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With Y Combinator Demo Day starting tomorrow morning, startups on the current batch are rushing to make some news before showing off their recent growth to investors. The list includes Runway, Mono, Pangea, and Flux.
Add Chums to the mix. Chums is a social shopping service that helps friends suggest products to their friends. And the startup has raised a total of $ 3.5 million in two pre-seed investments.
TechCrunch spoke with Noah Elion, one of the founders of Chums, about the round. He said his company closed $ 1 million in December, and would then look to raise another $ 1.5 million. Interest in the startup’s stock was high, so Chums ended up raising $ 1 million more than his last goal, for a combined $ 3.5 million.
The company refused to share the limit to which the funds, raised through a SAFE, were insured.
The $ 1.5 million goal was based on the amount of capital his company would need over the next 18 months, Elion said. The final sum came from Ludlow, Shrug, Contrary Capital and Fuel Capital, among other firms and individuals.
How did a company in the middle of Y Combinator manage to raise an old-school Series A round of capital despite launching their product only a few weeks ago? The background of your founding team helps some. Co-founder Dick Fickling was an early engineer at Honey, for example, another startup focused on shopping that had a material departure.
The startup’s service is a mobile application that allows users to follow the types of products they want to buy and to suggest products to each other that could be tailored to the needs of their friends. It hit the market three weeks ago, or as Elion explained, just before his company went out to raise funds. TechCrunch asked about the initial traction, to which Elion said it was too early to say much, although his team has seen “encouraging” levels of participation so far.
The startup is four people today, which its website describes as a group of friends. This is mostly true. Elion and Fickling teamed up after the former built a predecessor to Chums, called the Chums Referral, becoming friends in the process. Fickling was previously colleagues and friends of the people who make up the rest of the team, namely Lauren Williams (director of engineering) and Lena Gasilina (product).
The team is looking for a designer and front-end developer, but after that the hiring ends. He intends to stay at six people until his next round. Why? You want to achieve product market fit with half a dozen employees. Doing so should be able to raise more money with a comfortable valuation. The idea makes some sense, although it was a bit strange to hear that a startup plan measured growth to preserve capital in 2021.
Chums makes money from the commissions of the recommended products, dividing the income with the users. Elion declined to share the network, or networks, his company is working with to secure business ties with retailers, but noted that Chums will go directly to securing better deals over time.
With a closed round, most of their gear in place, and an app on the market, now it’s up to Chums to prove Elion’s opinion, Google is too duped, and Amazon is better when you know what you’re looking for. In the co-founder’s opinion, people liked shopping malls for their “diversity of content” and as a space for “spontaneous shopping.” Perhaps Chums can fit into that niche and, in the process, generate some serious coin.
