Positioning a Generative AI Startup: Erik Severinghaus, Founder and CEO of Bloomfilter (Part 2)

Sramana Mitra: How did you get that off the ground?

Erik Severinghaus: It began with me just investing my own personal money – the money I made at IBM and some of the money that I made at iContact. After maybe a year or so of running it, I started to look for outside capital and raised about a million dollars seed round.

Sramana Mitra: When you went out to raise your seed round, what was the situation? Did you already have a product in the market? Did you have customers?

Erik Severinghaus: We had a product and some customers. We had a nice distribution contract that we were planning on a close partnership with iContact. That was a big part of the whole thesis.

It was nice until we sold iContact, which was great for me personally, because I made a lot of money. It was less great because my partner was no longer quite as excited about distributing kind of the next thing.

We had a product and market. We had a few customers. We had a little bit of traction, but it was still early, very much conceptual. We were kind of making it up as we went along.

Sramana Mitra: Was the seed funding from angels or a VC?

Erik Severinghaus: A little bit of both. It was some angels in and around the Chicago area, some personal friends and family who I’ve known for a long time, and then from a couple of local investors and VCs.

Sramana Mitra: So you had moved to Chicago for your IBM job.

Erik Severinghaus: That’s correct. I moved to Chicago in 2006.

Sramana Mitra: Okay. So, you have a million dollars in funding. What year are we talking now?

Erik Severinghaus: This was about 2011.

Sramana Mitra: In 2011, you have funding, you have a product, you have some customers, a bit of traction. What happened next?

Erik Severinghaus: Well, we got a lot of publicity and hype. I was on the cover of a bunch of newspapers and magazines. We were like the next big thing, at least in the fairly small Chicago technology scene for a while. We went through and graduated Techstars. We were probably getting to about a quarter to a half a million of annual revenue. We’re starting to grow a little bit.

Basically what happened was that we ended up running out of money and ended up having an acquihire. We sold the company’s assets to a marketing agency in an exit that was not great for our investors. We didn’t end up returning capital to the investors. The back half of that journey was very challenging and very frustrating, miserable, and even a dangerous time for me. I had a really hard time grappling with the idea that this business that I poured everything I had into wasn’t going to succeed. So, I sold the business. Ultimately, you know, we at least achieved sort of a safe harbor, but this was not one of the entrepreneurial success stories that we all know and love.

Sramana Mitra: But, you know, especially since your story is that of a serial entrepreneur, it’s bound to be like that. You know, not every venture, a serial entrepreneur does succeeds. And that’s just the probability game.

Erik Severinghaus: That’s exactly right. I wrote a book about this. It’s important to know what game you’re playing and especially if you decide to go raise venture funding, you know, 75% of venture backed startups fail.

This segment is part 2 in the series : Positioning a Generative AI Startup: Erik Severinghaus, Founder and CEO of Bloomfilter
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