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Insider Access: How Settle raised two rounds from top tier VCs in less than 6 months
Needing only a 10-minute meeting to close his Series A from Kleiner Perkins, see how and why Alek Koenig raised back-to-back rounds for Settle with his seed led by Keith Rabois at Founders Fund.
A new section of our newsletter will be “Insider Access” where I talk with founders and CEOs, so they share with us what actually happened and the why behind pivotal moments in their company’s history.
For the first installment, we have Alek Koenig, the CEO and founder of Settle, who’s mission is to provide non-dilutive capital to ecommerce and consumer packaged goods companies of all sizes to unlock their growth.
As a first-time founder, Alek raised back-to-back rounds with his seed round led by Founders Fund and his recent $15M Series A led by Kleiner Perkins.
Continue on to see how and why…
Casey Armstrong: You quietly raised a seed round several months ago led by Founders Fund. As a first-time founder, how was that and who was your lead at Founders Fund?
Alek Koenig: We only had two months of growth behind us, but we knew we needed capital for our type of business. We put together a deck and ran a process. We did the pitch for a two week period and that created the FOMO we needed for others to act quickly. I believe we got a good price for our round and we raised $6M from Founders Fund, which was led by Keith Rabois, who I knew from my time at Affirm. It was not the best offer on the table, but thinking long-term, we believed they were the right choice for us and we took a lower valuation to work with them.
CA: How was it different raising your Series A compared to your seed round and working with Kleiner Perkins?
AK: We actually pitched Kleiner Perkins in our seed round. You can only pick one lead, so we had to pass on them, but I really loved the team over there, both Monica Desai and Mamoon Hamid. For me, my background is fintech and credit, so I really wanted a partner that could help me think about B2B SaaS because this is my first time doing that. Monica and Mamoon are so good at that, and of course, Kleiner Perkins is such a great brand as well.
We actually didn’t run a process for that round. We got a preempted term sheet from another firm, but I knew I really wanted to work with Kleiner Perkins, so I reached back out to them. Because of our prior relationship, it only took us ten minutes.
CA: Why raise back to back rounds so quickly?
AK: Since we’re not just a payments platform, but providing the actual working capital for these businesses, it’s very capital intensive. We didn’t need the equity because we are a pretty lean team, but for us to raise our target of $150M in debt, these firms will only advance you 80-90% of the funds and we needed to backstop that with equity. This way, we can finance these loans and because we are growing so quickly, for a company that is less than a year old, that’s a lot of debt to raise, which is another reason we needed the equity round.
CA: What was it like raising debt and equity simultaneously?
AK: It definitely puts a lot of stress on your lawyers.
And it was obviously better than us raising $150M in equity, which would have given away so much of the company.
CA: What do you think people neglect about debt as a tool?
AK: Debt definitely has a negative perception and there are a lot of bad actors out there. For us when we raised debt, we got six term sheets from different providers, but when you really read the terms, some are very pervasive. You have to make sure that not only is the partner from that debt firm high character and references well, but make sure the terms on the actual capital are favorable to your company.
CA: What was the #1 thing you learned at Affirm?
AK: How to build the team by getting the right people and culture, but most importantly what we are trying to take from Affirm here is to be honest and transparent while taking the friction out of the process.
When you are trying to get a loan or working capital line from the older school players, it’s like pulling teeth. For us, we have to rethink the process with the goal of taking all of the friction out of it and make it truly a seamless process, which bodes well for all parties involved. We will automate everything that we can and provide the best experience, as customer referrals have driven all of our growth.
CA: Big picture, what’s the future of Settle?
AK: Unlocking growth for brands through capital. We can quickly provide capital for companies to scale quicker. There is no reason for brands to run out of stock and leave money on the table when they have customers that want to buy from them.
If you enjoyed this, please let me know who we should feature next and why.
The State of Ecommerce
What’s happening in the ecosystem? Who’s up? Who’s down? Who’s building the future?
US retail sales grow at highest-ever rate for any quarter: Amidst the talks of an analog summer, ecommerce growth continued to soar in Q1. In the first three months of 2021, the YoY growth rate was nearly triple the year prior.
Google and Shopify partner again: With Amazon increasing their investment in its own advertising business, Google’s I/O Developer event included several ecommerce announcements, including their Shopping Graph and a Shopify partnership.
Buy One Get One…Mailchimp Stores: Mailchimp uses their latest ad campaigns to highlight their foray into ecommerce. While others are dismissing Mailchimp, I liked the point of view from Amir Torabi, Director of Parnterships at Sendlane, in his reply on LinkedIn:
“It’s a matter marketshare and market segment. Klaviyo has 77k clients. Mailchimp has something like 11 million clients…What they are doing is leveraging their position AND their market segment (new store owners, people just getting started) and creating a way for them to diversify their offering and ensure those small customers stick to their ecosystem.” Read his entire reply here.
Snapchat is also going all-in on ecommerce: With new launches like shoppable product catalogs and AR filters, Snapchat is going all-in. Plus, the company has recently gone an acquisition spree, first buying Fit Analytics (a company that tries to project how clothing will fit through AR; just like Walmart’s acquisition of Zeekit, which we shared last week) and then Screenshop (which can identify similar products based on a screenshot).
Snapchat’s growth is accelerating: With over 500M monthly active users and 280M daily active users, half of all US smartphone users are now on Snapchat and their DAUs are opening the app 30x per day.
When does Apple buy Snapchat? In a non-epic battle, Snapchat CEO, Evan Spiegel, says he is happy to pay Apple’s 30% revenue cut.
FedEx will increase three peak surcharges: As volume and capacity continue to affect major carriers, both FedEx and UPS have increased surcharges over the course of the pandemic. Regional carriers and startups like Swyft are worth watching, as many are looking to disrupt the entire supply chain.
Target is delivering the booze: Adult beverages are coming to order pickup, drive up, and same-day delivery at stores across the country. Long Target.
Speaking of Target… Their ecommerce sales increased 50% in its fiscal first quarter, as the retailer fulfilled 95% of all sales (in stores and online) from its physical stores.
The OG of content x commerce: Martha Stewart. Who else?
Acquisitions & IPOs
Liquidity events fuel the market, drive new innovation, and create new founders with deep experience and even deeper pockets. Who’s getting acquired? And who’s going public?
Klarna: As Europe’s most valuable tech unicorn, the Swedish online payment platform said its decision on whether to IPO in London or New York will hinge on the British government's post-Brexit financial services rules. Klarna has more than 90 million users and over 14 million customers worldwide.
Ro: The New York-based DTC pharmacy and healthcare platform valued at ~$5B has acquired Modern Fertility for over $225M. Modern Fertility had raised $22M from Forerunner Ventures, Maveron, Union Square Ventures, and First Round Capital.
Following the Money
Who are VCs betting on to lead the future of ecommerce?
Forter: To combat ecommerce fraud, the New York-based company raised $300M in Series F funding at a $3 billion valuation led by Tiger Global, along with insiders including Bessemer Venture Partners, Sequoia Capital, and, Salesforce Ventures.
Factory14: As the surge in Amazon rollup marketplaces continues, the Luxembourg-based startup raised $200M in equity and debt, co-led by DMG Ventures and DN Capital on the equity and Victory Park Group provided the debt.
Printful: As their founder Davis Siksnans shared, “Printful has become the first privately owned company with Latvian roots to achieve unicorn status with a valuation of above $1 billion” as they raised $130M from Bregal Sagemount. I’m a power user as I regularly design swag that probably only I find funny.
Sunbit: The Los Angeles-based “buy now pay later” startup focused on necessities raised $130M in Series D funding led by Group 11.
FarEye: The India-based supply chain and logistics operation optimization startup, raised $100M in Series E funding led by TCV and Dragoneer. It’s their third fundraising round since the pandemic broke last year.
HeyDay: Like Factory14, the Amazon rollup marketplace raised a $70M Series B round led by General Catalyst bringing their total funding to $245M. The company did not confirm nor deny that a couple recent hires were generally the catalysts to this round.
Thunes: The Singapore-based cross-border payment network raised $60M in a Series B round led Insight Partners.
Great Deals: The Phillipine-based ecommerce enabler founded by Alibaba eFounders fellow Steve Sy, raised $30M in its Series B round led by Fast Group.
Little Birdie: The Melbourne, Australia-based Little Birdie, an ecommerce startup that wants to become the “new homepage of online shopping,” raised $30M AUD prelaunch from Australia’s largest bank, Commonwealth Bank of Australia.
SevenFifty: The New York-based supply chain platform for the alcoholic beverage market, which is over 10 years old, raised $23M in Series B funding led by Level Equity.
Boox: With circularity popping up again after talking about secondhand markets and companies like Treet two weeks in a row, this sustainable ecommerce infrastructure startup raised $9.25M in Series A funding led by Valor Siren Ventures and was joined by Village Global and Kid VC.
Bain Capital Ventures: BCV raised $1.3B in fresh capital for their ninth core fund. In the past year, 88% of their new investments have been in the seed or Series A stage, much of which has been focused on ecommerce with companies like Attentive, Bloomreach, and Recharge. At ShipBob, I’ve been fortunate to work with them directly. They led our Series B in 2017 with Ajay Agarwal joining our board and have participated in every round since. Lastly, as I mentioned the other day, if are you growing >100% YoY & want an intro, message me.
Companies to Watch
Each week, I’ll highlight a couple companies in the ecommerce technology and brand space that stand out to me. If you have suggestions, please reply to my email or DM me.
With Printful raising a monster round propelling them into unicorn status, you have to check out Eliqs, a Los Angeles-based company that is becoming the “Prinful for alcohol.” Want to personalize some hard seltzers for your Brad and Chad analog summer rager? Or some custom rosé wine tallboys for your wedding? Or maybe a personalized 48-pack for your sales team who beat quota? They got you covered.
With Phil Mickelson winning the PGA Championship at 50, I have to highlight Mizzen+Main. I know it was a proud moment for the M+M co-founders, Kevin Lavelle and Web Smith, who took a bet on each other, a bet on creating a new category within menswear, and a bet on Phil. As Web mentioned, “It still has not settled in that the oldest champion in the 161 years of major championship golf was wearing the brand that we cofounded, as clueless 20 somethings, in a Dallas living room and an Ohio basement.” And even with their success over the years, former CEO and co-founder Kevin definitely relished in proving his prior doubters wrong…again. Winning never gets old.
I’m going to feature a few more technology companies and their founders over the next month. Who do you want to hear share their behind-the-scenes stories like Alek did with how and why he raised $23M for Settle in a seed and Series A as a first-time founder?