Becoming an entrepreneur in the past translated to “Oh, you don’t have a job?” but for the past 20 years, start-ups have been getting acquired for large amounts of money, and now everybody wants to be an entrepreneur. I’ve been hearing the terms scale, MVP, and “trying to close a round” more and more in my daily conversations with people. However, it seems the perspective of those on the outside of entrepreneurship looking in believe that once you “close a round” that you’re good to go and you’re off to becoming the next Elon Musk. That assumption is far from reality, in fact, when you close a round of funding, that’s when you’re just beginning to take responsibility for being an entrepreneur. You’re now the steward of other people’s money and the livelihoods of your team. The process of raising money can be a daunting task, but with the normalization of being a start-up company, you now even more avenues for raising money. These days, investors come in many forms—from micro investors on Kickstarter, to traditional VCs, to the founders of Cryptocurrency companies. I recently reached out to my friend Tom McLeod, founder of Omni, an on-demand storage platform, who recently closed a round of funding with a traditional and not so traditional mix. He recently attracted funding from Ripple’s CTO Stefan Thomas and Executive Chairman Chris Larsen on his last round. I was extremely curious about the semantics of this round and Tom was happy to answer my questions below:
You’ve closed a couple of funding rounds now, and a lot of entrepreneurs think that raising and closing capital is like it is in the show Silicon Valley? What’s your process, method, and secret sauce?
Ha, for better or worse, Silicon Valley does get a lot of things right—it’s the reason the show is so funny, but also so painful. Truthfully, there’s a vast number of challenges raising money in the Valley, many of which don’t make for good TV. The experience looks way different for men than it does for women or people of color, for one thing, and not everyone has a substantive VC connection they can call when they’re looking to raise. My approach—not just in fundraising but in general—is to develop real, meaningful relationships with people I like and trust as humans, and build a great business worth investing in. The secret sauce, if you can call it that, is having and selling a long-term vision that’s more than just dollar signs. Everyone who has invested in Omni did so because they believe in our vision of a cultural sea-change, not in a spreadsheet.
How did you attract a cryptocurrency to invest into Omni?
Just to clarify, the investment itself is from individuals on Ripple’s executive team, though we do have a business deal with Ripple Inc.
Last year I met Ripple’s CTO, Stefan Thomas, at a conference in Vienna. We ended up having an epic eight-hour conversation that planted the seed for the deal, and over the next six months, we worked closely with our teams to make it happen. The reason for the interest was because our visions for the future are in lockstep: At Omni, one way we see our company is as a ledger for your physical assets (i.e., stuff), and Ripple sees themselves as a connector of ledgers. Our visions for the future are aligned, in that we both see money and physical things moving through the world frictionlessly.
How does it work with terms? Did they just hand you (metaphorically) a bag of Ripple in exchange for equity?
We can’t disclose the details of the deal, but we can say that Stefan Thomas, Ripple’s CTO, and Chris Larsen, executive chairman and co-founder of Ripple, both invested XRP.
How does ROI work with that?
In a traditional VC funding round, striking a deal is something to the tune of: “We’ll give you $XX in exchange for XX% of your company,” and the terms get set after the negotiation is over. The nature of this specific deal was not at all traditional, mainly because the capital itself isn’t traditional—we were able to reach terms that were more favorable than boilerplate VC terms in exchange for the inherent risk in the uncharted territory. We had agreements that we could convert a significant portion of the funds into USD, which we will use to pay for warehouses, salaries, etc., but also to retain a war chest of XRP.
How did you explain it to your current investors?
Manish Patel of Highland Capital, who also invested in the round in USD—and who is also a member of Omni’s board—was very fired up and supportive. He believes strongly that cryptocurrencies will continue to impact the future of start-up fundraising and broaden the spectrum of how we reach deals. Highland’s involvement in this round was not only a huge bode of confidence regarding their belief in Omni but also a strong signal of their willingness to get on board with the future of their industry.
Why did you let them in the round?
Whether or not to include Highland was never a question—they have been one of our biggest advocates and have demonstrated that they’re on board with the changing funding landscape as well as Omni’s goals.
How does the volatility of the crypto market affect you? How do you think that will impact the future of fundraising through that medium in general?
Since part of the agreement involved converting a portion of the XRP investment to USD, we’ve hedged against that volatility enough to know what our bottom lines need to look like. This is not to say that we’re unaffected by the market, because we do still hold XRP and fully expect to see a lot of movement—up and down—in the coming months, but it’s not something that will in anyway pull the rug from under us. Taking this approach to fundraising is almost like turning the tables, where the party getting the capital is assuming a different hemisphere of risk—it could give entrepreneurs a different appreciation for the decision-making process of the people across the table.
What do you think the future of fundraising will be in your own opinion?
Broadened opportunity, access, and optionality are the future of everything. With fundraising, there’s been this prescriptive VC blueprint for a long time—decades—that has excluded a lot of people. For example, a (usually) man from a (usually) Ivy league school has (or partners with someone who has) an ace in his pocket—an “in” at an incubator, an angel investor friend. They hatch an idea, are lucky enough to be able to devote the necessary time and energy to the idea, and so forth. The future of fundraising is not prescriptive; it’s creative—whether that means VCs pursue businesses off-the-beaten-path and think differently about underserved markets, or entrepreneurs bootstrap their ventures with something like crowdfunding or emerging crypto or selling boxes of cereal.
Cryptocurrency sprouted quite a few millionaires over the last year, how will that play into the market?
I think it would be naïve at this point to build a start-up in 2018 without an idea of how you’re going to work with, accept or exchange some form of cryptocurrency. There’s a cohort of tech-savvy people who have had this crazy windfall, most of whom probably didn’t see it coming too far in advance, suddenly in a financial position to mobilize. Maybe they jump into the investment arena, maybe not, but at the very least they’re passionate about that financial pathway and could even be influential when it comes to its integration in more products and platforms.
What’s the next big move for Omni?
Lots to come this year: We plan on expanding to new U.S. markets in 2018, we’re HIRING, and we’ll soon announce more details from the deal with Ripple.
What three tips would you give entrepreneurs on starting and building a company worth investing in?
- Think globally
- Visualize and pursue your cultural aspirations early
- Don’t ever write off an emerging trend—be the most knowledgeable person in the room.
Lastly, what’s the dream that you’re selling for Omni? Democratizing storage? Marketplace for stuff we don’t use or what?
Depending on who you are—a business person, an API nerd, a person looking to make money off their costume collection—there are all kinds of dreams. To pick just one: The dream is a life where you access whatever you need, wherever you are, no matter what and no matter where. The physical things in your life live in an operating system called Omni, creating value for you both when you’re using them and when you’re not. Maybe your things are delivered by a drone that also surprises you with pizza? Maybe that part is just my dream.