How Turing’s CEO Raised Capital Using The ‘Parallel Fundraising’ Approach
2020 provided one watershed moment after another for Turing. The company grew 17x in revenue (from $700K to almost $12 million), expanded its customer base to include several high-profile companies, and last but not least, raised nearly $50 million in venture funding. In September 2020, Turing announced a $14 million seed round of funding led by Foundation Capital, followed by a $32 million Series B round led by industry-heavyweights including WestBridge Capital, a fund with over $3 billion under management, along with Foundation Capital. The quick capital raises remain notable for several reasons: not only did Turing co-founders Jonathan Siddharth and Vijay Krishnan raise a large sum in a relatively short amount of time, but the duo also did so in the midst of a global pandemic.
What’s the key to raising a sizable amount of funds for your start-up? In a post that recently appeared in Entrepreneur Magazines, Jonathan explains.
Convention largely dictates that at first, entrepreneurs spend 100% of their time setting up their companies — then pivot 180 degrees to focus entirely on securing additional funding. Along with Vijay, Jonathan employed this strategy while building and successfully selling their previous AI-backed start-up, Rover. Thanks to this learning experience, they decided there could be a smarter way to raise capital. Thus, with Turing, the two co-founders turned conventional fundraising on its head. The duo dedicated 80% of their time to company building while channeling the remaining 20% into fundraising. Jonathan terms this ‘parallel fundraising.’
To derive maximum benefit from a parallel fundraising approach, Jonathan recommends following some simple principles. First, synchronously apply investor insights to your company-building activities. Think about it: gathering and implementing investor feedback is simpler while you’re in development mode than it is right before you’re ready to go to market. This way, you don’t need to overhaul your product moments ahead of a market-wide launch, all in an attempt to meet investor expectations.
Second, during your seed round of funding, leverage SAFE (Simple Agreement for Future Equity) notes, an increasingly popular form of convertible security. You can use them on a rolling basis, which fittingly complements the parallel funding approach. What’s more, with SAFE notes, you can progressively adjust your valuation cap. Jonathan recommends beginning with smaller, more reasonable tranches.
Finally, measure the impact of an investor meeting by the number of valuable insights you collect, not by the amount of funding you secure. To make the most of such feedback and insights from investors, Jonathan suggests identifying their ‘superpower’ — that is, their area of savvy and expertise. This strategy allows you to pinpoint whom to approach for help with a particular business challenge.
To recap, parallel fundraising — that is, strategically splitting time between company-building and fundraising — is the secret sauce behind Turing’s significant fundraising numbers. To make the most of this fundraising technique, co-founder Jonathan prescribes three key points to bear in mind: take full advantage of the continuous flow of investor insights, opt for the SAFE fundraising route, and take keen notice of ‘investor superpowers.’
To read about Jonathan’s parallel fundraising approach in greater detail, head here.
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