Lining up investors who understand the campaign industry remains a challenge for political technology startup founders even as the ecosystem for nurturing the growth of these companies has matured.
Progressive incubator Higher Ground Labs, for instance, has invested tens of millions of dollars in some 55 startups since 2017 while on the right Startup Caucus recently announced its second investment round has grown to $500,000. But political technology startup founders say they still get questions from investors like, “What do you do during the three years in between elections?”
“Some investors only think elections happen every four years,” Alex Niemczewski, CEO of BallotReady, said during a panel at C&E’s CampaignTech East conference. “So there’s a lot of education.” Niemczewski’s backers include HGL, but also angel investors and venture capitalists.
“Most of our investors are not impact investors or political investors,” she said. Jess Riegel, co-founder and CEO of Motivote, said she’s looked for investors that share the company’s philosophy around making a social impact. “Finding investors who come in with somewhat of an understanding, or at least a desire to expand their understanding of the space is important,” she said.
Motivote, a non-partisan platform that aims to increase voter participation, has chosen to focus more on developing client relationships with businesses, universities, or non-profits rather than parties or campaigns.
“Most of our investors are also focused on the B2B [business-to-business] SaaS [software as a service] or enterprise play rather than political-tech focused, and they look at what we’re building as an engagement tool that can be expanded more broadly beyond voter turnout,” she said.
Brandon Harris, co-founder and CEO Votus, Inc., which helps clients find persuadable audiences on social platforms, said his company has been “pretty strategic about who we’ve taken money from.”
“We have had a lot of success with impact investors and strategic investors,” he said. “We’re actually raising a C round now and the people we’re talking to range from agencies who see us as a strategic partner with the tools that we offer. There are impact funds. We were in the Higher Ground Labs cohort last year.”
Harris said he offered investors equity in the company, something that Niemczewski and Riegel did as well. He added: “I maxed out my credit cards first.”
While getting the initial funding is one challenge, balancing the demands on the investors with the needs of clients is another.
“You want investors that understand what’s realistic because if they don’t they’re going to be pushing you and altering your vision,” said Harris. “People get into this space, and they’re like, ‘We’re going to work for a presidential and that’s going to take care of all our bills,’ and that’s just not as feasible as you would think.”
Meanwhile, clients will put a different kind of pressure on startup founders. “Our approach in the beginning was if a customer asked us for something, we would say, ‘yes,’” said Niemczewski, whose company launched in 2015 and “fuels efforts by companies and organizations to recruit candidates and inform and turn out voters through a customized digital platform.”
“I think that should be the approach of an early stage [startup]. It helps you build the relationship. Honestly, the first product we sold was not the first product we thought we’d sell,” she added.
Even during the 2020 presidential cycle, Niemczewski said her team was making product changes including adding a vote-by-mail tool.
“Sometimes, an election year will give you reason to build a new product or add a new feature — and the urgency of customers to demand it,” Niemczewski said. “Sometimes you don’t want to do it too early” in the cycle.
One thing you should be wary of, according to Harris: being too accommodating to clients who are asking for different features to get baked into a startup’s products.
“You do get to a point where you’re either going to be stretched too thin or you’re going to lose vision,” he said.