Chaz Englander says founders should never announce a raise before they have raised anything, because the first check usually comes from someone they already know.
Englander says Fat Lama's SPAC exit process cost over $500,000 in legal fees and six to nine months before a buyer that kept calling finally acquired the business.
Model ML, an AI workflow product for financial services, grew from about $5,000 to $100,000 monthly revenue in three months and has just raised $75m.
Three startups taught Chaz Englander to build with design partners
Chaz Englander has built three companies, and each moved on a crude first product and close contact with users. Fancy grew on an app that was almost a WhatsApp group, while Model ML worked beside a design partner and won trust in a slow-buying industry.
Takeaways
Early rounds come from allies, not announcements. Englander says never announce a raise before money is in, since rounds are usually nearly done before anyone discusses them. About 100 LinkedIn messages yielded one meeting, and only 5 to 10 percent of Fat Lama's roughly £1m came directly from them.
A design partner beside you speeds iteration. Model ML's first customer was a small investment bank working as a design partner. Englander says one you work next to beats one you speak to weekly, and demos count for nothing while real usage matters most.
Model ML grew fast on trust and credibility. Revenue went from about $5,000 to $100,000 a month in three months, then repeated that in the next three. Englander credits trust and senior advisers, and the company has now raised $75m after an earlier $15m.
Model ML grew out of internal investing software. After selling two companies, the brothers invested their own money and wrote software to evaluate deals. Bank CEOs showed interest, and it became Model ML, which automates presentations, emails and Excel materials for financial customers spending at least $250,000 a year.
Fancy won with a crude MVP and speed. Fancy launched in Newcastle with an app that was almost a WhatsApp group, as Y Combinator's Michael Seibel advised. Founders made the first 1,400 deliveries, orders reached thousands a day without marketing, and it reached about 15 cities in six months.
Category expansion was Fat Lama's real challenge. Fat Lama, a peer-to-peer rental marketplace, got into Y Combinator in 2016 and raised a $12m Series A, though unit economics took about a year to work. Englander says expanding categories was harder than expanding cities.
A failed SPAC cost months before the sale. Founders spent six to nine months and over $500,000 in legal fees on a SPAC that collapsed weeks before Christmas, and calling shareholders was the hardest part. A buyer who kept calling then acquired Fat Lama, which Englander calls a much better outcome.
Signals and advice on persistence
Model ML knew it had product market fit when customers asked to push back their start dates.
Englander's closing advice is perseverance, though not blind perseverance. It is justified only when the idea makes sense and the founder is not kidding themselves.
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On this episode 2
Show 1
Procurement cycles in financial services take six to twelve months at a minimum, so Model ML had to sell three to six months ahead of its product.