential customers for user interviews, and basic infrastructure costs to host a pilot version of the SaaS product.

We also had initial legal costs for incorporation and patent exploration.

We started with friends and family, but as the company developed, we wanted to partner with investors who had experience in the industry and add credibility to our team when going out to market. 

Strategic investors who would help us gain access to their sales channels became our main focus. Because, in addition to the capital they could provide, we assumed they could also give us access to their sales channels.

We started with our personal networks. From there we tried to find people who cared about the mission as much as the opportunity. 

The labs we were initially solving problems for were cancer research labs.

Being a part of the solution to cancer appealed to certain investors – along with the monetary incentives. 

We were fortunate and had about a dozen meetings. About half of them led to investments. 

In the early phases, we had a letter of commitment from Harvard saying they would test our product in their lab for 6 months.

We showed that we had our first potential customer and a venue to experiment until we found broader product market fit.

As we gained more experience and information, we showed case studies and testimonials from real-world data that proved our systems were solving problems that customers cared about. 

Since we were at a very early stage, we focused on the size of opportunity. Healthcare is a large total addressable market. 

We explained that Harvard was close to signing a pilot agreement with us, even though we needed to show some legal infrastructure was in place before they’d sign it.  

We also showed that having minimal salary would reduce our personal stresses to allow us to focus on the product.

We had, who was supposed to be our anchor investor, back out at the last minute.

This was very difficult because an anchor investor is so key to gaining momentum for the rest of the raise.

It can hurt your momentum and your morale as a team to get that close and get set back.

But it is also an important opportunity to navigate those difficult moments, which come up when you are starting a business.

In the early stages of the startup we were doing our best to self fund the business.

This was in the early 2000s, so many of the resources and infrastructure we have now, such as networks of angel investors and accelerators, were more scarce back then.

We decided it would be better to burn through our savings and operate on a lean basis rather than give away equity at that point.

I have seen situations where a founder will get to a billion dollar exit and not make that much money because they gave away all of their equity along the way.

Focusing on validating product market fit before you fundraise will yield a very big ROI in the process.

It is becoming rarer for early-stage investors to invest in an idea, try to make at least one dollar before fundraising. 

You should be prepared to not simply try to rely on the brand of your university or former place of work to get you through the fundraising process.

The brand can get you in the room, but you need to be able to answer the basic questions about your market and your business before someone will trust you with their money. 

Find resources specific to your niche that show you how to gain your first customers in the most efficient way possible. It heavily varies for different types of companies.