$45M In Series D Funding Depends On Series A Moves

Jan 30, 2016 by     Comments Off    Posted under: B2B, Entrepreneur, Management, Private Equity

(As appeared in Forbes.)

Manav Mital, the CEO & Founder of Instart Logic, is very pleased with his Series D round at $45M. He and his team have come a long way since 2010 when they were an aspiring gaming company. Wasn’t everyone you talked to in 2010 an aspiring gaming company?

Instart Logic is now a rapidly growing enterprise application delivery company. Wait…isn’t everyone in the enterprise application space now too? Perhaps…but differentiation for Instart Logic comes from a few areas that are feeding their success at raising capital:

  • Mobile First, and
  • a management philosophy based on continual learning and long-term relationships (it’s not as ‘touchy feely’ as it sounds.)

So how did they get from Series A to Series D so well?

Investors Want To Put Their Money In Majorly Expanding Markets

You’ve no doubt heard of people focusing on their BHAG—big hairy audacious goal—or their North Star. Somewhere out in the distance is their destination…and the edges of their potential market. Ideally, no one can really see the end of the market…just the far regions between today’s revenue and the end of the road.

For Instart Logic, the drive to distribute applications in mobile-rich environments and to integrate technologies that are operationally driven is growing by the minute. Mobile, cloud and global applications are all at tipping points feeding each other. They play in a global market where their Asia Pacific business is taking off. Investors like global businesses that don’t merely have a multi-cultural management team but can demonstrate a multi-region balance sheet.

The People That Invest In You Today Aid You With Who Invests Tomorrow

Some entrepreneurs are struggling to keep a few core investors in the boat. Mital, when discussing the relationships he has with investors makes you wonder how there is room in the boat.

They tout on their Website that they wrapped 2015 on a high note and with $45 Million in new funding. Some investors have been with them since the Series A round. I look to see who the two or three investors are and read:

‘Instart Logic announced today that it has closed on $45 million in Series D funding in an oversubscribed round led by new investor Geodesic Capital. The round included other new investors, including the Stanford-StartX Fund and Harris Barton Asset Management, and participation from existing investors including Hermes Growth Partners, Andreessen Horowitz, Four Rivers Group, Kleiner Perkins Caufield & Byers, and Tenaya Capital. Additionally, the company announced a strategic investment from Telstra Ventures, the venture arm of Australia’s leading telecom provider, Telstra .’ And there’s also Greylock Partners, Sutter Hill Ventures, SV Angel and Wing.’

I mean…come on. The company is doing something right.

How Do Relationships Made At Series A Help In Series D

Obviously investors have different risk profiles and objectives. They all want to bet on a winner, but they do so with different tolerances for risk they and expectations for ‘reward.’ There is nothing that says a traditional Series A investor won’t participate in subsequent funding rounds once they see their bet is paying off. And so you have Andreessen Horowitz proudly still in the boat.

And the folks that are typically B round people want to know who the A round people were. Were they investors with a high hit rate betting on winners? Are they still keeping money in the investment? Those are signs that help tip the round B guys into the cup.

Mital says it’s even better when investors first met you at the Seed round. Those individuals have an opportunity to see your growth as a business and as a management team. They might have liked you and your concepts, but they needed more time to see how you would develop as an entrepreneur and how you would fare through scale. When your professional and organizational growth compounds quickly the likelihood of funding from these groups goes way up.

Imagine A World Where The Funding Comes To You

While many entrepreneurs talk about their split loyalties to raising a business and raising capital, some entrepreneurs benefit from relationships. By creating a buzz around the business and broadening their base of investors, Instart Logic has created an environment where investors want to approach them with capital.

From their press release blurb, you can see that this entrepreneur is a creative individual open to a variety of investors and strategic relationships. That sends a clear signal to investors that there is opportunity here and makes it more likely that a win-win can be found between entrepreneur and investor.

Keep The Terms Clean

As I imagined negotiating terms with all those investors, I thought…wow, their lawyers made a pile on these deals. There are visions of multi-page contracts with tables and diagrams, metrics and future state schema. Nope. Mital believes in keeping terms clean.

So what is a clean term sheet? Apparently it fits on one page. It clearly defines the amount of the investment, the current valuation, staffing changes planned and that’s about it. It’s hard to do deals this simple if there isn’t trust. When there is trust, the relationships stay as clean as those term sheets.

How Did Instart Logic Succeed In A Harsh Investment Climate?

Mital said it was the team and the investment advisors, but a lot of it sounds like discipline and an earnest approach to opportunity and growth.

Mital admitted that he didn’t know anything at the Seed stage. He was a technical engineer. Through the process of growing the firm and engaging fully with investors and advisors he has become an excellent businessman.

He now not only envisions technology, but also envisions a business case. He knows how to make customers happy and reposition for further growth. He understands how an organization comes together and how to grow it into something better through careful selection and hiring.

Perhaps the reason Instart Logic has been so successful through scale is because the leader’s own growth aligned with the objectives of each round of funding. At the seed stage he was a passionate visionary technologist. At the Series A stage he was an apt pupil to advisors and a servant to customers. As the growth continued he and his team all became more sophisticated in the ways that investors, stakeholders and customers get enhanced value.

Mital made this transformation in only 5 years. That’s a lot of growing and learning to do in a short period of time. It takes an open mind and an interest in more than technology and money. It takes a true passion and competence for the ‘entrepreneurial condition.’

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