I think a lot of would be entrepreneurs have a glorified view of venture capital fundraising. That you come up with a great idea and somehow go into a meeting, pitch, and get a check. It may have very well happened like that at the peak of the dot com boom, but based on our experience, probably very seldom happens like that now.

Fundraising is a pain in the ass for entrepreneurs. It takes a tonne of time and is a huge distraction.

This is the story of my first real venture capital fund raising experience.

The startup was Swagsy and we were building a celebrity curated shopping experience where tastemakers brought their fans and followers sweet deals on their favorite products and services.

We had been working on Swagsy for over a year but got serious at the tail end of 2011. I had built an early prototype that, in hindsight, we should have went to market with in order to stay lean and test our hypothesis on the cheap. But I suffer from the same sense of idealism that a lot of product guys do – I wanted Swagsy to be awesome. So my co-founders and I decided to invest our own money into Swagsy and bring on some additional development help.

By March we were armed with a very slick alpha product. Our business dev efforts had delivered some early commitments from celebrities and brands. I had also managed to build out the team with some very talented people who joined us on either an equity or commission only basis. We had also put together an impressive set of advisors who could help us along our journey.

We decided it was time to raise money.

In late March 2012, I scheduled a lunch with our advisor Jody Sherman to discuss our fundraising plans. Jody was very clear about his opinion, “Forget about fundraising for now – just launch!”

My opinion was that we had taken Swagsy far bootstrapping and while we hadn’t ‘launched’ we had traction in other forms as well as budding investor interest. I didn’t need to prove end user traction, right?

Knowing that we had some loose ends to tie up on the product side and had more business development work to do, we moved forward with our fund raising efforts.

I feverishly worked on a slick deck that was inspired by the open sourced by DressRush deck. Of course I also spent a lot of time creating detailed financial models that outline how much capital we would require, our use of funds, and all sorts of assumptions.

We were armed.

We set up meetings with a smorgasbord of angel investors in both the technology and entertainment communities. We pitched at angel group events. We met with accelerators. We even took meetings with a few early stage VCs.  Our efforts spanned both northern and southern California.

It was a huge undertaking to go on all these first and second dates and we spent over three months doing it. They all seemed to have gone extremely well. Everyone was saying the same thing. They thought we had a good idea, they were impressed by our alpha product, and thought we had a strong team with complimentary skills. We were feeling like real players.

But then came the eventual ‘We are interested in investing but want to see what happens at launch’. We came to realize that there was a common concern about whether we could actually execute on this grand plan. I guess that I can see why people might think we’re a little audacious – or crazy – to suggest we’ll get a bunch of celebrities to cooperate. And to be frank, it was. Getting a group of celebs to cooperate on a project is like herding a group of wild cats.

In late May / early June of that year we realized that all of our attention was going into fund raising and the rest of the business was suffering. It was time to scale back our efforts.

One of our close angel investor contacts had already made a commitment for $100k very early in our process but our goal was to raise $1 million to get the company off the ground. We reluctantly realized we should have taken that $100k and focused on getting our minimum viable product to market rather than chasing investors for 3 months.

So we decided to sign a convertible note for $100k, walk away from fundraising and go back to building the business.

While I think that our timing was off, I don’t feel that our time was wasted. We learned our lessons.

Lesson #1 – Never meet with VC’s unless you are 100% ready to fundraise. We were almost there but weren’t quite there. Our efforts would have been better focused on building the business and getting to launch.

Lesson #2 – Focus on the right investors. Being fairly new to the fundraising process, we spent a lot of time meeting with people that were not a good fit. The stage of our business was far beyond the value add an accelerator could provide and the terms at which they invest wouldn’t make any sense. This was hit home by Howard Marks, Co-chair of the LA based accelerator Start Engine, who simply responded to our pitch with a “Why are you here? You don’t need an accelerator”.

Lesson # 3 – It’s not just the stock market that is focused on short-term results. We hear all the time about how Wall Street is too  focused on today’s earnings rather than investing in tomorrow’s opportunities for growth. Well this is becoming the norm for early stage venture capital as well. These days traction outweighs ideas, team, or product. Investor interest will absolutely be affected by how your business performs during the months they are considering investing in you.

Ultimately we did go to market with a beta Swagsy product.  We built a great beta site and a ran small pipeline of ‘flash sale endorsements’ using celebrity curators.

However, in the end our hypothesis was wrong. The economics of the performance-based endorsements business model just didn’t equate to a scalable business. Celebrities had unrealistic expectations for upfront and post sale payouts when, in reality, a celebrity micro-endorsement via social media does very, very, little to push product.

We could have tested our hypothesis for a lot less money by following lean startup methodology. But we were blindly chasing the startup dream.

I’ve had lots of time to reflect about the experience and I have no regrets. I also don’t look at it as a failure because, as torturing as it was, the experience was priceless and I learned more about startup life, the inner workings of Hollywood, and the venture capital economy than most will ever have an opportunity to.

Success is nurtured by failure.