A Q&A with Clarke Miyasaki, Managing Director, Kickstart Seed Fund. The fund closed its second round of fundraising with $26 million in late April. Kickstart is focused on companies located in the Mountain West region of the U.S.
SUB: Please briefly tell us about the vision behind Kickstart Seed Fund.
Miyasaki: Kickstart was founded to provide Seed financing for Utah tech startups. For quite some time, Utah has had very successful company outcomes, despite a Seed-stage gap in funding. Some of the indicators that suggest a healthy start-up environment in Utah include: second highest in the nation in Inc. 500 companies per capita; University of Utah number one and BYU number three in tech startups 2011 and 2012; Forbes’ best state for businesses and careers; Salt Lake City and Provo-Orem both in the top ten best-performing cities ranked by the Milken Institute.
Kickstart has lined up the key players in the ecosystem by getting the top Angel investors, universities and influencers around the table to focus on filling the Seed-stage funding gap in the state.
SUB: Why was this a particularly good time to raise a new fund?
Miyasaki: I wouldn’t say it was a good time to raise a fund from a macro level, but we were lucky to have several groups catch the vision of what we are trying to accomplish. Our fundraising pitch was easy to grasp because most of the folks on the other side of the table were heavy lifters in the Utah ecosystem and believed in our thesis of becoming the fund Utah entrepreneurs think about when raising their first institutional round.
SUB: What kinds of companies are you looking to invest in with this fund?
Miyasaki: Aside from the typical innovative product in a growing market, the common characteristic of companies we invest in will be the ability to get to Point B in a capital-efficient manner. We are a Seed fund and realize our portfolio companies need to make significant progress in a short amount of time with limited capital to keep us from getting crushed in future financings.
The majority of the portfolio will end up in the software sector, particularly SaaS business models, but we are open to any early-stage company. For example, we have investments in an organic compost company—EcoScraps—and an electric vehicle technology—WAVE—that are both performing really well so we are pretty open in terms of sectors we’re willing to look at. Since we only have two partners, we prefer for companies to be in Utah or a surrounding state to help manage our bandwidth.
SUB: What kinds of companies/sectors would you say are leading the way in technology innovation right now?
Miyasaki: Clearly what Apple, Amazon, Facebook and Google are doing on the consumer side has been the big story in tech for some time. What we are seeing right now is the incredible influence that these companies—and many others—are having on the enterprise in terms of the types of technologies that business users expect, especially from a UX and flexibility point of view. These business managers have a new expectation and impetus to update their tools. This is a terrific opportunity for scrappy SaaS companies to jump in a verticalized way or in a bigger, horizontal play to provide the next generation of services. We believe that the opportunity is particularly compelling in the SMB category.
SUB: There have been several big VC raises lately, and the frequency and numbers of investment in technology companies seems to be on an upward trajectory this year. What do you think this indicates about the tech startup economy?
Miyasaki: We are pretty regionally focused in our investing so our day-to-day experience is largely in Utah and the intermountain region and at the Seed/Series A stages of the capital continuum. The definition of what needs to be accomplished to raise a Series A round has clearly moved to the right. These days most firms are looking for $100,000-$200,000-plus of MRR to get excited about a SaaS deal. We are also seeing coastal VC firms more willing to invest in companies in places like Utah, which we are really excited about. Companies with great momentum can raise money—especially in software, Internet, and green tech. Healthcare is still difficult—diagnostics, devices, pharma—where even great companies have a difficult time raising money. Increasingly, we see entrepreneurs focused on top-and bottom-line driven businesses—get to cash-flow positive quickly.
SUB: Generally, what characteristics do you look for in a company and in founders when you are considering an investment?
Miyasaki: We seek entrepreneurs with a lean startup mentality that can clearly paint the picture of where they will be with a capital infusion and what that will mean in terms of setting up the next financing round or hitting break even. It is hard to explain what exact characteristics we look for in a founder because we believe many different types of people can be successful, however we have a fondness for founders that have done a lot with a little coming to us with a product or service that has been somewhat validated by a small segment of the target market.
SUB: What is the one primary piece of advice you would offer to entrepreneurs just starting out and building a new technology startup?
Miyasaki: Building off the last question, it seems like all stages of institutional financing have moved a little further to the right. Series A rounds look like Series B used to look, etc. This has happened to Seed investors as well, and in order to get venture money now, you have to have some type of traction. My advice to entrepreneurs just starting out would be to get as far as you can to prove your idea before approaching institutional investors. We are getting spoiled from seeing ideas that are already taking off so it is hard to stand out now without some type of customer traction. This advice obviously doesn’t apply to the small segment of entrepreneurs that can raise money off a PowerPoint presentation at the terms they dictate.
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Clarke Miyasaki has a history of success in startup and early-stage investment environments. Most recently, Clarke served as the Global Vice President of Business Development at Skullcandy, which went public in July 2011 (NASDAQ: SKUL). Clarke joined Skullcandy in early 2008 when there were 18 employees and keyed several initiatives that helped grow the company to over $230 million in revenue in 2011.
Prior to Skullcandy, Clarke was the Vice President of Business Development at Logoworks, which was acquired by Hewlett-Packard for $57 million in April 2007. Clarke joined on the ground floor of Logoworks and developed several strategic partnerships that spurred Logoworks rapid growth and positioned it for a successful sale to HP. Some of the partnerships included Staples, eBay, Network Solutions, HP, Legalzoom and Intuit. Clarke was at Logoworks from August, 2004 to April, 2008.
Clarke joined vSpring Capital in 2002 after working as a financial analyst for Ford Motor Company. Clarke worked at vSpring in a very active investment period for the fund and opened up vSpring’s first satellite office in New Mexico with Paul Ahlstrom. Clarke also helped develop many of the initial modeling and diligence tools for vSpring.
Clarke received a bachelor’s degree in Finance from Brigham Young University. Clarke has been an active Angel investor, and is currently on the boards of Ecoscraps, Dropship.com and WAVE Energy.