The archive · Developer & Business Tools · Financial decision · 2012-2014
Mattermark bet on a second seed round when Series A terms were out of reach
VC data platform Mattermark took a $2M second seed in June 2014 after learning Series A investors wanted revenue it did not yet have.
Mattermark
What the business is
Mattermark sells subscription software that pulls Twitter, news, SEC filings, LinkedIn, AngelList and CrunchBase data so venture firms can discover, score and track growing startups.
Starting capital：Referly raised $1M in October 2012; at Mattermark's June 2013 launch, NEA and Andreessen Horowitz did a follow-on seed round.
How it started
Danielle Morrill, who had built the monthly Seattle 2.0 Index of local startups, first founded Referly, a YC-backed tool that let people earn affiliate commissions on product recommendations. Referly raised $1M in October 2012, was shut down in March 2013, and with Kevin Morrill and Andy Sparks she launched Mattermark in June 2013 as a data platform that mined Twitter, news, SEC filings, LinkedIn, AngelList and CrunchBase for signs a startup was gaining traction.
What happened
Mattermark spent nine consecutive quarters in some form of fundraising and ended up with a cap table of 40+ investors. In January 2014 Morrill pitched a dozen investors on a Series A and discovered that B2B Series A expectations had risen to about $1.5M in annual revenue run-rate; Mattermark was only about a third of the way there. Version One Ventures' Boris Wertz, a customer since the product was a Google Docs spreadsheet, offered a convertible bridge, and the round closed in June 2014 as a $2M second seed on a convertible note with no new board seats, from returning investors Andreessen Horowitz and Ullas Naik plus Version One, Felicis, Flybridge, Slow Ventures and others. Morrill wrote publicly that 95% of the money came from investors who were already paying customers and that the company had 21 employees with net annualized revenue run-rate growing 10-20% a month.
No ending yet — it is still running.
Background
Mattermark sells subscription software that pulls Twitter, news, SEC filings, LinkedIn, AngelList and CrunchBase data so venture firms can discover, score and track growing startups. It came from founder Danielle Morrill's experience ranking local startups in the Seattle 2.0 Index: her first company, YC-backed Referly, raised $1M in October 2012, was shut down in March 2013, and Morrill, Kevin Morrill and Andy Sparks launched Mattermark that June with a follow-on seed from NEA and Andreessen Horowitz.
By 2014 Mattermark had spent nine straight quarters fundraising and carried a cap table of more than 40 investors. In January Morrill pitched a dozen investors on a Series A and found that the market expected roughly $1.5M in annual revenue run-rate from B2B startups; Mattermark was about a third of the way there. Rather than take a small Series A that would force another raise in six months, she accepted a convertible bridge from Version One Ventures' Boris Wertz and closed a $2M second seed in June 2014.
Morrill's public post explaining the decision became the story's centerpiece: she admitted the company was going to run out of money and could not raise a Series A on acceptable terms, noted that 95% of the round came from investors who were already paying customers, and said the money would fund hires while net annualized revenue run-rate grew 10-20% a month. HN commenters called the transparency refreshing, debated whether a second seed was just a Series A by another name, and extracted the $1.5M run-rate bar as a data point for other B2B founders.
What has to be true
- Investors were already paying customers, which was both product-market evidence and the funding source when institutional terms did not fit.
- A small Series A would have reset expectations toward Series B metrics within six months; a second seed avoided that trap.
- A convertible note with no new board seats and no valuation left the cap table cleaner than a weak priced round.
- Publishing the messy reality made the unconventional round understandable and turned a fundraising post into free marketing.
What can be applied
Raising is fuel, not a milestone: when Series A terms would force another raise within months, a convertible second seed from customers bought time to hit revenue milestones on better terms.
Aftermath
As of 2014-06-29 Mattermark had roughly $2M in the bank and was taking its first break from fundraising in two years. Morrill said the money would go to engineering, sales, design and new markets while the company kept compounding its net annualized revenue run-rate by 10-20% a month. Still classified as pre-Series A, Mattermark became a reference point in the industry's 2014 discussion of second seed rounds, alongside posts by Hunter Walk and Nuzzel on the same phenomenon.
Sources
- Backed By NEA And Andreessen Horowitz, Mattermark (Formerly Referly) Wants To Be The Data Signaling Platform For VCs
- YC-Backed Referly Raises $1M To Bring Affiliate Commerce To Everyone
- HN thread: Mattermark Has Raised $2M in Our Second Seed Round
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