This Founder Raised $68.1 Million Last Year, But Only After Admitting to Investors: ‘It’s a Crazy Situation… I Don’t Have Great Options’
Option 1 #Option1
John Berkowitz grabbed a surfboard, paddled out into open water, and let loose nearly a year’s worth of anxiety. “I just screamed,” he says. “At the top of my lungs. It was the most incredible PTSD scream I’ve ever done.”
Berkowitz had begun 2020 trying to acquire a larger company, which was already stressful. Then the pandemic set in, causing chaos. Investors were scared. Travel was impossible. But he pulled it off — raising $68.1 million, outlasting competitors, navigating cultural barriers, and transforming his business as a result.
Now, he realizes, the pandemic pushed him into a great lesson about business. He discovered that with the right attitude, downsides can become upsides. “You can lean into the uncertainty,” he says. “I gave ruthless transparency into our business.”
Related: 4 Things to Understand When Buying a Business
The saga began in September 2019. Berkowitz is the founder of the Austin, Texas–based OJO Labs, an online platform to help people buy and sell homes, and he had a great chat with the CEO of Movoto, a large online real estate brokerage. Berkowitz saw an opportunity. If he could buy Movoto, he’d gain millions of customers and take a massive leap forward.
It wouldn’t be easy, though. “When I pitched it to my CFO, it sounded so crazy,” Berkowitz says. OJO Labs would have to raise tens of millions of dollars and keep it all a secret (because competitors, and even some of OJO’s investors, might want to outbid them for the deal). Movoto was owned by a Japanese company, so Berkowitz would need to spend time traveling overseas, navigating the country’s complex, relationship-driven business world.
Still, by late 2019, he felt confident enough to try. He set out to raise money — but 150 investor meetings went nowhere. “Literally every one of those 150 pitches was different because after every pitch, I received new feedback on the one prior,” he says. When the pandemic arrived, investors stopped taking meetings so they could focus on their existing portfolio.
Related: Let’s Talk About Raising Capital in the Pandemic
Meanwhile, Berkowitz had begun negotiations with Movoto’s owner, but it wasn’t going well. “This company was very thoughtfully saying, ‘You don’t have the money to buy us,’ ” Berkowitz says. Movoto then started courting other buyers — just what Berkowitz had wanted to avoid.
This was when his swagger started falling apart. But it’s also when things started looking up. Berkowitz confided in an early investor, explaining how badly things were going — but that he refused to give up. That investor connected him with a fund manager who is also based in Austin, and as much as Berkowitz wanted to welcome him to the OJO offices and impress him with their swanky digs, they decided to meet, safely, via Zoom. “It wasn’t much of a pitch,” Berkowitz says. “I was like, ‘It’s a crazy situation. It’s an incredible value. I don’t have any premium investors. I don’t have great options.’ Which meant he smelled value.”
The two started working out a deal; once that was done, other investors followed. Meanwhile, more good news: Although Movoto had begun acquisition talks with other companies, they were all scared off by the pandemic — causing Movoto’s price to fall. Even though Berkowitz had yet to secure financing, his talks with Movoto now picked up.
Related: 10 Dos and Don’ts When Raising Capital for a Fast-Growing New Business
This would usually require multiple trips to Japan, with formal meetings and high-stakes dinners, but the pandemic forced everything onto Zoom. And that ended up working in Berkowitz’s favor. “It’s hard to build a relationship in a boardroom,” he says, “but when you are in your house, and your kid busts in and the internet goes out, we all get to know each other a little bit more intimately.”
In June 2020, it all came together, and he went on vacation to Florida. “I gave the entire company the next week off,” Berkowitz says. That’s when he paddled out into the ocean, screamed, and came back to shore. He’s not afraid to tell that story, either. After this deal, he knows that raw honesty has its upside.