Sydney-founded delivery platform Shippit has secured a $2.2 million Series A funding round but its co-founder Rob Hango-Zada says the deal could have been much bigger.
After starting the round with a goal of raising $3 million, Shippit co-founders and joint chief executives Hango-Zada and William On ended up receiving a total offering of $5 million.
“We effectively were looking at the raise as purely discretionary,” Hango-Zada tells StartupSmart.
Hango-Zada says the data-driven delivery platform’s revenue “doubled” in the six months it took from opening the round to closing the deal, and this growth put Shippit in a “great position to negotiate”.
What will the election mean to you?
Sign up to our free newsletter, including this weekend’s coverage of the election.
In March last year, he told StartupSmart the platform was on track to hitting $1.5 million in revenue by mid-2017, however, he declined to reveal exactly how much revenue Shippit is currently recording.
After going “back to the drawing board”, Hango-Zada says the decision to decline the whole $5 million came down to not “over diluting ourselves” and bringing on a strategic investor who aligned well with Shippit’s plans to take on the Asia-Pacific region.
The delivery platform, which ships over 250,000 parcels a month and works with more than 750 businesses including Thankyou Group and Sephora, ended up securing investment from Aura Group, a venture fund that has backed startups like Catapult Sports and Institchu. Addventure Fund and RTL Group Investments also participated.
In addition to offices in Melbourne and Sydney, Aura Group is also located in Singapore and Bangkok.
“It knocked out a couple of investors because we only need one lead,” says Hango-Zada.
The $2.2 million will be used to fund Shippit’s “ambitious growth plan”, which includes increasing its team of 15 employees to 23 by the end of the year, Hango-Zada says.
The startup raised $500,000 in seed funding within months of launching in 2015 and in March 2016, landed a partnership with national carrier, Australia Post.
Aura Group managing director Eric Chan says the decision to invest in Shippit boiled down not only to the platform’s global potential but to the team’s ability to execute.
“Shippit stood out to us because of the scalability of its platform and its alignment to the global opportunity being driven by the transition of retail into e-commerce,” Chan said in a statement.
“The predominant reason we invested, however, was because we believe Shippit has the right founders to execute on a well-considered strategy and vision”.
Building startup bargaining power
For founders to gain strong bargaining power in investor negotiations, Hango-Zada says there are some important steps to take in the early days of building a startup.
First, he says, you’ve got to solve a real problem and meet customer expectations.
“Be true to your customer, know exactly what your customers want,” he says.
Then, he says, it’s crucial to foster relationships with investors. He says Shippit’s Series A round took six months to close and “build the right relationships”.
While the “temptation is always to bring in as much capital as possible”, Hango-Zada believes it’s vital to consider what amount the startup really needs to support the growth strategy. It’s essential to consider the long-term impact of bringing on new investors, he says.
Timing is also critical, says Hango-Zada. Raising too early can be a waste of time as the fundraising process can be “massively distracting”, but raising too late can be costly too, says the entrepreneur.
“Know the investment community well and know when to raise,” he says.