6 Strategies for Attracting Venture Capital
6 Strategies for Attracting Venture Capitalback

Paula Long, CEO of DataGravity, decided she didn’t want to be a small fish in a big pond. So, entrepreneur that she is, she carved out her own pond: small to medium-sized businesses with self-serve, big data solutions rather than large companies with highly customized solutions that attract the competition.

Now she can be the big fish.

Her New Hampshire-based start-up received $12 million from Charles River and General Catalyst in its first round of financing and $30 million from Andreessen Horowitz in its second round. DataGravity also made the CRN list of Big Data 100 companies to watch in 2013. CRN reports on and analyzes the IT industry.

DataGravity will launch sometime in 2014. Long cites six strategies that helped her raise $42 million in venture capital.

1.) Target a niche within a large and lucrative market: Big data is going to be huge — $24 billion by 2016, according to IDC. Businesses produce a rapidly increasing volume of information about their customers and markets. Big data allows organizations to not only process and manage that data, but tap into it to develop insights.

Right now, big data solutions are complicated and expensive so its only practical for large companies. Big companies hire a data science team then spend big on software and hardware tools to build algorithms and models to analyze their data. That’s out of reach to most small to mid-sized companies.

Long wants to change that by making big data analysis affordable and easy for small to mid-sized companies. She envisions self-service analytics tools that give end-users the ability to explore a limited set of data on their own.

Here’s how two beta testers are using DataGravity tools: Administrators and teachers in a K-12 public school district are using DataGravity to get real-time information about students’ learning processes. This allows them to react in a timely way to the needs of individual students who may be having trouble. A nonprofit managing foster care and adoption services is using DataGravity to show it data in real time that doesn’t meet compliance requirements.  

2.) Have a track record: Long previously co-founded storage provider EqualLogic, which was acquired by Dell for $1.4 billion in 2008. She has held technical leadership positions in five technology startups, two of which she was a founder. In four of these companies she participated in the A-Round or Pre-A stage. Her company experience includes buying, selling, failing to start and almost going public.  

She has won multiple awards for Entrepreneurship, including New Hampshire High Tech Council Entrepreneur of the year award, the Ernst & Young’s 2008 Northeast Regional “Entrepreneur of the Year” and a National Finalist for the same award. (Remember what I’ve been telling you about applying for awards?)

Importantly, the people who funded Long recognize her ability to take something that has high value, but is very complex, then distill this down into something that’s simple to use without losing the value.

3.) Build relationships before you need them.  (I’ve been saying this over and over again.) For over a year, Long and her team worked closely with several venture capital firms that through the years she had built relationships with. When they had refined the idea to something that they thought had legs, which included vetting the idea with potential customers — it took a mere three months to close the first round of funding.   

4.) Have an experienced team with a history of problem solving: John Joseph, cofounder and president of DataGravity, worked with Long as VP of marketing and product management at EqualLogic. At EqualLogic, he developed and implemented the the company’s marketing plan. Joseph’s marketing skill set is different and complementary to Long’s technical one. Bryan Panner is Director of Engineering at DataGravity. While at EqualLogic, he consistently delivered products that customers wanted, on time and with a high level of quality.

Investor’s can be confident that, having overcome challenges in the past, they will be able to do so in the future.

5.) Sought smart money: Long wanted a small board. It’s less bureaucratic. She wanted people she had seen in action and whose opinion she valued. She had known both David Orfao of General Catalyst and  Bruce Sachs of Charles River Ventures a while and liked the way they did business. Her relationship with Peter Levine of Andreessen Horowitz is relatively new. While on a trip to New Hampshire, Long had a chance to meet him, find out what he is looking for in a company, and how he operates. They hit it off.

Rounding out the board is Brian Stevens of Red Hat. Long knew him from when they both worked at Digital Equipment Corporation. He was an Advisor to EqualLogic, as well.  All board members have deep knowledge of the enterprise software industry.

6.) Build a culture of collaboration and openness: Even though DataGravity is a technology company and  engineering is critical, input from all departments is valued and sought after. Everyone at DataGravity uses the product and knows how they fit into the overall success of the company.

There’s a strong sense of personal responsibility among the staff. People are encouraged to be honest. If they think something stinks, they say so. It’s a collaborative atmosphere.

There’s also a mutual respect for each other’s time. Say what you’re going to do and do it. Making deadlines is important. However, if you can’t, admit it so you’re not holding other people up.

When DataGravity hires, it looks for more than just skill fit. It also wants a cultural fit. No prima donnas need apply. The company never hires just to fill the seat. Women are great at building and motivating teams.

What’s your strategy for raising venture capital?