Startups see an uptick in investment

GOOD ENERGY: Smart-grid company Utilidata received $20 million in Series B-round financing in 2013.  Above, Utilidata CEO Scott DePasquale, right, speaks with his software team. From left: Gautham Krishnamurthy, Miriam Vera-Cruz and Svetlan Bzenic. / PBN PHOTO/CONNIE GROSCH
GOOD ENERGY: Smart-grid company Utilidata received $20 million in Series B-round financing in 2013. Above, Utilidata CEO Scott DePasquale, right, speaks with his software team. From left: Gautham Krishnamurthy, Miriam Vera-Cruz and Svetlan Bzenic. / PBN PHOTO/CONNIE GROSCH

The $20 million investment raised by e-commerce startup Teespring in December was a fitting end to 2013, even if the news broke early this year.
Last year was a good one for many startups in the Providence area, as they collectively raised at least $140 million in new funding, according to estimates from Betaspring co-founder and local startup guru Allan Tear.
“The Providence metro has seen an uptick in major financing events among our high-potential startups,” Tear wrote on his Founders League blog. “Just as impressive as the dollars invested are the blue-chip venture capitalists that have invested in Rhode Island companies.”
While leaders of the Providence startup ecosystem like Tear have worked to raise the city’s entrepreneurial profile, it’s not as if investors in Boston, New York and Silicon Valley are just discovering Providence. In 2012, East Providence medical-device startup IlluminOss raised what is believed to be a state record $28 million.
The rising deal volume is likely more the result of a greater number of innovation-based startups forming over the last several years with international ambitions.
“I think there is more flow between Boston and Providence and more awareness of what is happening in Providence, but the truth is if a company based in Providence exhibits early success and the ability to go to venture scale, they will attract capital from Tier 1 markets,” Tear said. “You are seeing a logical outcome of when you start more things with the intention to go national or global.”
Citing confidentiality, Tear wouldn’t list all of the companies that raised money in 2013 or the value of individual deals.
But he highlighted many of the large deals announced publicly throughout the year, including two other $20 million investments: one a Series B round in smart-grid company Utilidata Inc. and a Series D in DNA-sequencing firm Nabsys Inc.
Payment-analytics firm Swipely raised $12 million in a Series B round in May. “I think it just reflects the market as a whole – I don’t think Rhode Island surged ahead last year necessarily,” said Peter C. Dorsey Jr. president of the Business Development Company of Rhode Island and executive director of Cherrystone Angel Group.
Dorsey said in 2013 Cherrystone’s deal volume had been about the same or up slightly from the previous year and signs pointed to a similar 2014.
“There is definitely a lot of opportunity out there,” Dorsey said.
For the Providence area, these kinds of venture deals bring outside money into the region to fuel hiring, capital purchases and further expansion.
At Swipely, investments and growth have allowed the company to roughly double its employee count last year and move to a new downtown Providence office with more hiring on the way in 2014.
Teespring, which was founded by two Brown University students and Betaspring alumni, is also using the investment to grow.
Co-founder Walker Williams said by phone that Teespring has grown to about 100 employees, four-fifths of them working at the Providence headquarters and the remainder in San Francisco, with more new employees coming this year.
Teespring was launched just two years ago out of a project Williams and co-founder Evan Stites-Clayton started to save a local bar with custom T-shirts. With funding from local angel investor Bill Cesare, who is now CEO, Teespring built an online platform for designing, ordering and fulfilling custom T-shirts, at first mostly for fundraising campaigns.
But the $20 million investment from Andreesen Horowitz, a California-based venture-capital firm that invested more in 2013 than any other venture firm, according to CB Insights, is a sign of Teespring’s larger ambitions.
Williams said the ultimate goal is to build an e-commerce platform capable of processing orders across a wide range of product types, allowing customers to create their own brands and access custom manufacturing. “For us it was never exclusively about T-shirts; we want to be the place where people can launch, scale and grow brands,” Williams said. “We are focused on becoming the best way to sell online – that is the goal – and [the investment] allows us to move toward that vision faster.”
Williams said Teespring moved into its current offices at 3 Davol Square last summer and is close to needing a larger space already.
Among the group of companies raising capital in 2013 were several that have received public support, including some in the portfolio of the state-backed Slater Technology Fund.
Along with Nabsys, those Slater firms include Mnemosyne Pharmaceuticals Inc., and VoltServer Inc., of East Greenwich.
Nulabel Technologies Inc., of East Providence, received a $1.5 million loan guarantee from the since-canceled state Job Creation Guaranty program, although they are not believed to have drawn on that line of credit.
Utilidata received a $500,000 loan from the R.I. Renewable Energy Fund.
“There is a wide variety in that list from life sciences, to Web tech, to industrial and energy,” Tear said. “In the majority of cases the technology has been proven, the market has been proven and now it is a question of executing against the market opportunity. That is when the big dollars come in.”
Tear said the collective $140 million investment estimate for local startups represents large venture deals and does not include the numerous smaller seed and angel investments, which, while dwarfed in size, are essential to creating the companies that will scale in the future.
“The vast majority of what you see is venture-capital investment, but what you don’t see is the next generation of companies coming up that are reliant on more seed investment from angel investors,” Tear said. “That is where we need to develop more resources.” •

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