Kick-Start V venture-capital fund generates $3.8M
Capital will be invested in 15 to 20 companies over next three yearsApril 13th, 2023
Spokane angel investor Tom Simpson says he has completed fundraising for Kick-Start V, a $3.8 million venture capital fund to invest in local and regional startups.
The latest funding round concluded on March 31, and it’s the fifth such campaign since 2008, says Simpson, who is the CEO of Spokane-based startup accelerator Ignite Northwest and president of the Spokane Angel Alliance.
Eighty percent of Kick-Start V is expected to go toward funding companies in the Spokane, Coeur d’Alene, and Sandpoint areas—across a variety of industries—over the next three years. Investments will range from $100,000 to $500,000, says Simpson. The balance of the fund will go toward investing throughout the Pacific Northwest, including in Seattle; Portland, Oregon; and Boise, Idaho.
“I’ve got the first (company) teed up,” says Simpson. He declines to disclose the name of the business but says it’s a Spokane-based company in the health care industry.
Investors in the Kick-Start V fund consist of 25 corporate and individual investors, primarily from Spokane, including Simpson.
Since 2008, Kick-Start has raised just shy of $13 million. The previous four Kick-Start funds have led investment rounds or participated in first financing for 50 regional startups.
Although Kick-Start V isn’t the largest fund to date—and many venture capitalists are being selective about their investments in the current economic environment—Simpson claims now is a good time to invest.
“Like Warren Buffet says, ‘be fearful when others are greedy and greedy when others are fearful,” Simpson says.
Simpson has over 30 years of experience as an investment banker, a venture capitalist, and a co-founder of a tech company, Green Cupboards, Inc., which later was renamed etailz Inc., and was acquired for $75 million by what now is Spokane Valley-based, publicly held e-commerce company Kaspien Holdings Inc.
Simpson says he came up with the idea to form Kick-Start in 2008 so that he could take the lead in the early investment funding of a company. Back then, he would regularly bring two to three startup companies to present their business to Spokane Angel Alliance luncheons. He observed, however, unless there was an individual or group of investors to take the lead, those companies wouldn’t be funded.
“Many angel investors may like an idea and want to invest but may not have the time or energy or knowhow to do the due diligence … and go through the closing process of funding these companies,” he says. “The lead investor is like the conductor of the orchestra. The lead takes point on due diligence, takes responsibility for negotiating the terms of investing, and oversees the closing process.”
Iterations of Kick-Start funds have been launched about every three years, Simpson says.
The first Kick-Start campaign he formed in 2008 raised $530,000, says Simpson.
Kick-Start I invested in 12 companies, including Green Cupboards.
For Kick-Start II, Simpson raised $650,000 from investors and funded 13 companies, he says. Recipients of that round include Post Falls-based SafeGuard Equipment Inc., and Spokane-based software company Gestalt Diagnostics LLC.
SafeGuard was founded by three University of Idaho students who developed a wristband that warns users—typically utility linemen—about imminent threats of electrocution.
“I was enamored by the three young men and the idea,” says Simpson who led the funding round.
SafeGuard’s products are used by most investor-owned utility companies, he claims.
Gestalt Diagnostics is a digital pathology diagnostics startup. Last year, the company secured eight patents in the United Kingdom for its PathFlow software, as well as clearance for clinical use of the software throughout Europe.
The largest funding round to date, Kick-Start III, raised $5.2 million and invested in 20 companies, says Simpson. Prime examples from that fund include Spokane-based Spiceology, and Liberty Lake-based Cloud Inc. which does business as Vega Cloud, a cloud optimization company that recently completed a separate $9 million funding round.
Simpson didn’t take the lead in Vega Cloud’s latest funding round but says that he tries to serve as an adviser for many early-stage companies and guide them through initial investor funding, so that when those companies raise capital again, they are familiar with the process.
Simpson speculates that the reason Kick-Start III was the largest fund yet might be because it was formed shortly after Green Cupboards was acquired, and the success of that exit led people to feel more confident about investing in startups.
“That transaction was a very successful investment and notable success story in Spokane,” he says.
The size of the funds he forms is somewhat correlated to the strength of the economy and the stock market environment, he adds.
Kick-Start IV raised $2.8 million and invested in 17 companies, with funds remaining for one more investment, says Simpson. Funding recipients include Spokane-based Slate Dental Inc. and fintech startup Treasury4 Inc., also of Spokane.
Over the past 15 years, a number of startups funded by iterations of Kick-Start have been acquired successfully, including Liberty Lake-based Demand Energy Networks, which was acquired by Enel Power North America Inc., and Liberty Lake-based 2nd Watch Inc., which was acquired by Singapore-based TS Telemedia.
“That’s how I generate a return for my investors,” says Simpson.
Skye Henderson, Ignite board member and investment manager for Cowles Ventures, a venture capital investment subsidiary of Spokane-based Cowles Co., describes the venture capitalist landscape in Spokane as a tight-knit community. He cites Avista Corp. as a prominent partner and investor in the community, and Cowles Ventures is one of the largest investors.
He says Simpson is the face of the startup ecosystem in Spokane.
“He lights the spark in the community and then connects the dots between startups, not just to Cowles Ventures, but other individuals looking to invest in the area,” Henderson says.