Bootstrapping From Arizona To 36 Million Dollar Series A Valuation And Silicon Valley Venture Capital: Infusionsoft CEO Clate Mask (Part 8)

Sramana: Have you raised any additional funds?

Clate Mask: No. One of the investors who did the Series B wanted to invest more, so we allowed them to add a few more million dollars last year. We did the Series B in November, and it was a terrible time in the market. We chose a handful of firms based primarily on connections we had. We were talking to seven firms that were amenable to where we were in our business development. In many ways, we were at a stage that made us a tweener between B and C rounds. When we flew out for second meetings, we met Nancy [Schoendorf] from Mohr Davidow for dinner. The place was buzzing when we walked in and I sensed something different, and then she pulled out the memo from Sequoia [that the company created for its portfolio companies, advising them on how to survive the financial crisis]. I sat there at the dinner table and read it.

Sramana: That was one of the worst things they did to the industry, especially with the panic that was hitting the industry. It was irresponsible.

Clate Mask: I was feeling it in the heat of the moment because we were getting ready to talk to investors for our second round of meetings. The next day, without exception, each firm I spoke to brought up the fact that the sky was falling, and they all talked about the Sequoia memo. They all mentioned that assets were not going to be valued as they had before, and they wanted us to be reasonable about the valuation that they were going to give us. The game was changing on them and they were all freaked out.

Over the next three weeks, instead of the normal smooth process, all of the partners were talking about their portfolios and how they were going to deal with the new world. They were not talking about the new deals they were going to invest in. Our Series B was really strange because I would call after their Monday meetings and find out they never talked about the deal because they were busy talking about all the other things. I went through a process of trying to figure out which VCs were not scared and who would actually make a reasonable investment.

After three weeks of dealing with that environment, I had had enough. I had contacts from my time in Utah and had kept in touch with several of them. I ultimately decided to raise that round of money from an investor in Utah. The Sequoia memo had not gotten as much traction everywhere else, and investors there were not panicking. It was really strange to see how much the Valley overreacted and how other investors maintained their long-term view. There was just no way to close a reasonable deal with a VC in Silicon Valley during that time.

Sramana: What are your plans going forward?

Clate Mask: We are cash flow positive, have a solid customer base, and a great market opportunity. We believe we have a powerful product and that the notion of an integrated CRM and e-commerce platform that combines with email marketing is extremely powerful for small businesses. They don’t need to move from system to system and can accomplish everything from a single platform. For now, we are going to focus on growth and developing the best product possible.

Sramana: I really like your notion of a consolidated platform for small businesses. Your story has been very insightful. Thank you for taking the time to share it with me.

This segment is part 8 in the series : Bootstrapping From Arizona To 36 Million Dollar Series A Valuation And Silicon Valley Venture Capital: Infusionsoft CEO Clate Mask
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