The Digital Frontier – A Showcase of San Diego’s Entrepreneurial Innovation (Clip 2 of 8)

| June 5, 2012 | Reply

On Wednesday, 4/18, a few local tech entrepreneurs spoke at the 6Degrees Breakfast Speakers series on digital startups and innovation here in San Diego.

Topic: The Digital Frontier – A Showcase of San Diego's Entrepreneurial Innovation. In this segment of the video, the second of eight clips, the panelists discuss how we raised money to fund our businesses.

 

 Video Text:

Moderator: Let me ask you a question that probably anybody in the audience out here would love to know who's in a position where they're thinking about doing something like what you all have done. Where the hell did you get the money?

Scot Chisolm: Do you want me to start?

Moderator: Sure, go ahead.

Scot Chisolm: Beg, borrow and steal.Yup. We leveraged the initial company off of credit cards to be honest with you, and we did anything we could to get ourselves full time. I used to work at Booz Allen Hamilton, and my business partner had worked at General Dynamics and we literally did anything, borrowed from family, took our credit cards just to get full-time to give us about six months so we could build a prototype and get it to market, and then from there we raised a small Angel round, and did it a little bit.

It was a lot to work out so we did it in chunks rather than raising a huge round at first. And now we're, you know, we've raised about three million and we're probably doing the institutional round next year.

Moderator: Still wearing the same Booz Allen Hamilton clothes, right?

Scot Chisolm: Yes, sir.

Mitch Thrower: no, I think advice for people that are out there considering a capital raise or raising funds, you want to stay private as long as you can. You want to stay angel and more private capital as long you can. I actually have a few ventures. The first one we did bootstrap. We literally it did the same thing back in 1990 with credit cards.

Actually took out $60,000 in credit card debt and funded a business in 1990. Then 6 months later we had 1.6 million in sales which was a very lucky strike alright, I mean that's not a normal scenario. With the active network, which I co-founded in 97, we raised venture capital and actually raise several hundred million venture capital over the next decade.

With Bump Network we raised private, but my advice is to stay private as long as you can so that when you are at the discussion table with a venture group you can dictate your own terms. Which is, it's hard, but right now if you have a great idea that you're passionate about you can do it. Yeah. I'll build a little bit on what Nick said.

Steven Cox: When we first started off I had done a previous venture, so I kind of funded the company myself. And it's always good when you have your own skin in the game as these guys can attest to. And, from that point we did a couple of small rounds of Angel financing, mostly people who believed in me and the business and what we were building, and that basically got us to the point to where we were at a break even point, had landed a big partnership and, very similar to what Mitch said, we were kind of in a position at that point where we could not necessarily dictate terms but have a little bit more leverage than someone just starting off.

So last year we raised another $6.2 million, it's our first venture raise. So, the total in the business has been about 8.2. But get a proof of concept out the door first, that's the easiest way to get capital later.

Moderator: What year were you doing the Angel?

Steven Cox: We started in 2006. So 2006 up to 'til last year, we did two rounds of Angel and final funding upon the developer.

Moderator: We've been told there's no venture money in San Diego right now, yet you just said you got a pretty big chunk.

Steven Cox: Yeah, we didn't get it from San Diego Firms honestly. So let me just be as blunt as I can, but here's the bottom line is that if you're building something real, it doesn't matter where the money comes. We'd love for it to be San Diego but if you're building something real, you will get noticed by the Bay Area firms.

And that's the truth of the matter.

Moderator: I imagine most of you guys have taken that 6:30 flight to San Jose at least once or twice. Go ahead.

Jimmy Hendricks: So I did everything the hard way. [audience laughs] Right, I think you guys are so funny. But I think we all raised about $600 grand from family and friends. And I did exactly the opposite of what they say to do. I picked a business partner I was friends with, went into internet space, we had no internet experience.

We'd been selling advertising. One had been in marketing promotions. We had no idea what we were doing. His brother gave us 20 grand and we thought we were going to build a website. And we blew 15 of the 20 in like 60 days and in like 9 months it failed. We had to reiterate into a new model. Luckily we had a small product we could sell.

We're always good at selling things and eventually after two years since 2008, 2009 became a couple of dealer network. I actually worked at Active.com. So for a year while I was building the business I had a full time job, and without that learning curve I wouldn't have been able to do what we're doing today.

Applied that experience to a new market, and we just 10, 20, 50, 100 grand here and there over four years, and anyone that would like Steven said believed in us, listened to us, give us the time, give me money, and leave me alone.

 Great. Is it possible every month like the Board of Directors, they were like, "What are you doing?"

Kind of figured it out especially because of time. That's what entrepreneurship's about. It just gets better. So many people fail and get so much stronger. Because you just learn. Your learning curve goes up and around. So if you can start, I say do it. What's the worst that can happen?

Moderator: Don't you hate it when those investors want to ask questions about what your company's doing? It just really drives you crazy.

Lars Helgeson: Yeah so, we have a little bit of a different story, how many of you are veterans? Did any of you get out of the military rich? It doesn't happen. So when I got out, I was kind of confronted with, you know, what do you do now? And I had this idea and I got a couple of books from Barnes and Noble and thought it would be kind of cool to come up with something that might be worthwhile, a company might want to pay us some money.

And, I started working on it, you know, in my apartment and I didn't really have a lot of money saved up because military. Being out helped me a lot. So, did some consulting on the side, and kind of struck on the right idea at the right time. and made a few of the right connections. I lived for a couple months, several months on my grandfather when he passed away gave me, you know, five thousand dollars for an inheritance, and that was sort of what I decided that that would be his legacy, would be something that I can create from that.

So I taught myself how to program and started talking with other people that I worked with, and grew the entire business organically and never really took any venture funding on, every now and then we'd have to put stuff on credit cards, but always kind of worked as a consultant or helping other people program or doing other things just to help other businesses to fund this business.

And by the time, you know, it took about a year and a half, two years of doing that. And finally I was able to switch all of my attention at that time on GreenRope. That company grew and so we've kind of used that constant organic growth to grow over the last twelve years I guess since we started. So we've always We've always wanted to be self-sufficient, organically grown, never tried to over extend, always tried to maintain a sustainable business model.

We feel like if we create something of value then the company should continue to pay for using our software because it provides them value, they get our ad using our software and increases the same Great story, Matt. Accompany's. Matt, fantastic. That's amazing.

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