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How to Fund Your Campaign Startup

The recent blockbuster sale of SKDKnickerbocker to a private equity firm has some poli-tech startups wondering if a cascade of funding is about to roll through the industry. 

Finding seed money or attracting investors to grow their operations are some of the biggest challenges campaign industry entrepreneurs face. Getting the right investor is challenging because many VCs won’t invest in a partisan firm. Moreover, investors want to know that your firm can compete for users and revenue outside of politics. 

“If you’re limiting yourself to politics, I think you’re going to be in trouble — and leaning to one side cuts the market value even more,” said Hue Rhodes, a filmmaker turned entrepreneur who launched the self-streaming service Amplfy.me. “The investor community is quite excited about applications in politics, but what they would be suspicious of is a tech startup whose only source of revenue was going to be the semi-annual influx of spending.That probably wouldn’t get enough traction.”

For instance, NationBuilder in 2012 was able to secure $6.25 million in Series A funding from venture capitalists led by the firm Andreessen Horowitz, in part, because it was bipartisan. "NationBuilder is that rarest of products that not only has the potential to change its market, but to change the world," Ben Horowitz said at the time. 

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Rhodes said he’s also pitched his streaming service, which is akin to Meerkat or Periscope, based on its bipartisan application. 

“I raised a pre-seed [fund] that was a mix of angel and venture funding,” he recalled. “Most of the folks knew me or were a couple of degrees away from me. Early investing is, in large part, confidence in the entrepreneur.”

Even once companies get past the early stage of their development they’re not a sure bet to attract investment. Even if the business if successful it can be hard for poli-tech startups to convince VCs to inject capital, according to Justin Gargiulo, who founded the Austin-based Republican software and data analytics firm VoterTrove. 

“They’re not political guys,” he said of investors. “You have to explain your business to them. The best bet is to go to someone who’s philosophically where you are.”

In the case of SKDKnickerbocker deal, it was fellow Democrat Mark Penn whose firm Stagwell Group that purchased the firm. Penn said he’s eyeing other companies to invest in, but Gargiulo was skeptical how far Penn would look down the food chain for investment opportunities. “I don’t think it translates to the million-revenue tech firm,” he said.

Will Hickey, head of business development at the poli-tech startup BillTrack50.com, said investors can be sold on a company’s influence. 

“You’re looking for the investor who really loves your idea,” he said. “The nice thing about the political space is that almost everybody has an opinion or can get excited about something.”

Hickey recommended networking with wealthy investors or speaking to angel investor groups around the country. “Network with the right people and make a strong case that your business can be profitable and can change the world in a positive way,” he said. “The more you know them and they know you, the better opportunity to find investors and founders who can work well together.”

Once a firm does find investors, Hickey warned of being cautious about the amount of money changing hands. “You give up control when you get money from venture capitalists,” he said. “In our case, I think the investors would have been happy to put in more. But it was important for us to put that number low so we could do as much as we could with their investment as opposed to treating it like a cash cow.”

Beyond looking for angel investors or VCs, poli-tech startups can look to some non-profits for funding. For instance, longdistancevoter.org this summer was awarded $325,000 in funding from the Knight Foundation. Longdistancevoter.org had been growing since 2006, but Knight does provide $35,000 in initial funding to “prototype” ventures so the entrepreneurs can test ideas, according to Chris Barr, director of media innovation at the foundation.

If the entrepreneurs show progress after six months, they can be awarded more. “We fund anywhere from 18-25 projects a quarter,” he said. “For us, it’s a way to catch new ideas, get to know people and how they work. We’ll continue looking at projects within the election space.”

Partisans, though, need not apply.

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By
Sean J. Miller
10/30/2015 10:40 PM EDT
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