How to Raise Over $20 Million Without a VC Lead

Brendan and Adeyemi

There’s a lot of talk in venture circles about startup founders who opt to raise money from a big group of individual investors in lieu of larger VC funds.

But it’s not often that I sit down with one of those entrepreneurs, which is one reason my conversation with Brendan Wallace, co-CEO of career networking startup Identified, helped put perspective on the trend.

Wallace co-founded the San Francisco social media startup in 2010 with Adeyemi Ajao, a cofounder of Spanish social network Tuenti.com, which sold to Telefonica earlier that year. Identified’s main offering is a Facebook-centered career networking and development application that targets young adults.

The company raised its first round of funding, totaling $5.5 million, from backers including Eric Schmidt’s Innovation Endeavors, former Facebook executive Chamath Palihapitiya, Tim Draper and Bill Draper. For its next fundraise, Identified is targeting around $20 million and, according to Wallace, has had term sheets “from almost every major VC.” Yet while they haven’t ruled out a venture firm, the founders are strongly considering sticking with angel investors.

“You can replicate a lot of the services VCs provide by having high caliber angel investors,” Wallace says. Angels have also allowed the two, who met at Stanford Business School, to maintain significant autonomy, he says, and they are looking to retain control of the board after their next fundraise.

That said, the agenda founders have laid out isn’t too different from what VCs usually try to do. They’re looking to ramp up users, introduce features to make their application stickier, and, eventually, make a bunch of money.

Today, Identified has about 4 million users, and has grown 4X since the beginning of the year. At this rate, founders say they expect to have about 20 million users by summer. The user demographics reflect the “Facebook  generation.” Some 93% are under 35 years old, and 60% are under 25 years old.

They launched the company, Wallace says, in part because they noticed an unfilled niche for young people active on Facebook who were looking for jobs, networking or career guidance. Though LinkedIn offers a huge network, he says, it’s attracted largely 30+ professionals and “isn’t really engineered for entry level and younger workers.”

With Identified, users fill out information about their education and job interests, plug into their Facebook networks, and get custom scores to see how well their background is suited for a chosen career path. The scores, which go from 1 to 100, are based on factors including education, work experience, and social network.

In putting together the application, Identified has collected a trove of data about how the large and Facebook-addicted Millennial Generation approaches the job market. One finding, which is both interesting and not particularly surprising, is that they are a hyper-connected bunch – with an average Identified user boasting 350 Facebook friends and some presiding over networks numbering in the thousands. Because these networks are so large and interconnected, Wallace says, they are finding it possible to connect many users to almost any sizable company.

They’ve also put together a list of which venture-backed companies attract employees with the highest average Identified scores. For engineers, Wallace says, Palantir and DropBox employees had the highest scores, above even those of Facebook and Twitter, which were themselves very high.

The company plans to make money through tools for companies and recruiters to contact its users about job opportunities. Given that much of Identified’s user base is looking for entry level jobs, Wallace says he expects that enterprise customer base will run the gamut from those offering salaried positions at large corporations to those with hourly jobs in retail and food service.