Sramana: You said you funded the seed round yourself. What were the milestones and accomplishments of that seed round?
Chris Gladwin: I used not only capital but in the early rounds I was also able to use equity as a way to compensate initial employees. You can provide equity to people when you form the entity and that is the only time you can do it tax free. I did not form the actual entity for around 18 months when we did our A round.
I provided some cash for operating expenses which was hundreds of thousands of dollars. Most of the compensation that people received was equity. We waited to form the entity until a little later. That is how we did the seed round. We effectively put in about $1.5 million in the seed round.
In terms of milestones, we built functional concepts of the capabilities we were developing for the enterprise storage system. We also conducted primary market research ourselves with the possible market segments. We were able to look at those results and determine what the demand for storage looked like. On the enterprise side, they were dissatisfied with alternatives and they valued their data quite a bit. They were willing to pay for solutions. We looked all the way down to consumers who did not have a home-based business and found that they did not value their data to the point that they were willing to pay for their own solution.
We understood how important digital data storage was to different segments. We knew what their willingness to pay was. Today, people understand that digital information is important and that they cannot lose it. Even small and home-based businesses understand that. It was not that clear in 2004. The concept of businesses having digital information was still a bit new in some segments. We just confirmed what is very obvious now.
Sramana: How far did your initial funding structure carry you? When did you decide to do a Series A?
Chris Gladwin: That initial structure carried us about 18 months. We delivered our milestones so that we could show the capabilities that we would develop. We used that information to enter into our Series A round.
That is when we wanted to prove out the technology for real and we started looking at investments in the range of millions of dollars. Not long after we started down the path of our Series A, some large investors approached us and told us they thought what we were doing was great. They wanted to fund us with several million dollars. We ended up doing the Series B shortly afterwards.
Sramana: What is the chronology of Series A and Series B?
Chris Gladwin: We did our Series A at the 18 month point and then did the Series B a year later.