(Updated, with comments from Philly venture capitalists) I broke bread Monday with a veteran engineer and company-founder: call him The Neck. We touched on the yearly South by South West conference in Austin, and how South Philadelphia's own BioBots, backed by University City-based DreamIt Ventures, won "Most Innovative" in Oracle's yearly investment conference there, and how Life On Air, developer of the Meerkat smartphone video app, which is also backed by DreamIt, has become the must-use app and potential Comcast-killer at SXSW and thus nationwide.
Pretty good for Philly, I said. Sure, as far as that goes, said The Neck. But then how do you explain what's happening to Bob Moul? The former Dell Boomi boss turned founder of Artisan Mobile went to our local VCs, such as we are, and came up empty. He's going to have to raise cash from the big West Coast firms. And you know how they are.
Artisan raised $5.5 million from New York-based FirstMark two years ago, hired a team to build out its mobile-apps-improvement platform, and is now trying to raise more. Moul is an appealing founder: As chair of Philly Startup Leaders, he has been an adviser and supporter of tech firms far beyond his N3rd St. office. When I called, Moul naturally declined to talk about what he is or isn't doing to raise cash (there are rules). But he readily agreed that our part of the East Coast is a tough place to raise next-stage capital. So Moul will have to spend a little more time on the road visiting the money people, a little less building his company.
What's different, East Coast-West Coast? "The big difference is, with the East Coast firms, there is more of a focus on operating metrics, initially," says Mike DiPiano, boss at NewSpring Ventures in Radnor (he hasn't been approached by Artisan.) "We all understand that software isn't like building a house on schedule."
Here's a degree of difference: "When you get to the second round, guys on the East Coast are like, 'What have you built, what are customers buying, how's that working?'
"West Coast investors are still a little more casual at that point. They will commit to the hope and the idea. They do become very rigorous with the metrics later.
"West Coast are also a little friendlier around valuations and the type of securities to use. But then, if things aren't going the way they want, they move on. They often sell companies to other companies they already own, so they get their money out. But they're not very interested in doubling down on companies that for any reason they no longer find appealing.
"East Coast investors, I think, are more likely to keep slugging it out. Maybe longer than they should. Our mentality in Philadelphia is 'Stick with it. Grind it out,'" DiPiano concluded.
It's not just a coastal question: It may be tougher for Artisan, having led Round One with a New York firm, to get Philly investors in for seconds, says a principal at a rival Philadelphia-area venture capital firm, who didn't want to be quoted because it's kind of a small town, you know?
"Everyone loves Bob," this principal said. "We all want him to succeed. But he went to Firstmark. And he's spent a lot of money, and now he needs more," and any local investors who felt bypassed the first time will want advantageous terms -- a bigger piece of the action, not the usual smaller piece the second time out -- at the least.