Many local founders say startup cash is hard to come by, but Michael Anderson isn’t buying it.
He moved to San Diego from Seattle in 2014 and immediately “got in the trenches to start raising money” as chief operating officer of Doctible Inc., a local software startup.
Doctible develops a SaaS product for health care providers. The company’s platform helps doctors get new patients, better serve existing ones, and automate manual tasks.
“When I moved here, the story I heard was that it was difficult or impossible to raise money in San Diego,” Anderson said. “I found the complete opposite was true.”
The company, led by CEO Ajit Viswanathan, has raised $4.2 million since its 2014 inception. That includes the latest and biggest tranche — a $2.2 million seed round that just closed this month.
This new round was led by a brand new venture capital and private equity firm here in San Diego called ClearVision Capital Partners. Previous investors joined in the round, including local early-stage investor Taner Halicioglu, who’s perhaps best known for being Facebook’s first outside hire. Today, he’s partner of early-stage investor group SEED San Diego while lecturing at UC San Diego.
Viswanathan spoke with the San Diego Business Journal about fundraising in San Diego. Here are some excerpts:
Of that $4.2 million you’ve raised, how much came from local investors?
About 90 percent. We started the company in 2014, and didn’t have any prior contacts here.
Why do you think Doctible was successful at raising this capital?
First, we weren’t going out and raising big chunks of capital. We did it in multiple, smaller tranches. We did a $675K round, a second $675K, then a $500K round and the big one was this $2.2 million round.
When you raise those bigger chunks of capital, you have to have so much more momentum. So smaller tranches definitely helped. We’re using just enough capital to show that we can go to the next level.
The second reason: All the innovation right now in health care is for big hospital systems. But the forgotten piece is the private practices. They’re still serving millions of patients. It’s an untapped market because the innovation is in the health systems where the bigger dollar deals are. But we went for the smaller practices.
How many investors did you approach?
We did not pitch to hundreds of investors. In totality, we probably pitched 60 investors total. In the early days, I would do pitch competitions.
Who were your first investors?
Our first investor was a VC health care fund called Bootstrap Incubation, led by Jean Balgrosky, Parker Hinshaw, and Kyle Williams. Jean, who was the former CIO of Scripps Health, sits on our board. They invested in all tranches that we’ve raised.
The rest of our investors were super angels. Maybe 18 to 20 investors max.
You’re $500,000 tranche was raised through crowdfunding, is that right? Can you tell me more about that?
We raised it through a platform called SeedInvest. We knew two other companies locally who had a great experience and successfully raised through them. We only needed a half-million and we felt we had tapped out the angels in San Diego. The great thing about SeedInvest is that they put money in themselves. You have to raise $250K from their group of angels. If you do that, they have a fund that will match and put in another $250K.
I had heard that crowdfunding can be difficult for startups, because too many names end up on the cap table (a company’s list of ownership stakes). I hear that later-stage investors don’t like that. How did you get around that?
There’s a couple ways to work around that. You can choose to set minimum thresholds for the amount of money people can invest. That way you don’t get a bunch of people on your cap table who are only contributing $100.
But also, SeedInvest has the option to create an LLC for investors to put their checks into. Then the LLC invests in Doctible. So it becomes just one item, one name on the cap table. That’s how you keep the cap table from getting out of whack.
We didn’t end up having to use the LLC because most people who invested put a lot more money in, with our average check size being $33,000.
You just announced a different $2 million seed round last year (the combination of a few tranches). How did you put that capital to use?
Part of that seed round was to accelerate our sales growth. That showed investors that more gas in the tank is beneficial, because now we’re growing much faster. With only 10 sales reps, we sold in 48 states. Now, we’re at 21 sales reps and our goal is to double that number within the next 60 days.