Martin Källström
knowledge / philosophy

Fundraising & Investors

Across three companies, Martin Källström raised money in almost opposite ways — Twingly's cautious single round in 2007, Memoto's deliberate staircase of grants, loans, seed capital and a crowdfunding campaign, and Narrative's roughly 100 million SEK across venture capital, crowdfunding and a corporate investor before the 2016 bankruptcy. What ties the accounts together is a single mechanism he keeps returning to: companies don't die of bad products, they die of running out of cash, and pricing, financing sequence, investor selection and even crowdfunding are all just ways of managing that runway.

Companies fail for one reason: running out of cash

"In the end there's only one reason companies fail, and that's running out of cash." Martin states this as close to an immutable law — strategy, product and market all flow through it — which is why his retrospective on Narrative's collapse focuses so heavily on margin design and cash runway rather than on the product itself. ▶ 21:35

The mechanism he blames most is pricing for growth instead of cash flow: "we priced it as a strategy to maximize growth, not to maximize cash flow." Narrative ran on roughly 10% margin in channels where it needed 30–40% to sustain itself, a problem that no amount of good execution could fix after the fact — a lesson he says Instacart founder Max Mallen later validated by making unit economics, not growth, Instacart's primary metric. ▶ 28:11

That pricing trap had a name at the time: investors telling him, in effect, "we'll finance you — just make the product as affordable as possible." Martin says Narrative's failure to hold margin against that pressure was a direct cause of the eventual cash crunch. ▶ 18:09 He later judged Narrative's funding rounds too short: one round was budgeted to last 24 months when 36 would have been safer. Breakit ↗ The first sign of trouble, in his own account, was realizing how little runway separated the Narrative Clip 2 launch from the next fundraise — "the first big red flag we saw raised in front of us during 2015." ▶ 16:14 Bad timing compounded the problem: GoPro published a catastrophic earnings report the day before Narrative's prebooked Series A meetings began in January 2016. ▶ 20:27 Narrative's CTO later drew the same conclusion from the outside — that investor pressure had forced the company to grow faster and take more risk than was sustainable. TechCrunch ↗

As a counter-example of the opposite instinct, Martin points to Google's 1999 Series A, when the company kept most of the money in the bank rather than spending aggressively — caution he's unsure was foresight or reflex, but treats as the model he wishes he'd followed more closely. ▶ 26:37

Build a financing staircase

"You can picture climbing a staircase where the steps are in the wrong order — imagine how awkward that would be." Martin's model for sequencing capital is a staircase: proportionate steps, each one justifying the next, so that when he pitches any single funder he can show them their step is structurally necessary — pull it out and the rest becomes unstable. He says this is one of the questions journalists, investors and recruits ask about most often. ▶ 27:28

Memoto's actual staircase, as he laid it out: his own Twingly salary funding the early planning, a 200,000 SEK validation grant from Innovationsbron, a 300,000 SEK innovation loan from Länsstyrelsen Östergötland, roughly 500,000 EUR in seed funding from Passion Capital, and finally the Kickstarter campaign. ▶ 29:15 He notes the Länsstyrelsen loan is forgivable if the project fails but must be repaid if it succeeds — a rung specifically designed for de-risking the earliest stage. ▶ 29:40 For students building their own first step, Martin recommends the CSN study grant explicitly: "make CSN the first step of your financing staircase." ▶ 31:47

Narrative's later rounds were planned to last exactly six months each, deliberately forcing an immediate pursuit of the next round to keep momentum and market timing tight — the same staircase logic applied more aggressively. ▶ 4:15 By late 2013 the funding stack behind the Narrative Clip totaled 500,000 SEK from the Swedish state, 3.5M SEK from a London seed fund, 3.5M SEK from Kickstarter, and 18M SEK from a San Francisco investor. ▶ 3:49

Twingly, by contrast, ran the opposite strategy: a single 10 million SEK venture round from the Stockholm firm Cervisen in 2007 — "enormous for that time" — that Martin then tried to make last as long as possible rather than climbing further steps. ▶ 4:41 ▶ 3:45

Raising people, not just capital

Fundraising, in Martin's account, isn't only about money — the same vulnerability that convinces investors also convinces co-founders and early hires to join. "If you talk from your heart, people will want to help you." He contrasts hedged language — "if everything goes right, maybe I'll do this" — with showing that you're "jumping off the cliff right now": half of Narrative's initial team quit their jobs to join on nothing more than a PowerPoint and a 3D-printed prototype. ▶ 36:49

Pitch with proof, not promises

"You need team, product, financing and market clear in your head." Martin frames this as a mental checklist rather than a document: when those four fronts are genuinely clear, every question from an investor, journalist or recruit has a ready answer, and gaps in any one of them read as doubt about the whole venture. ▶ 21:54

He extends the same four pillars — product, team, market, financing — to what makes a pitch land with sophisticated audiences like Almi, who see many founders and can tell demonstrated action from asserted intent. His example: rather than merely claiming to be "born global," point to the fact that Narrative's PR agency was already based in the US. ▶ 55:21 Underneath that discipline sits an older rule from the Twingly days — launch with nothing that lacks a business model, and build the business model alongside the technology rather than after it, which he says creates real value and real confidence rather than a plan that only sounds good. ▶ 1:59 For hardware specifically, he reduces success to three foundations: solid production and fulfillment partners, sufficient funding, and a team that pulls together. Rude Baguette ↗

The VC hype cycle

"Every startup that is VC-funded needs to build the vision before they build the product... the VC industry demands a hype-driven development cycle." Martin argues this is a structural flaw in venture capital, not a personal failing of individual founders: investors won't fund a company that hasn't already promised what it will build, so even honest founders are pushed into overstating readiness. ▶ 28:33 He generalizes it one level further — investors themselves need to hype rising valuations in order to raise their own next fund, so the pressure runs in both directions at once: "hype all the way up, hype all the way down." ▶ 29:17

Crowdfunding: funding, market intelligence, and story

Martin treats crowdfunding as a strategic tool that happens to also raise money, not primarily a fundraising channel. "Crowdfunding isn't just a way to bring in money — what you get is also a huge amount of information, which is at least as valuable." ▶ 6:07 The clearest version of that argument: a Kickstarter campaign forces people to "take out their wallet and pay," which is a far stronger signal of product-market fit than a survey or focus group could ever be. ▶ 7:09 It can even answer a manufacturing question directly — whether Memoto should build 300, 3,000 or 30,000 units — while simultaneously providing financing sized exactly to that number, cutting inventory risk. ▶ 6:34 A successful campaign becomes part of the product's story too: "it's not just a cool product, it's a crowdfunded cool product" — an extra layer of attention on top of the launch. ▶ 9:07 He recommends every startup evaluate crowdfunding seriously as one launch option among several, even when other funding already exists, rather than defaulting into or away from it. ▶ 8:46 ▶ 8:21

That intelligence is bought with heavy preparation, and he warns most teams underestimate it: "the huge preparations that need to go into the campaign before you launch" are easy to describe and hard to execute. ▶ 10:09 Concretely, that meant pitching the product to 100 or more potential customers before launch ▶ 3:31, using those conversations to pre-answer objections in the campaign video and landing page ▶ 3:31, and building a mailing list, a Facebook event and journalist relationships ahead of time to create day-one momentum. ▶ 3:05 It worked: Memoto hit its $50,000 Kickstarter goal within five hours of launch ▶ 2:27 ▶ 1:30, and went on to raise roughly $500,000–550,000 from around 2,700–3,000 backers — reported as 1,100% of goal and 10x oversubscribed. Forbes ↗ ▶ 2:49 The Narrative Clip repeated the pattern almost exactly — a $50,000 goal, roughly $500,000 raised. ▶ 7:54

Both campaigns, notably, came after seed money was already secured. Narrative brought in seed financing before Kickstarter and treated the campaign as a go-to-market channel rather than a primary funding source. ▶ 11:08 The team leaned heavily on a network of suppliers and PR contacts to set the campaign up, and Martin says he still fields Skype calls from other hardware founders — sorting their problems into three buckets: not knowing how to prepare, a campaign that isn't taking off, or being overwhelmed by customer support once it does. ▶ 12:38 One structural constraint he flags for other hardware founders: Kickstarter bans bundling multiple units of the same product into a single reward tier, a rule introduced after the Pebble Watch used bulk-purchase rewards to get around it. ▶ 10:02

Company financing track record

Twingly — a single 10M SEK venture round from Cervisen in 2007, deliberately stretched rather than followed by further rounds. ▶ 4:41 Revenue diversified beyond the core blog index into data sales to media-monitoring firms (including Sition, then the world's largest) and custom analysis consulting for PR agencies ▶ 60:15, alongside a subscription tier for the blog-indexing service. ▶ 23:29

Memoto — seed financing from London's Passion Capital preceded a Kickstarter campaign that itself became "hugely successful." ▶ 3:13 The Passion Capital deal came together fast: Martin and the team flew to a London pitch meeting with their bags in tow because they couldn't afford to fly over twice, and the VC — assuming they'd already pitched other investors the day before — offered a term sheet the following week. Breakit ↗ ▶ 10:31 Martin later described the choice to move fast on that first offer, rather than shop around for better terms, as a deliberate bet on speed under perceived FOMO — one he says worked out well. ▶ 10:56 Passion Capital eventually wanted to exit the investment. Der Spiegel ↗

Narrative raised roughly 100 million SEK in total across its life, including Silicon Valley investors, before the September 2016 bankruptcy Breakit ↗ ▶ 13:55 — with Khosla Ventures, True Ventures, Passion Capital and Martin himself as the largest owners at the end. Breakit ↗ True Ventures alone put in $3 million, giving the company at least eighteen months of runway regardless of how sales went. Gizmodo ↗ Slashgear ↗ A design-driven fundraise moved fast too: within nine months of a design investment, the company raised 10 million SEK on the strength of the resulting vision. ▶ 34:07 Snapchat also circled the company as a possible acquirer — meeting the team more than once, though never stating outright how serious its interest was — which Martin says is typical: companies with genuinely cutting-edge technology should expect interest from major US tech players. Breakit ↗ By summer 2016, with investor appetite for hardware startups having "decreased significantly" over the year Breakit ↗ Affärsliv ↗, Martin was seeking $1 million to avoid bankruptcy — money that didn't arrive in time. Breakit ↗

See also: Narrative.

Sweden vs. Silicon Valley

Martin frames Sweden's startup infrastructure as a genuine funding advantage: a strong network of accelerators and government-backed soft loans ▶ 2:51, plus strong engineering talent ▶ 3:09 — though experienced marketing and product people are harder to find because the pool of people who've actually worked inside startups is still small. ▶ 3:13

The sharpest contrast he draws is on dilution: "here in Sweden you can get the same money and a fantastic infrastructure for building both companies and technology — without giving up any ownership stake in the first round." He sets that against the US norm, where investors typically expect 15% equity from day one. ▶ 49:22

Worth remembering