It was borderline impossible.

While the time and era was different — late ’02 was about the single worst time to be raising venture capital, after the DotBomb implosion — there are some illustrative lessons.

The idea for my first start-up as a co-founder was to take an abandoned, science project done at a small start-up I was working at as a non-core one-off experiment, and magically commercialize it.

Our technology used nanomaterials to allow impantable batteries to deliver power faster, longer and most consistently inside of pacemakers and ICDs. This technology has since gone on to save hundreds of lives, which is kind of cool.

While it looked promising on paper, the lab project, the technology, had never been commercialized or even truly tested in any fashion. And most of the top technical talent in the industry said it was literally impossible to make our technology work. And they had some valid points.

The team:

  • Me. I had never run a start-up, raised capital myself, nor really did I have any domain expertise in the space.
  • CTO and Co-founder. She ran the initial project and experiments and had built our prototypes. But she had never put anything into commercial production. Ever.
  • Chief Scientist. Developed core technology. Brilliant. But many thought scaling it was impossible.
  • COO. 20+ year industry experience scaling.
  • Customers. We had industry support from several of the largest customers in the industry.

It wasn’t a perfect team or a perfect idea, but pretty much we had (x) validation, (y) customers — $6m in LOIs and signed commitments, (z) the right changes in the market.

We barely got two terms sheets — and then my COO pulled out. He thought it was too hard. I lost both the term sheets. And had no cash left to make payroll.

Anyhow so in the end we got a pretty awful deal done, but we did get it done, to live and fight another day:

  • $9.2m in first round capital, on an effective $2m pre. (the nominal pre was higher, but to the founders and initial employees, this was the pre to us).
  • All board seats but one immediately to VCs
  • 5x liquidation preference, no cap
  • I had to sign a $750k full-recourse promissory note, which vastly exceeded my savings at that time (and likely included our house as coverage for the note)

Even then, and after 2 weeks unable to make payroll, I had to give up being CEO and become President and allow the VCs to put in a CEO for a little while.

So we sold for $50m in 12.5 months. We had an amazing time building this company. But the dilution from raising any more capital would have been utterly crushing.

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