Raising a funding round for a startup isn’t easy. Doug Winter should know. He’s raised four since he founded Seismic in 2011.
The first round, whether it’s a seed or Series A, is a different beast than later growth stages, Winter said.
“Assuming you’re not someone who’s sold five companies before, which was not me, then you’re really trying to beg, buy, borrow, steal, anything you can do to get in the door to tell your story to a fairly skeptical audience,” he said.
For Seismic’s $4.5 million Series A, which was led by early-stage software firm Jackson Square Venture Partners, Winter said he talked to other successful entrepreneurs to get a sense of which firms might be interested in his company. Winter talked to former investors, and well-connected lawyers and accountants, too, and managed to get a few introductions through them.
Winter said he worked to get 15 to 20 meetings with VCs before he found Jackson Square. One of the partners there was more familiar with the San Diego area, and had previously met with the San Diego Venture Group and Connect.
“It was a lot of work. Frankly, it was a lot of flights to San Francisco to have those meetings,” Winter said. “The VCs want to take your call. If someone they respect says you should take a look at (this company), they’ll do it.”
The Later Stages
After that initial investment, Winter said, everything changes.
“Now, all of a sudden, they call you,” he said.
Winter said he spent time teaching firms about his company, learning about their goals, and whether they might be a good fit in the future. And yes—Winter said he also took calls from the firms that snubbed him during his first round.
“When the time was right for the next round, they knew you, you knew them, and you had a good idea of what a good fit was going to be,” Winter said.
At least, that’s how it’s supposed to work. The company’s second investor, San Diego-based JMI Equity, actually surprised Winter. JMI typically invests in later-stage software companies, but Seismic was just a few years in, though it was bringing in a solid stream of revenue.
“JMI was not someone I knew well because generally they did later stage investments than what we were,” Winter said. “We somehow got onto their target list. It became clear that because we were local, they were willing to do something earlier stage.”
JMI ultimately led the company’s Series B round for $20 million.
Winter was introduced to its most recent lead investor, Menlo Park-based Lightspeed Venture Partners, through another one of Seismic’s investors. The firm “clicked with us,” Winter said.
Good Angel Network
In general, Winter said San Diego has a good angel network, and some local firms that will invest earlier on, such as during a company’s Series A round. Raising a Series B is where it gets a little bit tougher, he said.
“When you get to a size where you’re starting to talk to some of the later-stage folks, who want to write bigger checks, they don’t care where you are. They’ll come find you,” Winter said. “I’m excited to see more activity in San Diego. Hopefully it’s the beginning of a big upswing.”