SacStarts - vc

Engine Yard closes $15M Series B

Adam Kalsey — Sun, 13 Jul 2008 22:01:38 +0000

Locally founded Engine Yard, a provider of Ruby on Rails hosting has closed a series B round of $15 million from New Enterprise Associates, Amazon.com, and existing investor Benchmark Capital. NEA led the round, and partner Peter Sonsini is joining Engine Yard’s board.

The money raised in this Series B will help Engine Yard develop a platform for cloud computing clusters and to continue funding the development of Rubinius and Merb, their open source projects.

In January 2008 the company raised a $3.5 million Series A round from Benchmark Capital. The quick turnaround to a Series B comes because the company wanted to raise money before they needed it, says Engine Yard’s CTO, Tom Mornini. The company’s board was concerned about the tightening market for venture capital, and decided to raise enough cash to carry them for some time.

The company is growing quickly. When we profiled Engine Yard in January of last year, CEO Lance Walley said they had 34 customers. Mornini tells me they currently host more than 400 companies and experienced 40% growth in the first quarter of this year.

With the new funding, Engine Yard plans to start deploying their managed hosting clusters on existing cloud hosting providers. Mornini wasn’t able to say which providers, but with Amazon as an investor, it’s safe to say that EC2 is a likely target.

The addition of Amazon as an investor is an interesting move. Thanks to Amazon’s cloud infrastructure services EC2 and S3, the company is widely seen as a leader in the emerging cloud computing market. They’ve been criticized, however, for not providing uptime guarantees, service level agreements, or managed services. This investment now ties them to a company that’s providing fully managed services for cloud deployments.

The size of Amazon’s investment was not disclosed and neither company is talking about any specific plans for working together.

The company currently hosts their clusters in traditional data centers, placing racks and server hardware in data centers around the country. Mornini says they plan to continue to use this infrastructure for clients that require physical hardware. Many clients, he says, are unwilling to move their data into the cloud, often citing security or regulatory concerns.

American River Ventures adds CFO

Adam Kalsey — Wed, 23 Jan 2008 22:39:18 +0000

American River Ventures has added F. Ray Nunez to their executive team as CFO. In addition to the typical duties of a CFO, Nunez will work with ARV’s portfolio companies to help them create sound financial plans at the earliest stages.

Prior to joining ARV, Nunez served as Director of Finance law firm McDonough Holland & Allen PC. Prior to joining McDonough, he spent 16 years in various financial and management roles at HP.

American River Ventures is located in Roseville and manages a $100 million fund. They invest primarily in energy efficiency technologies from early stage companies, although they’ve made a number of investments in other areas, including communications and security. Portfolio companies include Agoura Technologies, Synapsense, and KeyEye Communications.

Velocity Venture raises $15 million fund

Adam Kalsey — Tue, 15 Jan 2008 19:31:40 +0000

Folsom’s Velocity Venture Capital has raised a second fund of $15 million to invest in early stage Sacramento-area companies. Velocity’s current investments include Revionics, KeyEye Communications, and their latest investment, Freepath.

VentureBeat reports that this fund will be used to make regional investments ranging from $100,000 to $3.5 million.

American River Ventures co-founder scaling back

Adam Kalsey — Wed, 12 Dec 2007 17:29:02 +0000

One of the co-founders of local VC firm American River Ventures is stepping back. ARV is currently raising another fund, but The Sac Bee’s Bob Shallit says that Corely Phillips has other plans.

Raising a new fund takes a long term commitment, often taking a decade or more to raise the money, make the investments, and wait for those companies to grow their businesses to a successful return for the investors. Phillips says he doesn’t want to commit that much time and plans to spend more time with family and friends.

American River Ventures was founded in 2001 with a $100 million fund focused on early-stage technology companies. Included in their investments are local firms Agoura Technologies, KeyEye Communications, and SynapSense.

Before founding ARV, Phillips was an active angel investor. He managed two startup technology companies through successful mergers as CEO of Manzanita Software Systems and founder of Grafpoint. Phillips sits on the boards of ARV portfolio companies SynapSense, OpenClovis and Senforce Technologies.

Getting your VC's attention

Adam Kalsey — Sat, 06 Oct 2007 14:27:26 +0000

A few days ago I wrote about using your board more effectively. Related to this is how you use your VCs.

The VC’s job doesn’t stop when they write the check. They want to see the investment succeed and have a wealth of business knowledge and contacts that can help that happen. But too many entrepreneurs see their investors as the enemy and don’t include them in the everyday business.

Fred Wilson, a VC blogger, says

If you want to get more attention from your VC than you are currently getting, and you don’t want to get that way by struggling, then you should find ways to rope them into your internal discussions.

He goes on to list a few reasons a VC will pay close attention to one of their investments. The trick is to get them paying close attention to you so you can use their expertise to grow your business.

Unfortunately Fred talks about people he knows that do this well, but doesn’t offer any ideas on how to do it yourself. If you’re interested in engaging your investors in the business, try these tips.

Forward them interesting discussions. If you’re having an email discussion about a new strategy, a new feature, or even a potential client, forward a copy of the email thread over too him. Do it before it gets too long and before you’ve made any concrete decisions. You’re not informing him of what you’ve done, you’re asking for input. A short note at the top that says “Fred, we’re thinking of X, any thoughts on it?” will help him understand what you’re looking for.

You’re looking for private feedback here, and by forwarding the message to just them, you’re shielding the rest of the team from his reply. Treat his guidance as confidential.

Add them to discussion. Occasionally copy him on emails that you think they might be able to help on. Say you’re looking for an advertising partner and you’ve tossed a few names and ideas around. Perhaps you’ve even picked a short list. Copy your investor into the email chain and as their opinion. “Fred, do you know any of these companies? Or someone else that might be suitable?”

The trick is knowing when to ask. You don’t want to get him involved so early that he’s getting copied on replies every few seconds. He gets enough email already. You also don’t want to wait so long that his counsel isn’t helpful.

Inform them of your direction. Got a new product, a big customer, or a feature that you’re testing out? Send your investor a note about it. “Hey, check this out…” can help focus his attention on what you’re doing and if you do it at appropriate intervals, it will give him a good picture of where you’re going and how fast you’re moving.

Remember that your investors aren’t the enemy. They want you to succeed and have a great deal of help they can offer to get you there. But they’re not around the office each day and don’t know what your challenges and next big ideas are. It’s up to you to get them involved.

Financial modeling for startups

Adam Kalsey — Tue, 02 Oct 2007 16:57:44 +0000

Redfin has posted an interesting peek into their financial models. They show their assumptions going into the business and their actuals after running the business for a while.

When first putting together our financial model, we looked online to calibrate spending assumptions. So many people have blown venture capital, we thought, there must be a manual somewhere on how to do it, at what rate, avoiding which follies. We couldn’t find anything. So we took some wild guesses and figured we’d see how they turned out. And now two years later to the day that we built our first model, here are the projections and actual results. Hopefully, you can learn from our experiences.

They cover everything from employee costs to legal fees, and provide an explanation for the differences between their projections and actuals.

Phil Angelides, Venture Capitalist

Adam Kalsey — Tue, 09 Jan 2007 22:18:25 +0000

Venture Beat tipped me off to an interview with former state treasurer and gubernatorial candidate Phil Angelides in which he announces he’s raising a venture fund. The fund will be based in Sacramento and will focus on environmental technology with some real estate investments.

Angelides’ firm joins numerous other funds that are focused on alternative energy, including Vinod Khosla’s Khosla Ventures. Kholsa was widely criticized for backing an alternative energy ballot measure that would benefit his investments. Khosla responded to critics by pledging to donate any direct profits to charity.

The fund will be raised from numerous sources, says Angelides. VentureBeat speculates that California’s pension funds are likely to invest as Angelides has previously served on their boards.

Investment by locale

Adam Kalsey — Fri, 08 Dec 2006 01:30:01 +0000

At last week’s dinner we were talking about the realities of starting a company in Sacramento and getting outside investment. I’d recently seen a chart on Paul Kedrosky’s blog that shows investment by locale with the SF Bay Area getting a whopping 39% of investment dollars and Southern California and New England tied for second with 10% each.

It’s not clear from the graph what investments are counted (all VC, angel, public companies…?) but it’s clear that if you aren’t in the Bay Area you have an uphill battle when it comes time to raise outside investment.

I also wonder if the numbers are skewed somewhat by the locations of the companies that are seeking investment. Did 39% of investments go to the Bay Area because that’s where investors are looking or because there’s more startups in the Bay Area? If you’re in the Bay Area, is it perhaps harder to raise money because there’s more local startups? In Sacramento, you have a much smaller pond to play in.

There’s a couple of Sacramento-focused VC funds and a local angel group, not to mention a number of unaffiliated investors in the area. The fact that there’s less startups competing for their attention may make it easier to get in the door.