Dwolla closes $1M Series A round - interview with founder Ben Milne
A Dwolla user checks out the startup's new mobile money transfer options at a recent Dwolla Meetup in Des Moines. Photo from facebook.com/dwolla.
Ben Milne, founder and CEO of Des Moines-based Dwolla, announced today that his startup has completed its Series A financing round with $1 million from two of Iowa’s longest-standing financial services companies: The Veridian Group of Waterloo and The Members Group (TMG) of Des Moines. This is Dwolla’s second raise, following a $250,000 Angel round completed in November 2009.
The Veridian Group is associated with Veridian Credit Union which had a previous relationship with Dwolla as one of the financial institutions where user’s funds were deposited. Veridian Credit Union is the largest credit union in Iowa and one of the largest in the nation. TMG, a subsidiary of the Iowa Credit Union League, provides card processing, payment solutions and other services to financial institutions.
Additionally, Dwolla has engaged industry leaders in its first Advisory Board including Suku Radia, President and CEO of Banker’s Trust and technology entrepreneur Christian Renaud, both of Des Moines, and Matt Harris, managing general partner of New York City-based Village Ventures.
Despite being extremely busy with today’s announcement, Milne was able to answer a few questions for us by email about the news:
Silicon Prairie News: What's it feel like to have finished your fundraising?
Ben Milne: It felt fantastic for the first 15 minutes! After that, everything turned into a lot of urgency. Shane [Neuerberg, Dwolla’s CTO] and I have been working on this for a long time and we are having a great time adding to the team. Planning and hashing out ideas about how to get into the marketplace feels pretty amazing. We have some unique marketing ideas that we think people will have fun with.
Life doesn't get calmer when the money comes in; it gets busier; a hell of a lot busier. This isn't about working 14-16-20 hour days anymore. This is about hiring the right people because we can't keep doing it every day as we continue to grow.
The biggest part of this for me personally was the validation I felt upon closing the deal. This was a long project (raising money) and it took a lot out of me personally. Finishing this deal gave me a lot of momentum and energized me in a big way to keep driving forward.
What was your experience like to seek investors for your startup?
Raising money is the hardest sale I've ever made. One day I decided that selling my first company was a good choice and pursuing Dwolla full-time was something I felt compelled to do. There has been a lot of kickback in my personal life about whether or not that was the right choice to make. When I decided to stop attending college to build my last company [Elemental Designs] the feedback from my family/close friends was almost identical to the [feedback] I got when deciding to exit Elemental Designs and pursue Dwolla.
Obviously building companies isn't something that always inspires a lot of faith from others on the front end. :) It's no secret that building companies isn't easy on the people [around you] and this project has been no exception. I'm fortunate to be surrounded by people who keep my head up on the bad days and allow me to pursue the ideas that move my project forward. I'm a very lucky guy.
I came to Des Moines asking for $3 million from virtually everyone I met and I had a good reason for that. By the end of the day my plan also required an additional $5 million-plus in additional collateralization for our licensing. So basically the face value of what I needed was in excess of $7 million to get out into the market and $1 million in growth infrastructure capitol.
Obviously the people I was pitching didn't really just write me a check, largely because they didn't know me. Arrogantly, I think that the initial plan would have worked, but the folks in Des Moines helped me see a much bigger picture.
I had coffee with Suku Radia one morning, having no idea who he was, and he said something like "have you considered doing it like this…" which basically changed my life, direction, and how we structured the deal. From this “bigger picture,” involved accomplishing the same thing, but with the right partners and only $1 million in growth infrastructure capital.
For the next 12 months I just didn't shut up until we closed, except when I had the opportunity to learn something that could improve us. Now that we've closed, we are building out the platform and executing what we conceptually see as “what’s next” for Dwolla users and this new industry.
Suku has accepted a seat on our advisory board as well [along with the aforementioned Renaud and Harris]. I feel infinitely fortunate, to say the least, for the knowledge this town has given me access to and bestowed upon me.
Were you ever discouraged by the "there's no money available in Iowa" type of thinking?
I think I was actually encouraged by that idea. Being told "it's not available here," kind of creates a bit of a burning need for me to prove them wrong. I don't throw stones but I will work myself into the ground if I think that I can do it.
What the town lacks in socially reinforced investment capital, it makes up in knowledge. I came to Des Moines with the equivalent of a Bachelors Degree in making money and in 12 months I feel like I’ve earned Master’s Degree in deal flow and financial regulation. If you keep your ears open and your mouth shut at the right times this town will educate you in ways you never imagined.
I always knew that if we ended up getting some funding here that it would be a point of excitement for us. It took a while and it wasn't easy, but I'm extremely proud of what we've done. I think being in Des Moines helped us build a stronger company that is operating more efficiently. We've done more than we thought possible with less money and I think this current relationship is going to allow us to continue doing that.
What would you like others on a similar path to know about raising capital?
Don't expect anyone you don’t already know around here to write you a check. Assume you won't get the money and keep operating under that assumption until you find the right match. Our seed round was just too easy. I’m sure part of that had to do with me being an investor in that round. We told some people about the project and all of a sudden we had some money.
This series of funding didn't go so easy. While it appears that money may have just come in, we've actually been working to raise these funds from the right people for almost a year.
If you’re in Des Moines and considering fundraising, start with your accelerators. Mike Colwell [of the BIZCI] and Tom Chapman [of the Greater Omaha Chamber of Commerce] are two amazing resources. From them you'll find the angels in town and the venture groups, whether that's Equity Dynamics, DeWaay, Treetop, or Dundee. They know who is doing what in town and as you pass through their BS filters they will introduce you to their friends. If you lie and BS about things you don't know you'll burn out here really quickly and everyone in town will think you a moron. It's a small town and word gets around fast.
I say this knowing full well when I got to town people were talking about us and probably asking their friends if the guy with the ugly beard moving money had pitched them yet.
What’s amazing is when the venture groups here see you as too risky they'll start introducing you to strategic investors which is exactly what happened to us (maybe they didn't see us as too risky, I don't want to put words in anyone’s mouth, but they didn't write me a check, but did connect me with really strong introductions).
Other generic thoughts.
- Tell the truth, especially about what you don't know. The “fake it until you make” approach won't get you anywhere in Des Moines or Omaha.
- Show up for meetings on time. Being late around here does nothing for you and puts you at a considerable disadvantage.
- Know why you just got the meeting. You won't randomly find people who can help you, if they don’t know what you need (and vice versa).
If you’re in Des Moines, do your best to get in the same room to pitch Matt Kinley [at Equity Dynamics]. Matt and Equity Dynamics were not a part of this round, but every time I was in the room with Matt he taught me something valuable through his comments. He told me once that "you don't need money, you need partners" and that never made sense until I talked to Suku and he connected the dots for me.
This also isn't a town where you type people’s names on the internet very often, but I did anyway. I hope next time I see Matt in public he doesn't ignore me for saying that, but he is kind of a badass and I've always valued the time I've had with him.
Why did you choose the Veridian Group and The Members Group as your funding partners?
Like any relationship it just flourished from the first date. We started with a discussion, eventually held hands, dated, and then got married (figuratively).
I think we chose one another because the relationship offers each party more than just money ever could. The Veridian Group and TMG investment solves a lot of structural, security, and regulatory questions the market (and us) takes very seriously. The amount of money this will save us over the next few years far exceeds the actual investment. This is great for Dwolla, TMG, and Veridian.
I also believe that TMG and Veridian saw the value in our platform and found another great market that supplements our original concepts. They have incredible knowledge about how to move and manage money. They've vetted our platform and really helped us build some pretty amazing security procedures that will scale well.
When you look at a deal and everyone feels fortunate to be involved you know you got lucky. I got lucky. Dwolla got lucky and I'm elated we found the right fit for us all right here in Iowa.
To read more about Dwolla's funding, visit the Dwolla blog: dwolla.org/blog.