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Finding the Golden Needle
Netpreneurs Discuss Their First Funding Experiences

Do It Without The Money

Mr. Riechers: Matthew Pittinsky is co-founder and CEO of Blackboard, Inc.. Blackboard is a leading provider of technologies that help make the Internet more useful for teaching and learning. The company creates powerful software tools for hosting virtual campuses, university intranets and online corporate training environments. At the center of Blackboard's product line is CourseInfo, a course management system that institutions such as Cornell University, Yale University and Holton College in the UK are using to deliver instruction online. Since June of 1997, Blackboard has been a leading participant in the Instructional Management Systems (IMS) standards program sponsored by Educom, a nonprofit consortium of 600 higher education institutions. IMS investment partners include Microsoft, Sun Microsystems, Oracle, IBM, Thompson Publishing, KPMG and others. As the project's primary development contractor, Blackboard is a significant source of expertise in designing to the IMS standards.

Mr. Pittinsky: Thanks, Gene. Blackboard started 10 months ago. When we first began looking for money, we were a company of four people working in two rooms of 800 square feet in a red brick building that leaked—which isn't a good thing when you have very expensive server hardware. We had one contract and about $200,000 in revenue. Today we employ 21 people, doing about $1.5 million in business. 7,100 people teach and learn in virtual classrooms powered by our software. Based on what current clients are doing with our products, in four months that will grow to 40,000 people teaching and learning in virtual classrooms powered by our software.

We didn't get financing for a very long time, so one of the reasons why I may be up here is that we took a different route from most. We focused on individual investors and only now are we looking at venture financing. It really is hard work. There are a lot of people who say "no," but it takes just one who says "yes." I have a couple of rules for the road, but the most important one comes out of a first insight, that everything we did happened because we couldn't raise big money.

If you are good at growing a company and you have time to prove it, then eventually the money will come. But if the first thing on your business plan is "raise the money," and after that comes "build the company," you're probably not going to raise the money. We grew, and every time we thought we couldn't do something unless we raised money, we found a way to do it without the money.

If you don't have a product or any customers and you are a company of two people, you are probably not worth a $10 million valuation.

Another good rule is to keep your mouth closed, and I'm very bad at that. Throughout our experience raising money, I kept telling one individual investor that my other investor "is just going to close in three weeks." But then they never closed in three weeks. I would tell one venture capital firm about another that was interested in us. We would never get beyond a certain stage in the process.

People talk, and you only have one chance to introduce yourself. There are venture capitalists in this room who know Blackboard based on our first introduction which was as a four-person company with $200,000 in revenues. I explain how we've grown, but even though they see that growth, it would have been much more powerful to introduce ourselves the way we are today.

You will learn that there are all different types of yes's. There is, "Yes, I'm going to invest." "Yes, I'm going to invest and we agree to terms." "Yes, I'm going to invest, let's change the terms." "Yes, I'm going to invest, here's the term sheet." "Yes, I'm going to invest, here's the changed term sheet." And, "Yes, I'm going to invest and here's the check." Only the last one counts as an investment.

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