Portland software company Customer.io maxed out its crowdfunded equity round, raising $5 million from investors.
The company opened the round at the end of June using a platform called Republic. A little more than a month later it had raised the maximum amount allowed with this type of funding. Thanks to this round, the company now has 2,473 new investors.
Most of the investors backed the company for around $100, said founder and CEO Colin Nederkoorn. However, he had one investor write a $500,000 check, and there were 10 investments that were more than $100,000.
Only a couple of those large check writers were people Nederkoorn had heard of before. They were current or former customers, but the rest were all people he would not have known to talk to.
Here’s Nederkoorn's take on the process and what he learned.
The process overall:
Nederkoorn said the preparation for the raise was eye-opening. It took slightly longer than he anticipated — at about two months — because of the extended tax season offered by the IRS this year. The company had to go through two years of audited financials and some legal work in order to potentially raise the maximum $5 million. He noted the experience was valuable. Part of his desire to crowdfund was to get a taste of the kind of scrutiny that comes with being a public company. Though on a much smaller level, he was able to see what happens when you open yourself up to questions from people outside the company.
Advice for others looking at this route:
If Nederkoorn did this process again, he said he would likely raise a more traditional round with notable angels or VCs and then use a regulated crowdfunding campaign as a follow on. The reason: investors, at all levels, like to be part of a group and look to others to help determine the worth of a company and investment quality, he said. Had the company had some notable investors to point to, it could have made this round easier. But, the point wasn’t the capital. Nederkoorn said based on company stage and performance there are easier ways to get $5 million, but opening the company up to a broader set of investors was the point. He spent about 10% to 15% of his time tending to the campaign and answering questions posed by investors and potential investors. He made sure everyone had their questions answered either by himself or another expert in the company.
About all those new investors:
The way a platform like Republic works is the new investors are put into a group so they are all one line on the company’s capital table, Nederkoorn said. This keeps the complexity down for corporate activity and governance. Nederkoorn was already writing regular investor updates for the investors that participated in the company previously. Now these new folks will get those updates. Nederkoorn is curious how involved these new investors will be and what kinds of questions they will have for him.
Customer.io makes software aimed at small to mid-sized startups that have high-growth ambitions. Its product is in the customer engagement category and helps companies automate customer interactions across email, push notifications, text message and other messaging applications.
The company, which is hiring, has 100 employees and more than 2,600 customers. It has been profitable since April of last year.
