What does it take to raise that next round? Founders of Kinvey and Backupify, which just collected $14 million in total, weigh in
So I asked two Cambridge entrepreneurs what they thought the critical factors were in raising their most recent round. Both Sravish Sridhar of Kinvey (pictured at right) and Rob May of Backupify announced new funding today: $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, says Sridhar. 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 says. "We beat that by three months earlier this year. Another was creating partnerships with companies like Adobe, Urban Airship, and Microsoft. Despite not having a vice president of business development, we got them to sign up to work with us." A third milestone was making the Kinvey service available to any user — not just beta-testers. Finally, he says, investors wanted to see that 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. One of the company's investors, Rich Levandov of Avalon, told Sridhar that he though the founder's sense of humor was helpful in building the team: "He said being funny and charismatic could help our company hire just about anyone." He also invited the company's early investors to just about any significant company meeting, to keep abreast of Kinvey's progress.
Kinvey's $5 million in funding today is considered the company's A round, following 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 like Google Apps or Salesforce.com, May says one obvious thing investors like to see is metrics heading in the right direction. "We pulled into the low single-digit millions, in terms of revenues," he says, "and we crossed 5,000 paying business customers." But he also says that demonstrating that a company has figured out how to effectively sign up profitable customers is vital: "I think we showed that we could take money, hire sales reps, do advertising and grow our monthly recurring revenues." When sales reps talk with prospective customers and demonstrate the Backupify service, May says, "they have close rates of 40 to 50 percent." The company has 30 employees, and is now "mostly hiring salespeople, but also some engineers," says May. 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.
PowerPoint presentations and promising prototypes may help entrepreneurs raise their initial capital, but clearly metrics and momentum are what matter when it comes to keeping the money flowing.
About Scott Kirsner
Scott Kirsner was part of the team that launched Boston.com in 1995, and has been writing a column for the Globe since 2000. His work has also appeared in Wired, Fast Company, The New York Times, BusinessWeek, Newsweek, and Variety. Scott is also the author of the books "Fans, Friends & Followers" and "Inventing the Movies," was the editor of "The Convergence Guide: Life Sciences in New England," and was a contributor to "The Good City: Writers Explore 21st Century Boston." Scott also helps organize several local events on entrepreneurship, including the Nantucket Conference and Future Forward. Here's some background on how Scott decides what to cover, and how to pitch him a story idea.
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