Startup Resilience in Market Shifts: The Pylon Story

December 4th, 2023 by StackedSP

I recently caught up with Marty Kausas, Co-Founder and CEO at Pylon. We talked about his unique fundraising strategy in the week following the aftermath of the Silicon Valley Bank collapse. The mission? To raise a $3.2 million Seed round as a three-month-old startup. Here’s how they did it in only 6 days.

An Atypical Approach

Pylon ditched the pitch deck for a Notion memo, making investor interactions more casual, more like coffee chats than boardroom presentations. Marty’s strategy? “Story-telling about how BIG you can become is more important than traction at Seed.”

Don’t just take Marty’s word for it, take it from the grandfather of Venture Capital, and Sequoia Founder, Don Valentine in this interview at Berkeley in 2009:

“One of my favorite stories— What happens in a conference room like this, we have people come and pitch us for financing. And it’s storytelling—can you tell a story? Huge numbers of them have no idea how to explain their business. And they come in and they ramble on and on and on. So one day there were two Sequoia people, three people from a company, and the guy was just making no sense, no progress. And I said, “Let’s have a timeout. Here’s my card. We’re going to come back in ten minutes and I want you to write your business plan on the back of my card.” And he says, “That’s impossible.” And the other two guys on the team, clearly were loving this, because they didn’t understand it either! And we went away and [came back]. You can imagine, the card was almost all ink. But he did an infinitely better job having thought about it, focused on the few messages he wanted to get across that were not full of all this extraneous barrage of data but not facts.

And it seemed like a cruel thing to do, and I didn’t do it for that reason, [but] because I wasn’t getting the pitch. And we have a concept around here called ROT, R-O-T [spells], and it means Return on Time. We can’t afford to have four partners sitting in this room, and somebody explaining something, and I’m not getting it. Now it’s not we’re not getting it because it’s superscientific and we don’t understand it—it’s the storytelling technique. It’s the building of the idea, the size of the market, the degree of the technical risk to get this product finished. Who’s going to care? And explaining that in a very simple way, we can tell that that person is somebody we want to be in business with.”

Social Proof and Back-Channel Intros

Marty crammed an epic 46 VC meetings into 6 days.

Social proof is king for investors trying to de-risk, Marty explains. Being well-connected in the Bay Area tech scene was an important advantage for Pylon. Additionally, Pylon used back-channel introductions – leveraging their customer base (mostly other tech startups) to champion their cause to VCs and get investors to reach out to them.

“Get your network, people you know, to tell investors you are raising: ”Hey, have you heard of this company? They’re fundraising, they’re really good.” Like that’s what you want people to say.”

For startups without a well-known reputation, Marty advises being “pointy” – whether standing out through extraordinary revenue growth, an incredible team, or some other unfair advantage.

Closing the Deal Over Sushi Rolls and Nigiri

By Saturday, Pylon’s relentless hustle paid off. A casual sushi dinner with General Catalyst turned from sashimi to signatures as they received their term sheet. In light of macroeconomic uncertainty, Marty’s team’s grit and determination were remarkable.

The Behind The Scenes Work

Marty explained that the seeds of success were sown well before their fundraising blitz. Meticulous planning and preparation were key. Even the Silicon Valley Bank collapse couldn’t deter their resolve.

Key Takeaways for Founders

Leverage your network to have investors reach out to you, known as back-channel intros. This reverse approach increases the odds of getting noticed and respected by potential investors.

Storytelling Over Stats: In the seed stage, your vision’s potential and story is everything.

Prepare, Practice, Pivot: Use early meetings as practice. Be ready to adapt your pitch based on these experiences and feedback.

Leverage your network as social proof to advocate for you.

If you’re not well-connected in the space, standing out requires being “pointy” in unique ways, such as incredible revenue growth, an exceptional team, or some other unfair advantage.

Schedule investor meetings in a concentrated timeframe to create urgency and momentum. This leads to a more competitive environment among investors.

Be mindful of taking intros from one investor to another unless the referrer has already invested. The perception of your startup’s value can be influenced.

Start the fundraising process when you’re in a strong position, ideally with traction or demonstrable progress.

Stay focused, even in light of macro uncertainties. Control what you can control.

Have amazing co-founders who are committed. Read this for more on this topic.

Final Note

Marty’s response when asked what advice he would give to other founders facing headwinds with odds stacked against them is to believe in your success.

“I think it was predetermined that we were gonna do well that week. And what I mean by that is that our setup was really good. Our team was really good. We had paying customers.”