One million dollars, $2m, $7m, $12m. These are just some of the amounts that venture capitalists have doled out recently to Silicon Valley companies, with recipients ranging from three-people start-ups working out of cafés to established firms in gleaming offices.
Numerous reports and surveys suggest that while US venture capital is not back to 2007 or 2008 levels, it is growing again. But what do these cash infusions mean in practical terms? Or to put it more bluntly: what happens when $5m is wired into your company’s bank account?
Take BlockChalk, an app that enables residents of a neighbourhood to connect over local issues such as crime or schools. Prototyping began in November 2009, and seven months later, in May this year, the firm raised $1m. This may sound like a quick dash from development to funding but that’s not the case, according to one of its founders, Dave Baggeroer, 36, who teaches at the Stanford University design school.
“The Valley moves crazy fast. Six months actually sometimes feels like an eternity when you’re watching other companies move closer to the space that we’ve envisioned,” he tells Monocle in a pub not far from the site of his new office in San Francisco’s SOMA district.
The venture capital investment has enabled major growth at BlockChalk. Previously the three founders, who live at different points along the 45-mile stretch of peninsula that links San Francisco to San Jose, would collaborate online using applications such as Skype and Google Docs or meet at cafés or each others’ homes. This phase is often called bootstrapping, meaning when firms make do with few resources.
Now BlockChalk has been able to rent an office in a space shared with 20 to 30 other start-ups, and will move in come July. It plans on hiring two engineers to ramp up the development process. That said, the three founders intend to draw minimal salaries for a while – Baggeroer uses the term “ramen salaries”.
Fifteen miles south of San Francisco, in the affluent town of San Mateo, a company named Jelli is growing on a different order of magnitude thanks to its recent $7m funding round – $5m was raised this year, with the remainder obtained previously.
Jelli allows listeners of participating radio stations to vote for what they want to hear, and should soon be present in 17 US cities. The extra funding means the company can pursue its plans to go fully national, its founder, Mike Dougherty, 39, explained to Monocle in an office featuring a wall covered with vinyl record covers (think classic Madonna, Iron Maiden, even Peter Frampton). Ten employees will become 18, including two from Yahoo; Dougherty estimates that around three-quarters of the company’s costs are personnel-related.
Jelli is also adding on space – it’s knocked through to the office next door, expanding from 1,800 sq ft to 3,500 sq ft. It bought the jelli.com domain name after making do with jelli.net. And it’s hired a chief financial officer from a CFO outsourcing firm.
The employees are not resting on their laurels, however. To celebrate receiving the funding, there were few snatched hours of celebration – they took a boat onto San Francisco Bay. Then it was back to the Silicon Valley grind.
