On Friday, a little-known e-commerce payments company named Klarna raised a massive $155 million round of funding from DST Global and General Atlantic. Its previous round was only $9 million, in May 2010, when it was discovered by Sequoia Capital and superstar partner Michael Moritz took a board seat. Of this investment Moritz says, “This is the public financing of twelve years ago. It is just done privately.”
Today, founders and board members of cloud and mobile startups have new questions to consider when raising capital. For example, do the founders need or want to take some liquidity at the same time they take additional capital? For a few lucky entrepreneurs like Klarna, Facebook and Zynga, this new funding strategy has been a brilliant way to bridge the gap on the long road toward an IPO or acquisition. The cynics see it as just another control strategy used by venture capitalists. Either way it is clever.
The real question that this funding strategy poses to an entrepreneur is: Just how confident are you in your idea and in your team? If you have some doubts or, frankly, you need the personal capital, then an early liquidation strategy is a very effective remedy. But, if you’re absolutely certain of the game-changing nature and unique value that your solution delivers, why take early liquidity unless you have to? For the many young entrepreneurs who have put themselves through college and then struggled to start their company by taking little or no income, taking this money and running makes a lot of sense. Yet for others that may have enjoyed some success and who are most confident in their offering, the better strategy remains to pull out as little capital as needed to become the winner in your space.
That said, my company, SOASTA, is pleased to announce our newest funding of $12M. To date we’ve raised $32M from Canaan Partners, Formative Ventures, Pelion Ventures and TEFIII. We would like to thank our thousands of customers, hundreds of employees and partners around the world. Season’s greetings and best wishes for 2012.
About the Author
As CEO of SOASTA, Tom brings more than 30 years of experience building early stage software companies, leading two companies to successful IPOs. Tom is a regular speaker at both cloud and testing events, and has become a leading advocate in using the cloud to empower individuals and accelerate changes in how applications are built, tested and deployed. Most recently, Tom served as President and CEO of Kenamea. Prior to Kenamea, he was CEO of Dorado Corp., a financial services software provider. Previous to Dorado, he was EVP of Sagent Technology through its 1999 IPO, entrepreneur-in-residence at Crosspoint Venture Partners, and held executive positions at Digitalk Corp., Knowledgeware (KWI) and Encore Financial Services. Tom also serves on several boards in the Silicon Valley.