Hosted by Rich Adam, Managing Director, Technology Sector, Raise delves into the remarkable journeys of Canadian tech startups and their approach to successfully raising capital.
Raise is a PwC Canada produced podcast in collaboration with TechTO.
SnapTravel CEO and Co-Founder, Hussein Fazal, joins Raise to talk about his fundraising learnings gained through raising capital for a B2C startup. From the importance of getting to an answer quickly to the value of having an investor that's as excited about your vision as the numbers, Hussein walks us through key investor considerations for new founders looking to close their next deal.
Rich Adam: This podcast has been produced by PriceWaterHouseCoopers LLP and is for informational purposes only. Content discussed is for general guidance on matters of interest and should not be taken as professional legal, business or investment advice. Welcome to Raise, a new PwC podcast series where each episode showcases a Canadian tech entrepreneur and takes a deep dive into their fundraising stories. I your host Rich Adam, Managing Director of the technology sector here at PwC Canada.
Happy to welcome Hussein Fazal to today's episode. Hussein is the co-founder and CEO of SnapTravel a B2C online booking platform for hotels. Welcome Hussein.
Hussein Fazal: Hey, thank you very much. Thanks for having me.
Rich Adam: Listen, love to have you explain a little bit more about SnapTravel. Where it started, the kind of background for yourself and your co-founder.
Hussein Fazal: Yeah, sure. So I'll start with my background So I'm a repeat tech entrepreneur. My first business was a company called AdParlor. So, graduated from Waterloo, did a couple of years of full-time work and then started AdParlor. It was a Facebook ad optimization company. So we optimized Facebook ads for companies like Starbucks and Netflix and Groupon. Ran that company for three years, sold it to Adknowledge, stayed on for three years, and then took some time off. Took some time off, traveled the world, did some volunteer work, and tried to figure out what I wanted to do next, definitely decided I wanted to start another company. I met my now co-founder, Henry, who was an engineer at Google. He wanted to leave his job at Google, I wanted to start another company so we came together and started SnapTravel.
Rich Adam: That's great so a proven tech entrepreneur with a track record and an exit, you've got an engineer with Google pedigree. It's a nice combination for you, being able to start a business.
Hussein Fazal: Yeah, definitely. It definitely helped in terms of being able to fundraise, which I'm sure we'll be talking about. But also just being able to run and operate a business. Right? Like, I built a big business before and Henry also has a ton of great business sense plus, obviously the tech ability to scale things so that really helped. So let me tell you a bit about SnapTravel. We believe that commerce should be as simple as chatting with a friend. So people don't want to download apps anymore, they spend all their time chatting with their friends on WhatsApp, on SMS, on Facebook Messenger, so the same way you pick up your phone and you chat with a friend, you should also be able to chat with businesses and you should be able to conduct commerce. So what SnapTravel does right now is very simple. We allow you to book a hotel room over your existing messaging apps. So whatever app you use the most, SMS, Facebook Messenger, WhatsApp, imagine you pick up your phone and the same way you message your friend, you message SnapTravel. So you can say, "I need a hotel in New York next weekend with free Wifi under three-hundred buck near this location," and we'll go and use some natural English processing and machine learning to understand exactly what you're saying and get back to you with the best result. So first, search becomes really really easy you pick up the phone and you just type what you want. Number two, we have access to really good pricing so when you go and you run that search you'll get some great hotel deals. And then number three, we use messaging to create this ongoing experience, this conversational experience. Almost like having a travel agent. So if you say, "hey, I need to add my spouse to the reservation," if you say, "I want to get an early check in," "I want to know if the pool's heated," You'll instantly have someone you can message. So it's a combination of chatbot technology, human agents, we have about seventy to eighty humans who are kind of, you know, online ready to answer you, and a user interface. So a combination of UI bot and human create this great conversational experience to book hotels.
Rich Adam: And certainly, that level of communication and that format of communication is becoming increasingly common, and I would say expected around among consumers. Let's talk about the fundraising experience. You certainly did a seed-round and happy to hear some of the background on that and then certainly love to focus a little bit more of the time around the Series A, which was not an insignificant amount, it was 21.2 million dollars and again we can talk about that size of Series A as it relates to a B2C business perhaps versus a B2B business and what kind of drives that value.
Hussein Fazal: Yeah, sure, so on a B2B business you're typically hiring sales people, you're hiring sales ops people, you have long sales cycles. It's a different kind of business. On the B2C side, it's primarily performance marketing so you're media buying at scale and you need to figure out a model where you can put a dollar in and you can get more than a dollar out over some reasonable amount of time. Now, fortunately my entire last company was ad optimization, so I understand the game pretty well essentially, you need money to spend so you can continue to test and learn specific channels and how well they work and how well they don't work.
Rich Adam: When you talk about the process to go through closing the Series A we always like to touch on due diligence. Right? Because it's a necessary evil, if you will, in the process. Can you share a little bit about that experience?
Hussein Fazal: Yeah, sure, so we had talked about this a bit earlier and this goes back even before the due diligence, the fundraising process between Canadian investors and U.S. investors.
Rich Adam: A topic we always love to dive into as well.
Hussein Fazal: So what you'll find is Canadian investors are generally a lot more conservative. They want to meet you may more times, they want to look at every single number, they want to see that you're going to get to profitability very fast. Whereas U.S. investors are a bit more looking at the vision, looking at the dream, are you solving a big problem? Do you have a good team? Are you in a big space? And I think that's what's more important to the U.S. investors. And they're also will be a lot more aggressive in their projection.
Rich Adam: If we can maybe talk about that process in terms of it's kind of kissing the proverbial frog in terms of the number of investors that you go to before you get people to choose to lead to choose to follow on. Can you talk a little bit about that in terms of how many investors you spoke to in Canada, how many you spoke to in the U.S.
Hussein Fazal: Yeah, probably throughout the Series A process we raised, initially, a pretty large check from Inovia, a little while later we raised a pretty big check from Telstra so we kind of combined those two together as our Series A. But I would say, in that process, probably spoke with almost every investor in Canada so that's maybe twenty, thirty-ish. And then in the U.S. probably fifty to one hundred. Even though I had a successful exit before and we have an ex-Google engineer, and the company's doing well and it's going up and to the right it's still not easy. You're gonna get a lot of no's. But you only need one investor to say yes and you're good to go.
Rich Adam: And I think that's important for people who are considering fundraising or have done a smaller early round that even, like you said, for people who've got a great track record and a super strong team it's still not easy. You still have a lot of people saying no, likely or otherwise.
Hussein Fazal: Yeah, it's not easy. The good thing is when you get investors who say no right away the annoying part is when you have investors who want to keep meeting with you and keep asking me for information and then eventually say, "Hm, I just don't know that now is the right time for us." So that can be frustrating, and I'll just kind of jump into it --
Rich Adam: Yeah, I want to unpack this because before we started recording you shared some thoughts and maybe a practice now that you've undertaken to try and get to know quicker or get to serious conversation so that it's in the best interests of you and really any other founder that's trying to raise money.
Hussein Fazal: Yeah, so this is something I do now and it may be a little bit controversial or maybe even hard for some other entrepreneurs to do, but, I get reach outs from investors all the time and most of the time they're associates or more junior people on the team and I will now straight up not take a call with them unless they bring a partner on the phone. And the logic is I've been through this before so I've been through stages where I spoke to the associate and they asked for data and then, you know, I do a call with them and then I meet them in person and they maybe bring someone slightly more senior and then you have, you know, a VP and associate and I fly down there and I meet them in person, they ask for more information and then eventually I get to a partner and the partner will very quickly make a decision, yes or no, based on the information that I could have got at the very start of the process. The partner, generally, in some short amount of time has some pretty quick decision and whether it's biased or not is kind of irrelevant, because they're the ones making the decisions so you might as well get to that partner as fast as possible.
Rich Adam: That's great advice. And to your point, maybe not as easy as your making it seem.
Hussein Fazal: Well it's hard because for a lot of entrepreneurs it's like, "oh my god, whoever it is reached out to me," and it's not easy to be like, "no, I'm not going to talk to you." But generally, I mean, actually that probably gets you more respect in the eyes of the VC to be able to say that. And I'm not trying to game the system, it's actually the truth. It's actually, I used to waste a lot of time talking to a lot of investors and then eventually getting getting to a partner who would say yes or no. The other thing I will say is that when you get into the due diligence phase and you look at the numbers there's always ways to look at the numbers in a certain way or think about them in a certain way that can get you to a yes or get you to a no. Because you can always find something to convince you one way or the other so I think it's really important that, right off the start, you have a partner who's excited about it, who's excited about the vision, who's excited about the founders and the company, and the numbers and the direction. Because then that ends up permeating in what the analysts are looking for in the numbers. Again, go to the partner first, get them on board. Make sure they're kind of, you know, leaning in the right direction and then feel free to spend hours with the other people, the underlings.
Hussein Fazal: To get them everything they need, to justify their decision.
Rich Adam: A lot of who you may be reaching out to, investors, you can find out a lot about them in terms of what their thesis is for investment, right? The areas that they may be focusing on and you're not going to go to somebody who's got a track record of health tech investment to talk about B2C travel.
Hussein Fazal: Yes.
Rich Adam: So to the same point, you can get a good understanding of that partner within that firm before showing up there. So the same way that you want them to kind of understand you or at least have that mindset. Is the partner your representing going to actually be able to invest in my company based on what is available out there?
Hussein Fazal: Yeah, I mean, all of these things are popping into my head now, now that you say that. The other really important piece is to make sure you talk to the right partner. Because what happens is, you go to a specific firm if you get the wrong partner and that partner says no, now that firm is off the table for you. What you should be doing is asking for an introduction to a particular partner because they lead the investment in Company XYZ or they lead the consumer internet You can't say, you know, "introduce me to this firm." It's like, "hey, introduce me to this guy at this firm because he's invested in this company and I read his blog posts and his tweets and, you know, this is the direct-- these are the things that he or she believes in." And I think that's really important. To get to the right partner at the right firm.
Rich Adam: I would also just like to expand upon that a little bit in terms of building the relationships with A) the right partners, and the right firms and things but also maintaining that relationship. People don't write check based on the first meeting. Not at this level, right? You have to build that relationship, build that mutual trust, interests in working together, all of the things that kind of come into play with that. Can you talk a little bit about how you've maintained relationships over that time?
Hussein Fazal: Yeah, so that's a really good point and like you said you're not going to meet a VC and they're not going to write you a big check in, like, three weeks after meeting you. What's likely going to happen is you're going to have to build that relationship over time. And I will say that, building relationship with an investor shouldn't be hard or painful. You should hang out with investors who you get along with and you should hang out with-- the same way you would hang out with friends. There's some investors you meet and it just doesn't really click and there's some investors who you meet where it does click and you're just like, "I like you, you like me. You understand what I'm saying, I understand what you're saying. I'm asking the smart questions, you're asking the smart questions. It's like, you feel good and when that happens, you should make sure to stay in touch with those people and whether or not you're officially asking them for money at that time, you should keep them up to date and you should, you know, send them regular updates and, you know, every time there's like a big news story or something big that's going on, you should update them and just kind of stay top of mind because it will take time.
Rich Adam: So further validation to that point and a number of our previous guests have commented on that same idea. It's not always about when you're asking for a check to be cut, but also just kind of building up and showing the progress of the business at each and every step.
Hussein Fazal: Yeah, definitely. And I can understand that's difficult for first time entrepreneurs because they don't have a network. So the seed rounds always a little bit more difficult but definitely if you've done that, you should maintain all of those relationships from the seed round because at some point when you raise your receivers aid those relationships will be valuable.
Rich Adam: Another area that we really look to try and touch on is, when you're looking for a partner you've talked about the fact of just being able to get along with that person and socially interact for potentially hours on end, what else do they bring to the relationship other than just the capital?
Hussein Fazal: Our seed investors Lightbank, Bee Partners, they've been great and just being super supportive. I mean you find, at the seed stage, just find people who believe in you as an entrepreneur and, you know, and that's been great. Inovia, during out Series A, they've been super helpful because they're a larger firm and the partners and the staff they have, Inovia employees are very well networked and very smart and very diverse. With Telstra, they're a slightly smaller firm but they made one of the best introductions probably ever, which is, when we were looking to raise money, they said, "Oh yeah, we can introduce you to all these strategic investors, including NBA superstar, Steph Curry."
Rich Adam: I've heard of him.
Hussein Fazal: Yeah a lot of people have heard of him and, you know, that wasn't the only reason or the reason why we ended up, you know, picking them but obviously we were like, "okay, yeah that's cool. That could be interesting." Especially for a B2C company, right? Like, a B2B company is a little bit different but for a B2C company who's trying to build a brand that could be interesting. So Yash Patel at Telstra introduced me to Brant Barr who is Steph Curry's manager. I spent about half an hour to an hour with him in San Francisco and then over the next few weeks we spent a lot of time on phone calls and video chats and emails and at a certain point we was like, "okay, like, I like this. I'm going to talk to Steph and if he's in then we're in." And he was in, he liked it. So, yeah, they put in some money.
Rich Adam: I think the return on that, other than just some of the kind of halo effect that you get from having Steph Curry on your cap table is, to your point, B2C business building a brand, here's somebody that has a lot of reach and influence in terms of being able to share and market, you know, SnapTravel through social media platforms.
Hussein Fazal: Yeah, yeah and he's done a great job. So he's, you know, posted on Facebook, on Instagram, on Twitter, he actually wore a SnapTravel hat during game four of the NBA finals and we talked about, you know, collaboratively, what can we do more together and he's just great. SC30's great, and they've just been super helpful and super collaborative. For us, I mean, to build a consumer brand is expensive and on a start up budget it's not really possible to compete with some of the larger travel players. So when you have someone like Steph Curry on your side, it really gives you an amplified effect.
Rich Adam: Let's lay the cards on the table here. Last year, Golden State Warriors vs. Toronto Raptors NBA finals. You're from Toronto and, you know, let's say it, who did you cheer for?
Hussein Fazal: I cheered for the Raptors. Yeah, and like, I'd been a Raptors fan for 25 years, since their inception so I had to continue doing that. And I told Bryant and I told Steph. I was like
Hussein Fazal: Right? "Like I love you guys--"
Rich Adam: A little difficult in that board meeting, perhaps.
Hussein Fazal: Yeah, I was like, "Steph, you're like, you know, The Warriors are my number two team and like, I'm going to cheer for you as a player. I hope you score 50 points, but my loyalty is with The Raptors because I've been a fan for so long."
Rich Adam: You're not alone in terms of number of people who were cheering for The Raptors for that period of time and it was an awesome experience and that's a whole different podcast. Ready for a rapid fire round to finish things up?
Hussein Fazal: Sure, let's do it.
Rich Adam: Alright. What is your go to resource for all things fundraising and venture capital?
Hussein Fazal: I use Crunchbase. I like to see most of the time I think about a company I was like, "okay, how much have they raised, who have they raised from?" Or when I look at a firm I'm like, "who have they invested in?"
Rich Adam: What is your biggest single learning from your fundraising experience?
Hussein Fazal: I think it's what I had mentioned earlier, which is, try and get straight to the partner as fast as possible and try not to waste too much time with the other people.
Rich Adam: And what would you do differently if you were to do the process again, or maybe for a future round?
Hussein Fazal: Yeah, I think I talked about building relationship I think I could always do a better job with that. A lot of times when you try and raise and someone says, "oh, it's a bit too early for us," It's easy to just be kind of like, "okay fine, like, I'm not going to talk to you anymore." But really, sometimes that's the truth, right? And I think I should and will do a better job of maintaining relationships for those investors who you get along with but it is actually just too early for them.
Rich Adam: And if there's a single piece of advice that you would share with other founders that are looking to fundraise. What would that be?
Hussein Fazal: I would say, immerse yourself in the environment. So one thing we talked about earlier is spending time in San Francisco. Over the past ten years, over my last two start ups I probably lived in San Francisco two or three years. It's one thing to fly in for meetings, it's completely something else to just say, "hey I'm going to live here for three months," Because the networking, formal and informal, that you're going to do is going to be worth it. So, go out to the Valley, spend some time, eventually come back to Toronto and build your business.
Rich Adam: Thank you very much, Hussein. Congratulations to you, your co-founders, and the entire SnapTravel team on your success to date, and certainly we'll be cheering for you from the sidelines going forward.
Hussein Fazal: Awesome, thank you very much.
Rich Adam: Thanks for listening to Raise. You can get more details at PwC.com/ca/raise if you enjoyed this episode and wanted to hear more, please subscribe on iTunes, Google Play, or your preferred podcast platform. Until the next time.