Excerpts from the Innovation Economy blog.
Getting that first few million dollars from investors is tough enough. But persuading them to keep funneling money into a start-up that hasn’t hit the big time can be even harder.
So I asked two Cambridge entrepreneurs what they thought the critical factors were in raising their most recent round.
Both Sravish Sridhar of Kinvey and Rob May of Backupify announced new funding last week: $5 million for Sridhar’s company, and $9 million for May’s. Sridhar’s new money comes from Avalon Ventures and Atlas Venture, both with offices in Cambridge, and May’s includes Symantec, the security software biggie, as well as Avalon, General Catalyst, and Lowercase Capital.
Setting goals and hitting them is crucial, Sridhar says. His 14-person company, Kinvey, handles much of the back-end infrastructure required by mobile app developers, offering it as a subscription service.
“After our seed round last August, one goal was getting our first 2,000 users,” he said. “We beat that by three months earlier this year. Another was creating partnerships with companies like Adobe, Urban Airship, and Microsoft.”
Finally, he says, investors wanted to see the company could bring on board technical folks who had experience scaling up complex systems — and Kinvey managed to hire veterans of Akamai, Raytheon, Brightcove, and Fidelity.
Kinvey’s $5 million in new funding follows last summer’s $2 million in seed investment. The company participated in the 2011 TechStars Boston program.
At Backupify, which helps companies and individuals make backup copies of the data they create with various online services such as Google Apps or Salesforce.com, May says investors like to see metrics heading in the right direction.
“We pulled into the low single-digit millions, in terms of revenues,” he said, “and we crossed 5,000 paying business customers.”
But he also said it’s vital for a company to demonstrate it has figured out how to effectively sign up profitable customers: “I think we showed that we could take money, hire sales reps, do advertising, and grow our monthly recurring revenues.”
The company has 30 employees. Backupify’s latest $9 million in VC money represents the company’s third round of funding; the company has raised almost $20 million so far.
CloudTop moves to California
The latest winner of MIT’s $100K Entrepreneurship Competition, CloudTop, has moved to Palo Alto, Calif., to take part in the Y Combinator summer program for start-ups. A number of Boston-area entrepreneurs and investors tried to persuade the CloudTop team to stick around, though it sounds like no one offered to write a check.
The company is building “dead simple” uploading tools for digital files that can be used by websites and mobile app developers; an example of the early product can be seen at Filepicker.io.
“The four of us rented a house [in Palo Alto] and are cranking away,” chief executive Brett van Zuiden wrote. “We’re actually planning a launch of our mobile product soon.”
Van Zuiden, originally from the Bay Area, says that “investors” and “culture” played a role in CloudTop’s decision to head west.
Bill Aulet of the Trust Center for MIT Entrepreneurship said CloudTop won entrance to Y Combinator shortly after winning the $100K, but before MIT started taking applications for a new summer accelerator program of its own: the Founders’ Skills Accelerator.
Y Combinator, born in Cambridge but now operating exclusively in Silicon Valley, offers $150,000 in convertible debt to every start-up that gains entrance, as well as exposure to a wide range of angels and venture capitalists at its concluding “demo day” event. But it also takes an average of 6 percent of a start-up’s
equity at the outset. (The Founders’ Skills
Accelerator does not ask for equity but does not guarantee as much funding; it’s in its first year.)
It sounds like several local lights, including Rich Miner of Google Ventures, Jo Tango of Kepha Partners, and entrepreneur Andy Palmer, tried to persuade van Zuiden and the CloudTop team to build the company in
Boston. In particular, they emphasized the help the MIT alumni network could provide them in Boston.