Child Entrepreneur Caleb Sima: Cofounder Of SPI Dynamics (Part 6)

SM: How did you approach the financing phase of your business? Was there an angel community in Atlanta that you were able to plug into?

CS: Atlanta is not known for its angel investment scene. We knew a gentleman who had sold his company in the 1990s and made a lot of money. He believed in us and invested $50,000. We also knew the founder of S1. He recommended some other investors whom we pitched to. Even if investors declined to invest, they kept making referrals to other investors. My uncle is a surgeon, and he also invested in us.

Once we had enough angel funding, we started looking for real investment and a CEO. One of my friends from ISS worked for a VC firm in Atlanta. We spoke to him, and he believed in what we were doing. He brought us to the board of the VC firm. Atlanta VCs are not West Coast VCs. They are old-school money from manufacturing and oil. They were not familiar with technology like ours or how to valuate that type of deal. Pitching to them was very difficult.

SM: Most VCs like that have a very difficult time knowing how to value a company like yours.

CS: It took a lot of effort for us to help VCs understand exactly what our value was. I had to do a live demonstration illustrating how to break into a large commerce website before the lights went on. Once they saw that demonstration, they immediately grasped the severity and importance.

SM: How much money did you raise?

CS: In total we raised $11 million over two rounds. When we finally received VC offers, we received several close together. One VC firm whose offer we were going to take intended to put in a CEO of its choosing. We had all the paperwork signed and everything was ready to go on a Friday; the following Monday they were going to wire funds into our account. We met the incoming CEO at an Atlanta Braves game to celebrate. I was running late and I could not find them, so I tried to get in touch with Brian but he would not answer his phone. I was thirty minutes late and Brian had a history of never answering his phone, and as cofounders we had ups and downs.

When I finally found him, I started yelling at him asking him why he did not pick up his phone. That scared the new CEO shitless. He left and we then got a call from the VCs telling us they had decided not to invest. They pulled the contract and they left us with the attorney bill for all due diligence and the paperwork they had done. That was a hard lesson learned. It was a $130,000 attorney bill. It was unbelievable. We were young kids at the time, and as founders we fought a lot. I learned then that we had to find a better place to fight!

After we found the right investor, we found Brian Cohens to be our CEO. He had been the founder and CEO of a firewall company and he was the perfect CEO for us. That is when I believe we became a real company. We hired marketing, a real sales team, and got our act together.

This segment is part 6 in the series : Child Entrepreneur Caleb Sima: Cofounder Of SPI Dynamics
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