Looking to close its Series A round of financing, San Francisco EV startup BRD Motorcycles has had to rethink its investor-appoach strategy, as the venture capital market in California has gone through a reset as a result of the past economic recession.
“It has been brutal this past year talking to investors,” explained BRD Motorcycles CEO Marc Finegstein. ”In fact, it was actually easier to raise capital during the recession than it is currently right now. For the last few years, you just had to be bullish…you know, polish your PowerPoint deck, shift your paradigm, and make sure you were best in breed. But now, with all the bad paper that has been going through the market, the traditional funding sources have all but dried up.”
Countless dinners and evenings wasted, Fenegstein often returned to the office the next day with nothing to show for his hard work from the night before. Facing increasing production and development costs, it was clear that something had to change in the company’s funding strategy.
So, when asked what sort of measures BRD was taking to close its funding objectives for the Series A round, the young CEO exhaled slowly, sat back in his chair, and only hinted at BRD’s new investor-pitch strategy. “Let’s just say our funding strategy is more ‘hands on’ than it was before with our investment circle,” he said while staring blankly out his office window.
“Going into 2013, my hands were raw from trying to beat around the bush with these traditional investment guys, and that is when I realized we were going about this all wrong,” said Fenenshrine as his gaze drifted back to within the room.
Turning his attention from large singular investment institutions, Femensine had BRD begin to woo micro-funding sources for its electric motorcycle business. Sourcing its funds primarily from San Francisco natives, this allowed BRD not only to keep its business and manufacturing based in the San Francisco Bay Area, but now also consolidated its funding members in the same locale.
“I don’t think that I have to explain that the new darlings in the SF startup community are ‘social’ startups, so the guys and I had a long brainstorming session about how we could apply the social business model to BRD. We didn’t walk away from that meeting with any immediate answers, but as I was coming through the Mission that night, somewhere around Capp Street, the answer just hit me in the face.”
“We could get investments from any old John,” Freenananstain said with a grin. “Best of all, our engagement time with each investor was way lower than with the traditional venture capital funds. What used to take weeks of hand-holding, dinner meetings, and outright begging on my knees, we were now doing within minutes of meeting a potential new investor.”
For those familiar with the tech community that exists in the greater bay area, the concept of crowd-funding isn’t a new one. Funding sites like Kickstarter have funded thousands of projects at this point in time, a couple of them we have even featured here at Asphalt & Rubber. However, few EV startups have been able to effectively leverage a large group of investors and their divergent interests…that is until now.
“I wasn’t initially interested in investing BRD, but they made me an offer I couldn’t refuse,” said Oliver Klozoff, one of BRD’s first crowd-funders. “Let’s just say, Marc really got the job done when trying to persuade me to leave money on the table.” When asked what ultimately convinced him to invest in BRD, the man adjusted his black form-fitting skinny jeans, and described the dynamic team at BRD. “Really it is the whole team. There is no load, no work load, they can’t handle. I have an eye for people like that, and they really impressed me with their talent.”
While the funding amounts per investor have been considerably less than the amounts than the company’s previous institutional investors have put into the BRD, with some investors giving as little as five dollars to Fenigbrine, the CEO pointed out that the sheer volume of new investors was easily offsetting the smaller deposits.
“We have literally gone from Sandhill to Potero Hill, and what we’re finding with guys like Oliver is that we have a vast array of investors who are double, even triple-dipping in our company’s investment opportunities,” explained Frenegstain. “In fact, it is not uncommon to have multiple investors engaged in a funding pitch at the same time, with each one fighting for a better position. I really have my hands full in those meetings,” he laughed with a waive of the hand.
When asked how BRD finds its new investors, Fennenenenstam shot back an interesting look. “It used to be that a story on sites like Tech Crunch or Engadget could really make or break a tech startup, and in the EV space sites like AutoBlog and A&R were our target outlets, but that has now all changed.”
“Don’t tell me that print is dead, because beyond word of mouth, paper-based trade publications and cheap newsprint have been our #1 referral source with this new strategy. We are effectively penetrating into niche consumer markets that we previously didn’t think were open to our product, but with some re-tooling to our pitchdeck, we’re feeling a lot less friction in those kind of customers, and things are coming together nicely now.”
While the main role of a startup CEO is to raise capital at an exhausting rate, it rarely is a solo act, and at BRD it truly is an all-hands affair.
“Marc is really the face of the company,” said one BRD employee. “So, we really want to put him in front of whatever the investors are going to show up with. His skill set is the most-attuned to that kind of environment, but we try to fill-in wherever we we can. There are no egos here — whoever can close the deal is sent in to do the job, and everyone brings something different to the table.”
Not everything has been easy-going though, explained that same employee. “Marc makes it look so easy, but there is a huge learning curve to closing a deal. If you’re not careful, you can get really banged, even from just pitching an investor — it has really been a learning process for all of us, and I have definitely taken my licks from the investors.”
When asked what the future looked like for BRD, Farmerstam explained that BRD wasn’t backing down from building the best electric motorcycles in the industry. “I don’t care how thinly veiled our actions have to be, whatever it takes to build the best motorcycles possible, I plan on doing.”
That sounds like a philosophy we can all get behind.
Photo: A&R Image Database