Raising Venture Capital on the West Coast

October 25, 2013

Today's guest post is written by Christian Devlin.On the first day of Venture Atlanta this week, I had the pleasure of co-moderating a panel discussion entitled “Raising Venture Capital on the West Coast” with the acclaimed Silicon Valley corporate lawyer Judy O’Brien of King & Spalding. Our all-star panel included two venture capitalists from San Francisco and Silicon Valley, who traveled from the West Coast to participate in our event, one well-known Atlanta early-stage VC and entrepreneur, and the CEO/founders of two local tech companies.Instead of trying to consolidate an hour and half of great content around this topic, I’m going to share with you some of my key takeaways from this fantastic panel.Dafina Toncheva of US Venture Partners (who only one week ago led her first venture round with an Atlanta company, Starmobile):

  • The bar is high for all investments, but higher when the geography isn’t there (i.e. when the investor is on the West Coast and their portfolio company is across the country).
  • A West Coast investor will look for strong results or a great story that suggests strong potential.
  • Building strong relationships is critical when investing in people who you have to consistently meet with over the phone, instead of in person.

Cynthia Ringo (an Atlanta native) of DBL Investors (portfolio includes Tesla Motors and Pandora):

  • Be bold both in your strategy and your execution.
  • Don’t use the words, “we’re being conservative” when referencing your financial projections. No one achieves their “conservative” projections and investors don’t believe your projections are conservative.
  • Investors like big ideas that seem almost impossible.
  • Put yourself in the position of the person you’re seeking money from>. When you’re investing other people’s money, decisions aren’t taken lightly (VCs act as a fiduciary).
  • She is constantly looking for areas that are underserved by their peer group and Atlanta falls into that category.

Glenn McGonnigle of Tech Operators (aside from exiting ISS in the late 90’s, Glenn, an early-stage investor at Tech Operators, was recently involved in the Ionic Security round with Kleiner Perkins, and helps technology companies form syndicates with outside investors):

  • Attracting West Coast investors may require opportunities to dominate the market. Investors need to understand the opportunities the company sees.
  • To get investor attention, companies need innovative technology and strategic timing.
  • Successful companies have strong leadership, but a little chaos is a good thing. Leaders should be able to grow with the chaos that comes with growing a technology company.

George Mashini of Catavolt recently closed his $5M venture round, which was led by San Francisco’s Toba Ventures and had participation from Nashville’s FCA Venture Partners:

  • Build a list of ideal investors.
  • Healthcare is a tremendous opportunity for the company. Nashville is a hub for healthcare services, so they looked for investors in cities where their potential potential customers are located and who had relationships with those customers. This resulted in the selection of FCA in Nashville.
  • In evaluating building his company in Atlanta vs. San Francisco, $5M would have had to be a lot more on the West Coast (possibly $8-$9M). Also, the world is smaller now and geography isn’t as much of a limitation.

Greg Peters of NDN (who was CEO of a company in California and who has raised capital in both Silicon Valley and Atlanta):

  • It can help to stay under the radar. NDN made sure to build its company to scale and keep quiet for a while. NDN needed the flexibility to evolve its business model. When they were ready, there was no issue in attracting West Coast investors.
  • It is important to work with people who can help you build your business <through introductions, not only to sources of capital but to potential partners.
  • Be flexible and adapt your business model, but stay focused.

So, what are your take-aways from this? Here are mine:

  • Be unafraid to dream big and pursue those dreams
  • Be bold and adapt to the chaos
  • Be strategic about the investors you reach out to
  • Capitalize on the ability to develop your company in stealth mode in Atlanta until you feel ready to scale your business

I’d like to leave you with something Judy O’Brien stressed to all the entrepreneurs in the room….keep it simple. I know, we’ve all heard that adage before, but I urge you to consider it’s source, and the fact that our entire panel emphatically agreed. Whether you're just forming your company, bringing on investors, negotiating commercial or technology arrangements or experiencing a bit of that chaos that comes with the growth stage, ask yourself this question: am I keeping it simple?For more on this topic, find Christian Devlin on Twitter (@cdev20) and read his blog can also reach out to Judy and her team at King & Spalding (Matt Bozzelli in Atlanta and Laura Bushnell in Silicon Valley).

October 25, 2013
Karen Houghton