Seattle vs. Silicon Valley: TechFlash Cup startups on best place to find funding

By: Rachel Lerman and Sarah Aitchison

Daniel Daoura flew from Seattle to San Francisco and back in one day on a recent hunt for funding sources.

The co-founder of startup PebbleBee, which makes a multiuse location-tracking device, said he had never done anything like that before, but had to go look where the funding was.

Seattle has a booming startup ecosystem, but the venture capital community hasn’t quite kept up. In fact, most of the funding poured into Seattle’s startups comes from out of the area — specifically Silicon Valley and San Francisco.

Some think that’s a problem. We need more local sources, they say. But others don’t mind at all. After all, money is money.

Daoura and co-founder Nick Pearson-Franks said although they met some people who could fund their project in California, they were nervous about having one venture capital firm controlling the whole company. They would rather keep their funding local and are looking at Seattle angel investors and VCs now.

So far, the pair said the funding community in Seattle has offered not only money, but also mentorship and advice.

Many of the 10 startups in the PSBJ’s TechFlash Cup competition have raised rounds of funding from VC sources. A few got funds from local Seattle firms, and are happy to keep the money local. But others think location doesn’t matter, and if you’re willing to travel, you can find funds.

Gilad Berenstein, founder of Utrip, had the opportunity to move his online trip planning company to the Bay Area early on, and although he often makes trips to San Francisco, he decided to keep his company in Seattle and is happy with that decision.

Berenstein said that in his experience, a smaller investment community has helped him to build good relationships with investors.

Janelle Maiocco, founder of farm-to-table startup Farmstr, said she looked for funding in Silicon Valley before finding investors locally.

“I’m not opposed to money in the Valley — there’s more money there,” she said. “While the Seattle community is smaller and I don’t think investment comes as quickly, I think at least it’s very meaningful money because it’s a very supportive community.”

David Remer, of iWitness, agrees that location doesn’t matter. He is an angel investor himself, and thinks much of company’s success in Seattle depends on the scale and market of the business you’re trying to start.

Remer isn’t the only angel startup founder. James Walter, co-founder of data-analysis startup, Finagraph is also an angel investor. He said the angel community in Seattle is well-liked by startups for their depth of knowledge and expertise.

But that doesn’t mean there is enough money, he said.

For Mariah Gentry and Kyle Bartlow of JoeyBra, keeping it local proved valuable. Many of their investors are now important advisers to the company and even come to pitches with them.

But the company faced its own set of challenges in finding funding in the area.

“When we first started fundraising, finding investment for things that were non-technical was difficult,” Bartlow said. “For non-tech companies, it’s important to make it really clear that you know the industry.”

Seattle has a young and growing angel and VC community, Tim Nguyen of Filelize said. It’s often easier to get ahold of investors here, because Silicon Valley gets saturated. But he doesn’t see a problem with finding investments from outside the area.

“A lot of Silicon Valley investors like that companies are based in Seattle because the tech community is really strong here,” he said.

Seattle’s smaller angel community can also be more personable. At least that’s what Mary Egan of Gathered Table, an online meal-planning service thinks.

“Everyone talks the supportive talk,” she said, “but they also walk the supportive walk.”

And there’s another ecosystem in the area as well — the Eastside investors. Seattle is much farther ahead than the Eastside, said Davide Vigano, whose startup Sensoria is based in Redmond.

That’s partly because Microsoft has been sucking up all the talent for years, he said, not giving it much of a chance to develop.

“When we fly down to the Bay Area it's just instant, the level of support,” he said. “In fact there is competition in supporting startups over there. I think Seattle has a long way to go.”

But Shirish Nadkarni, CEO and co-founder of mobile shopping app, Zoomingo sees the Microsoft glass as half full.

The large technology companies in Seattle allow for a strong angel and venture capital community in Seattle and because of this talent, Nadkarni believes VCs are investing in the Seattle area.

“People [from large tech companies] have great ideas and want to spin off and start their own companies,” Nadkarni said. “I would encourage a potential entrepreneur to start with angel investors in the Seattle area but also look for options in the Bay Area.”

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