Ventech panelists share how to raise money in tough times
After a boom in the venture capital and initial public offering in 2021 and the majority of 2022, things have started grinding to a halt.
In 2023, due to economic headwinds from rate hikes to fighting overseas, more and more venture firms were keen on keeping their dollars in their funds.
But Scott Hamilton, CEO of Santa Barbara-based Live Data Technologies, raised an A round in 2023, securing $5 million in capital.
“And the one thing I can say is whether its good times or bad times, it’s never easy to raise capital,” Hamilton said at a March 27 Ventech event.
Ventech, an emerging technology forum in Santa Barbara, hosted an event titled “Raising money in hard times” and featured a panel with Hamilton, Jolie Diltmore, a partner at Central Coast Ventures, Kathy Odell, the CEO of Women’s Economic Ventures and Tim Arnold, a general partner at Steamwork Ventures.
Given that the majority of the panelists were on the venture capital side of things, Hamilton provided insight into what he believes made his series raise successful.
“We really were just at the right place at the right time. We have some tech that truly was able to uniquely deliver value and a nice roster of clients that embrace it. If you’re doing those two things right, then it is a little easier to raise capital,” Hamilton said.
He noted that raising money last year as opposed to 2021 was “definitely harder” but also from his side, it was an opportunity to revisit and realize that choosing firms that want to invest in the company can provide more than just money.
“It’s great just to get the money, but sometimes you’re going to need access to somebody else,” Hamilton said.
Odell, who was also the former CEO of Goleta-based Inogen, described her experience raising capital as a founder as well.
When Inogen was started up by three UCSB students it was still very much just a concept — the idea of their portable oxygen container — so raising money the first couple of times through pre-seed and seed were a bit harder to sell with no product.
“But if you are running your business properly, if there’s a market for your product, if you are doing all the right things, you can keep going and raise money in tough times,” Odell said, noting that after the first series A capital raise, Inogen had no problems raising money after.
Now as the CEO of WEV, Odell is usually cutting checks, giving opportunity to true small business owners.
Unlike larger VC firms, WEV’s checks are usually $25,000 to $50,000 but they are still large enough to make a difference.
Odell noted that women also have a harder time raising capital, citing statistics from Pitchbook that found only 2% of all venture capital dollars in 2023 went to women-founded companies.
“Many women are put off by the environment and so I want to tell them that they shouldn’t be,” Odell said.
“We are seeing more and more women join the space and that is a good thing.”
Diltmore’s Central Coast Ventures is a much more typical VC firm, investing in very early stage CleanTech, AgTech and software companies.
Founded in 2022, Diltmore noted the reason for the fund was the “pent-up demand” of companies with “a ton of potential” here on the Central Coast.
Based in San Luis Obispo, the fund aims to invest in Central Coast companies specifically, especially given the amount of startups coming out of the UCSB and Cal Poly innovation centers.
“There’s probably more demand here on the Central Coast than any of us realize and I think the pandemic helped in a way by getting a ton of interest from folks who may not have known all that the Central Coast has to offer,” Diltmore said.
The fund’s average check is $100,000 with the most being about $500,000.
Diltmore advised young entrepreneurs that even in the early stage, they should be thinking more far out about what the future holds. That could be the difference in getting funding.
“When we look at companies, it’s very important that the entrepreneurs not just have their go to market strategy and have all the details associated with it, but that they really have their path for funding and exit,” she said.
Steamwork Ventures is also an early stage investor currently raising its second round.
Arnold noted that, especially in 2021, there was a lot of noise around investing in crypto and NFT’s that got a bit tiring.
“Now we’re back to looking at the businesses for what they are and I think raising money is about staying true to the mission,” he said.
The fund’s average check size is $250,000 with more than $1 million for a follow-on round.
Arnold’s best advice to entrepreneurs was to “keep your investor involved.”
“Tell your investor what you’re doing, what you need, where you’re going and just be clear that communication is number one,” he said.
“Being transparent, being honest, will get the right people around your chest, and that if it’s not me, and I see them, I’m going to be motivated to try to connect them to somebody who is investing in that space or who can help you.”
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