Tera Ventures latest investment and portfolio company Brainbase – an IP licensing ecosystem – has kind of a crazy background story. It’s the second company for the co-founders – all in their early to mid-20s – and the previous company they had was founded and sold without ever physically meeting.
Brainbase’s CEO and co-founder Nate Cavanaugh proceeds to explain: “Both of my co-founders are from Estonia. I connected with them through a design platform called Dribbble.
I’m obsessed with branding and product design, and my co-founders were running a marketing and software agency in Tallinn. I reached out to them because of how impressed I was with their design and work portfolio. It was very clear that they were great at building beautiful products. And they seemed like a good fit for the company I was about to build.”
Nate was 18 when he ended up building a company remotely with his Estonian co-founders for about a year and a half and then sold it to a company in New York City.
“After that, we took about a three-month break. I went back to them in the summer of 2016 and said I was thinking about building a company in the IP space. Even though it was not a space they were domain experts in initially, I convinced them to join – and we were off to the races. A few months later, we ended up getting Severin Hacker, the co-founder of Duolingo to invest, which was a very big deal,” Nate says.
A cold e-mail did the trick
But the company was looking for a lead investor – in L.A., Silicon Valley and in New York. “And then we thought why don’t we look in Estonia because my co-founders have Estonian backgrounds? We found Tera through AngelList. I saw that in addition to Tallinn they had an office in L.A. which is a little bit odd because here if you’re a European-based firm, you’d think that your second office would probably be in San Francisco or New York. But for us it was perfect. We’re also based in L.A.”
Nate says he sent Tera a cold e-mail. “This is bananas! I joke internally that my best relationships have originated from cold emails. It feels like that rarely happens in venture capital. We ended up having a call. Before they actually invested we were talking for about eight months to build the relationship and also because they were still raising their second fund. We actually reached out a little bit early. I met with Eric in L.A. and we hit it off. And I thought – damn these guys are really sharp! Erik introduced me to the guys in Europe and I flew to Estonia to meet with them.”
Choosing Tera Ventures over other funds
Nate says they considered other VC firms as well. Nate’s Estonian co-founders, obviously, liked the fact that Tera Ventures is Estonian. “There are just obvious synergies between us and a firm that’s based in Tallinn and also has a presence in L.A.,” Nate adds. “What was also interesting – we kind of realized this after the fact that we had gotten a term sheet and went through the process – a significant percentage of the companies that license out their IP are actually European based. We have an advantage – we can get in the doors of U.S. companies and customers but it helps to have European credibility. Especially when you’re selling to great European-based companies. For example, three Top 150 Global Licensors signed up for our Marketplace in the first 30 days – all of which are European-based.”
Valuable advisory and intros
But it isn’t only money that good VC companies come on board with. It is also advice and know-how. Nate remembers where they got valuable, strategic guidance. “We had launched our very first product which is a management product for intellectual property licensing and we were about to launch our Marketplace, which we consider our flagship. Our team is seven people, we’re still a seed-stage company, we’re still pretty small. Stanislav Ivanov advised us instead of launching two products concurrently and trying to build those out simultaneously which would really strain the company’s resources to launch the Marketplace as a Waitlist so that we could learn what the scalable business model is going to be, how people react to it, etc. From a product perspective, it was strategically very helpful.”
Right after we announced the round Andrus made introductions to licencing and IP portfolio companies. Those intros are great and have been really interesting from a network perspective. When you need the Tera team, they’re there to provide guidance and it’s always a good intellectual sparring match with them which is kind of what you want in an investor.
How to get your foot in the door when looking for an investment?
“I still think it’s preferred to have a warm introduction to a firm,” Nate says. “So if you know another founder that knows a partner at a firm, getting a warm intro definitely helps because VCs tend to put a premium on founder-based introductions rather than other investor-based introductions.”
“But if you have metrics and a great product you’re going to be able to get a meeting with any firm,” he stresses. “Make sure you know what you’re going to do with the money – don’t raise just to raise. Have a 12-18 month plan of what you’re going to build, what metrics you need to hit. You should be thinking much further in advance.”
Nate remembers all this was what Tera told them when Brainbase started talking to them. “We’re super happy with Tera,” concludes Nate. “They’re great. As long as we keep executing, they’re going to be there for the long term.”
What happens after raising a round?
“We’re continuing to build out our management product, Brainbase Assist, to get it to a point where we’re comfortable onboarding a lot of customers. We’re learning and exploring more about what the scalable business model for our Marketplace is going to be,” Nate describes and adds. “A million dollar-round isn’t a massive round. It is a lot of money on an absolute basis, but as a team of seven, you really have around 18 months to make sure that you have a handful of customers on, that you’re generating early revenue in order to really ramp up on sales.”
Brainbase wants to get their products to a point where they’re comfortable onboarding customers. And for their next subsequent round, they are planning to hire executives from the licensing industry and also more engineers.
„The EstFund is an initiative created by cooperation between the Republic of Estonia and the European Investment Fund and financed under European Structural and Investment Funds”