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Anatomy of a VC Deal: How One Seattle Startup Raised $12.5 Million

This story appears in the July 2015 issue of Entrepreneur. Subscribe »

Kristen knew she needed to raise to get her -based startup off the ground. She and co-founder Josh Jarrett spent half of 2013 developing Koru, an immersive business program that gives recent college grads real-world job skills and positions them for rewarding entry-level work.

Robin Stein
Cash in hand: Kristen Hamilton of Koru.

That fall, the pair enlisted a handful of Whitman College graduates to participate in a weeklong pilot program at REI's corporate offices. The goal: develop a presentation for senior REI executives detailing how the retailer of outdoor gear and clothing could appeal to young consumers.

The week was a success. Besides nailing the presentation, the budding professionals gained tangible workplace experience and newfound confidence.

"The intention is to obliterate the statistic that 53 percent of college grads are underemployed or unemployed," says Hamilton, Koru's CEO. "We're fixing a problem for employers, too, because it turns out that employers struggle to figure out who the right hires are when people don't have a lot of experience."

To develop Koru's employer-embedded training programs, Hamilton and Jarrett closed $4.5 million in seed financing at the end of 2013, followed by an $8 million Series A round early this year. Hamilton was no stranger to fundraising, having co-founded online small-business retailer Onvia in 1997, where she raised more than $200 million in capital. Koru's fundraising efforts were highly calculated, from timing and pitch strategy to investors courted and sums sought.

"Fundraising is really an art and a science," Hamilton says. "You have to be thinking, How many rounds? How much runway do I want? What do I need to do to be able to prove the next milestone?"

Here's how she and Jarrett secured $12.5 million for Koru in 18 months.

The hunt for seed funding

The founders approached a small set of prospective seed investors in September 2013, certain they had a winning idea in a multibillion-dollar market. But conviction gets you only so far. Without any business metrics or revenue under their belt, the pair had to make a convincing case.

To do so, their pitch deck leaned heavily on stats. They cited research showing that $150 billion is spent in the U.S. each year on college tuition, yet 70 percent of college grads have degrees they can't apply in the work force. Employers spend $60 billion annually to hire entry-level talent but complain that 20 to 30 percent of their hires are bad ones, with 53 percent of employers saying they can't find qualified candidates at all. Enter Koru, which strives to bridge this gap by creating hirable young professionals with proven experience.

Hamilton and Jarrett emphasized the partnerships they'd begun building with employers such as REI, Zulily and Trupanion, as well as top liberal arts colleges and public and private universities. The founders also touted their own résumés: Hamilton, who saw Onvia through its IPO in 2000, later served as COO of global education nonprofit World Learning and global director of educator strategy and marketing at Microsoft. Jarrett, a Harvard MBA and Koru's chief learning officer, spent seven years heading higher-education initiatives at the Bill & Melinda Gates Foundation.

The Deal: The pair's goal was to raise at least $1 million to prove their concept, which they predicted would take 18 months. But investor interest was so great that Koru
raised $4.5 million in roughly two months "at a very good valuation," Hamilton says, pointing out that this was a priced round rather than a convertible-note or debt-based round. Venture capital firms Battery Ventures, based out of Waltham, Mass., and Maveron in Seattle led the round.

Maveron invests only in consumer startups. "If a company does not have an opportunity to build an iconic consumer brand and become a household name, we're not interested," says Maveron general partner Clayton Lewis, who serves as a Koru board member.

Funding participants also included First Round Capital, Andreessen Horowitz, QueensBridge Venture Partners (founded by rapper Nas, who reached out to Koru unsolicited) and 10 angel investors. Most were people the founders already knew or with whom they secured introductions through their network. "We were really helped by the fact that we weren't wandering in off the street asking for funding," Jarrett recalls.

Once funded, the duo was tasked with hitting the milestones they had outlined in their seed-round pitch. That meant expanding their hands-on training programs to three weeks, hiring instructors and launching programs in Seattle, Boston and San Francisco by early 2015. It also meant attracting college grads willing to pay the program's fee, which starts at $2,749. And it meant securing enough employer and higher-education partners to make the program a success. (Partner employers pay an undisclosed placement fee upon hiring Koru graduates.)

They succeeded on all counts. Demand for Koru's experiential training programs was high. Partnerships were flourishing, too, with 20 schools and more than 40 employers onboard.

The phase was completed months earlier than Hamilton and Jarrett had predicted. Rather than risk running out of operating capital, the founders rolled up their sleeves and embarked on another round of fundraising.

Landing the Series A

Here's where the heavy lifting began. Raising Series A funds, Hamilton says, "is a much higher bar, and you have to show results."

A pitch demonstrating Koru's short track record required hard numbers and testimonials from satisfied graduates and partner . The concise, 12-slide deck also required a bit more polish. "It's important to pay a designer," Hamilton notes.

Among Koru's selling points: The startup had successfully trained hundreds of handpicked college graduates, with 85 percent of them landing "meaningful" jobs with Koru's partner companies afterward. The company also boasted a 70 to 90 percent net promoter score, with an overwhelming majority of grads recommending the program to friends, helping to keep customer acquisition costs down. Revenue was strong and growing exponentially. (Hamilton declined to share specific amounts.)

Other highlights included Koru's contractual agreements with high-growth employers such as LinkedIn, Yelp and Zillow and premier colleges such as Georgetown, Brown and Vassar. New executives hailing from the highest ranks of Amazon and Yahoo had joined the Koru team, as had an impressive list of advisors, including a vice president of recruiting from LinkedIn, as well as a bestselling author/expert-in-residence at Harvard.

The Deal: Koru sought meetings with a dozen top VC firms focused on technology and education. Hamilton and Jarrett worked with their seed investors to target the right contacts at each firm and obtain introductions as needed. "You don't want to shop your deal too much," Hamilton says. "You want to be really targeted."

Maveron, which led the round with an investment of more than $3 million, had already funded two edutech startups, Capella Education and Course Hero. City Light Capital in New York, the round's second-biggest investor at $2 million, had been involved with 2U, an edutech startup with a successful 2014 IPO. Battery Ventures, First Round Capital and Trilogy Equity Partners also participated in the $8 million round.

Most of the investors were contacts the founders had known for five to 10 years. That's the way to go, says Maveron's Lewis, who initially met Hamilton when she hired him to join Onvia's executive team in 1999.

"We're really laser-focused on backing individuals," Lewis says. "On average, we know the entrepreneurs we back in our core investments for a year and a half. For us, it's about the relationships."

Next steps

Hamilton expects Koru's 2015 earnings and customer base to increase five to 10 times over last year's. Now, she says, the test is to keep scaling; she wants to see how Koru's first three geographic markets do before speculating on when the company will expand into other cities.

In the meantime, the company is using the capital raised to expand market reach and develop technology. To that end, Koru has beefed up its engineering and product development staff, rounding out the company to 20 full-time employees.

Hamilton anticipates a Series B round at some point. The idea, she explains, is to ensure that the company always has a year or two of capital on hand. "You're always fundraising.
It's a never-ending process in many ways. That's why one of the most important skills of an entrepreneur is being able to raise money."

Countdown to VC

Every deal is different. But in general, the funding timeline can be distilled to these milestones.


Typically $500,000 to $1.5 million to sustain the business for six to 18 months.

Step 1: Develop your business plan and pitch deck. (Time to complete: two to four months)

Step 2: Develop a target list of angels and early-stage VCs to pitch. (Two weeks)

Step 3: Shop your idea around.(Six to eight weeks)

Step 4: Interested angels and VCs conduct due diligence on the founders and the idea's potential to disrupt. (Six to eight weeks)

Step 5: Interested investors will offer a term sheet that you'll usually have 15 to 30 days to sign.


Typically up to $20 million to sustain the business for 12 to 18 months.

Step 6: Once you've been operational for two to three quarters and have gained traction with customers, update your business plan and pitch deck. (Two to four weeks)

Step 7: Update your list of potential investors to include later-stage VCs. (Two weeks)

Step 8: Preview your Series A pitch deck with your seed-round investors to get their feedback before you pitch later-stage VCs. (Six to eight weeks)

Step 9: Secure Series A funds from your seed investors, then target, pitch and secure additional later-stage investors, ideally at a higher valuation than your seed round. (Six to eight weeks)

Step 10: Twelve to 18 months later, the goal is that you'll have broken even or be in shape to raise a Series B financing round.

Source: Maveron

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