How to Raise Capital in a Niche Space
By: Nathan Beckord
Tags: Founder Stories, Startup, Venture Capital, Entrepreneurship, Founders

How to Raise Capital in a Niche Space

For first-time fundraisers, finding the right investors can be tough.

When co-founders Frank Reig and Paul Suhey started Revel, an all-electric moped rideshare company, in 2018, they knew they had a good idea on their hands. But things only began to click on the funding front once they zeroed in on investors in the transportation space.

Before starting Revel, neither co-founder had experience with fundraising or launching a startup. The idea for the company was sparked during a December 2017 visit to Argentina. Frank noticed how often mopeds were used in the South American country and how efficient they were, and wondered why they weren’t part of the ridesharing world in the United States.

“When I got back to New York, I couldn’t shake this feeling of, ‘Why is everyone driving around in major cities with SUVs?’” Frank says. “You can’t park. There’s congestion constantly. It’s expensive.”

As moped sharing companies cropped up in Europe with companies like Cooltra, Frank saw an opportunity to bring the same concept to North America, where car sharing and scooter rental startups — including Uber, Lyft, Bird and Lime — already flourished.

When he returned from Argentina, he got to work, and just two years later, the company has raised over $27.6 million and operates fleets of electric mopeds in New York City, Miami, Washington, D.C. and Austin.

On an episode of How I Raised It, Frank sat down to share the top tips that helped him and his co-founder get Revel off the ground — despite starting the process with zero fundraising experience.

Build a network of 57 angels clamoring to write you checks

Frank started with research — and then created an action plan.

“In my head, it was just kind of, ‘If I don’t do it, someone else will — so let’s do it,’” Frank says. He moved “from idea to hardware to the streets” in just under six months.

By early April, after bringing Paul on board as a co-founder, Frank quit his job to put together an investor deck and start fundraising. In March of 2018, Revel started looking for angel investors.

“At that point, we were looking to raise about $700,000,” Frank explains. “That was the minimum amount needed to buy the mopeds, get this set up, hire a small team and do it.”

Frank and Paul each put in $40,000 — the most they could each afford to invest — and didn’t take a salary to start. They also received a number of checks — ranging from $10,000 to $20,000 — from friends and family.

Next, they targeted investors in New York City.

“Neither of us come from what I would call money,” Frank says. “I didn’t have a network. Neither did Paul.”

They sent LinkedIn messages to individuals in the car, bike and scooter-sharing space, asking to meet for a coffee. Soon, they had put together a small advisory board. Those advisors were able to connect Frank and Paul to angel investors in the space.

“That was really crucial for us,” Frank says. “One of the people we brought onto our advisory board was one of the founders of Citi Bike. He then made introductions to four or five folks who were original angel investors to Citi Bike back in 2012, and we got a few of them on board to invest in us. But that never would have happened unless I reached out to that person through LinkedIn, got them excited about the company, got them on our advisory board, and they made some introductions.”

All told, they raised an angel round from 57 different investors who contributed between $10,000 and $70,000 each. With $1 million raised, Frank and Paul were ready to build out their business.

Go after investors that play in your space

Thanks to the angel round, Revel launched a successful pilot in Brooklyn in July 2018 and used the metrics of its success to launch a seed round in November. But even with data that showed traction, Frank initially had a hard time raising money during Revel’s seed round.

Why? He hadn’t zoomed in on the right investors yet.

“We were raising at a time when you’ve got companies like Bird and Lime raising $300 million rounds — and any investor you went to with anything that wasn’t a kick scooter in the summer of 2018, they kind of looked at you like you had two heads,” Frank says. “Like, ‘What do you mean there’s a world of transportation? It’s not a kick scooter?’”

Frank met with 100+ venture capitalists that summer. But something felt off in those meetings — he got the feeling they were not serious about actually investing in the space, that they took the meeting just to learn about transportation.

“I came home one day and said, ‘I think our problem is we’re not talking to transportation people,’” he says. “So I literally Googled the top 10 transportation venture capital firms, then went down the list of those 10.”

He had only spoken to two or three of those firms when he got an introduction to Maniv Mobility, a Tel Aviv-based venture capital firm investing in mobility technology startups. Six days after their initial conversation, Frank had a term sheet from them, kicking off Revel’s $4 million seed round.

“Make sure you’re touching base with the venture capital firms that are specific to your industry, rather than the VCs that happen to be in your city or close to you,” Frank suggests. “Sometimes you need a venture capital firm that just understands a specific space.

Leverage your growth stats

The Revel team used the $4 million seed round to expand further into Brooklyn and Queens in June 2019 — and the data that came out of their successful expansion made raising their Series A in October much easier.

“We showed product-market fit, and if you can show product-market fit in a real way, the Series A is going to happen very quickly,” Frank says. “If you have your inventory, you completely run out, and all you’re trying to do is keep inventory there and sell your products…it makes things a lot easier.”

With that data in hand, Revel raised $27.6 million in their Series A, led by IBEX. It was a large sum for a company under two years old, but still a smaller amount compared to the funding competitors like Uber and Lime have received.

But Frank isn’t worried about that. “We’re focused on a very specific type of product, and we’re not trying to be multimodal right now,” he says. “We’re trying to be the largest electric moped operator globally by next year. It’s a very specific goal that we’re shooting towards.”

Nathan Beckord is the CEO of Foundersuite.com which makes software for raising capital. Foundersuite has helped entrepreneurs raise over $2 billion in seed and venture capital since 2016. This article is based on an episode of Foundersuite’s How I Raised It podcast, a behind-the-scenes look at how startup founders raise money.