Capital Efficient Entrepreneurship: Don Mal, CEO of Vena Solutions (Part 7)

Sramana Mitra: By the time you raised Series A, you already had $20 million in revenue?

Don Mal: Yes.

Sramana Mitra: Can you discuss what kind of equity cap table did you raise that money on? We have a very big philosophy in our program where if you operate tightly with small amounts of capital, you have a lot of leverage in follow-on situations.

We have a lot of hanky panky going on in the industry right now vis a vis these cap tables with investors stuffing term sheets with liquidation preferences. I imagine you have none of that. Talk to me a little bit about how by the time you went out to raise your Series A, you had a lot of leverage.

How much equity had you parted with? How much equity did the founding team control at the point at which you went in to raise your Series A and how much did you have to give up?

Don Mal: We never went to build this business to keep as much equity as possible as founders. We did it slightly differently. This might not be great for your readers. We gave 15% of the company to the employees.

Sramana Mitra: That’s a good thing.

Don Mal: Right off the table, 15% of the company is owned by employees through options as well as stock purchase programs. The founders started with almost 90% because we did sell 13% on day one. I want to say that we had still about half of the equity in the company when we went out to do our Series A.

Sramana Mitra: Did the management team, founders, and employees take any liquidity in this Series A? The kind of situation you’re describing is often a situation where these days, we see a lot of founding employees taking liquidity and the professional VCs coming in with money. Is this something you did or did you put all the money into growth financing?

Don Mal: It was a combination of taking that equity and we paid off the debt that we had. There was some secondary. There was an opportunity for all shareholders to take some money off the table. It was given to every shareholder including friends and family and angels. There was some secondary. Some of the funds went to working capital. The majority went to the balance sheet for working capital.

Sramana Mitra: That happened last year in 2016.

Don Mal: Yes.

Sramana Mitra: What else do you want to share with our audience?

Don Mal: If you think about the journey around why we’re successful, we had a highly-differentiated story with a product that is very easy to articulate.

Sramana Mitra: And relationships with big customers.

Don Mal: It doesn’t hurt.

Sramana Mitra: That is the business maker here. You really understood the problem and the solution that customers would be willing to accept.

Don Mal: Stay close to what you know and who you know.

Sramana Mitra: Exactly. Thank you for your time.

This segment is part 7 in the series : Capital Efficient Entrepreneurship: Don Mal, CEO of Vena Solutions
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