[UPDATED] St. Paul Startup Structural Raises $2.5m Equity

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Updated 6/5/18: Closed. Investors include: Revolution’s Rise of the Rest Seed Fund, Great North Labs, High Alpha, Matchstick Ventures, The Syndicate Fund, and angels.

Original 6/1/18: St. Paul startup Structural is seeking $2.5m in equity capital per this SEC disclosure from May that almost slipped through the cracks.

Structural was started during the first half of last year by repeat entrepreneur Scott Burns and Minnesota tech veteran Chip House to “pioneer employee success management by giving organizations real time, mobile access to their employee data.”

Following their launch, Structural reported a string of initial B2B customer acqusitions and Salesforce VP joined the BOD.

While the filing only shows $50k as claimed, unofficial sources are saying the company has already received upwards of $2m.  That is yet to be confirmed by the company itself, though House acknowledges having “received some funds…”

Structural is estimated to have previously raised $1.5m in convertible debt from High Alpha (Indiana), The Syndicate Fund, Great North Labs, and Daren Cotter – among others.

“I think a business of this nature is $5m-$15m for the first wave of growth, depending on what we want to do with acquisitions and international reach, more is an option,” Burns had said in an earlier interview about Structural’s capital strategy.

The company is based inside Osborn370 and counts 14 employees, up from 10 this time last year.

Comments

  • http://thebigidea.com/ TheLittleDuke

    I would like to see a “use of funds” infographic with all “capital raise” stories — something color coded and laid out like a treemap so that we can quickly get a sense of how the capital will be deployed. Candidate categories include: Debt (Repayment or Servicing), Salaries, Operations, Sales, R&D etc. Could be nested too for that matter to break out things like “Rent” in Operations.

    Think of it like a nextgen Morningstar Style Box, except that the size of the boxes would be weighted and show up like a kind of heat map. Should be simple to gather based on percentages totaling 100%.

    This is something we’re considering adding to the Silicon Prairie Online funding portal stack as a way for investors to quickly understand how their money would be spent.

    • http://thebigidea.com/ TheLittleDuke

      A few more thoughts…

      It’s really unsatisfying to see “so and so company is raising 2.5M blah blah” and have NO idea what they plan to do with the funds!?

      Pay themselves big salaries? Move into swank office space? “Hookers and blow”? Or worse, “debt service”.

      Nobody wants to pay for someone else’s lifestyle.

      We tell this to “wantrepreneurs” all the time: If you NEED that paycheck so bad go get a job working for someone else.

      • http://tech.mn Jeff Pesek
        • http://thebigidea.com/ TheLittleDuke

          LOL – IKR!? It’s hard being us…

      • Daren Cotter

        I’m struggling to understand your complaint. Private companies raising capital share a significant amount of information with prospective investors. Answers to the hypothetical questions you pose are almost *always* part of that information share. Investors can ask for as much (or as little) information as they want; ultimately it is their responsibility.

        Is your argument that this private information should be made public? I find that very unrealistic. I see minimal advantages in this and extreme challenges.

        Is your argument that “the press” should require more information from companies in order to publish capital raise stories? They could certainly try, which is their right. But when companies choose not to share these details (as almost none would), then what? I fail to see how stakeholders are better off.

        Of course, if one wished to create a 3rd party platform connecting entrepreneurs seeking capital with investors seeking investment opportunities, then said platform could choose to implement whatever disclosure requirements they wanted. Stakeholders could choose to participate or not based on those requirements. If said disclosures were a value-add to all stakeholders, then they would become the norm.

        • http://thebigidea.com/ TheLittleDuke

          It’s not a “complaint” it’s an observation….

          Yes companies in theory provide this information, buried in their financials.

          I think if companies want to take credit for raising funds they should be more transparent about their use of those funds. IF “the press” is going to report on it, then there should be a nominal cost to providing that information. Otherwise, my immediate thought is “what are they hiding?”

          Take a look at the LinkedIN post I created with an example of what I’m talking about — already approaching 5,000 views and climbing

          https://www.linkedin.com/feed/update/urn:li:activity:6408662004042596352/

          If we’re going to begin engaging more non-accredited investors then we need to do a better job of helping educate them about what they are investing in.

          If we can use a nested tree like map to socialize that a company is disproportionately spending the money on executive compensation, I think investors have a right to understand that in the broader context of the use of funds.

          Silicon Prairie Online has already obtained approval from the regulators in Iowa and Wisconsin to begin providing this info graphic on our crowdfunding portals (waiting on MN regulator to get back from vacation and for FINRA to comment) — I’m all for failing fast — if the crowd loves it, then it could become the norm…

          • Daren Cotter

            I agree — investors do have that right. If a company is soliciting investment from “public investors” then they should be prepared to share detailed information publicly. It sounds like that’s your vision for SPO, which I respect.

            IMO, applying that criteria to a private company raising money from investors in a private transaction does not make sense. Just because you want to know how a company is choosing to invest capital, doesn’t mean you’re entitled to that information. Maybe this isn’t what you mean, but since you’re posting it on a story about a private company raising capital in a private transaction, it would be easy to draw that conclusion. =)

          • http://thebigidea.com/ TheLittleDuke

            I’m glad you can see the utility in this kind of infographic.

            I totally get that a private company doing a private raise does not need to share that information with the PUBLIC per se.

            However, are you saying that a private company raising money somehow has a right to hide it’s use of funds from it’s investors? I don’t think you’re saying that. My hope is that ALL investors would want to see this kind of distilled information — front and center on the cover of an offering document!

            IMHO if a company won’t disclose at least SOME of it’s use of funds, maybe broad category strokes, then I don’t find there is any value in socializing it and again IMHO they should not get to take credit for the raise? Of what practical value and utility is it to the rest of the world?

            There is so much BS in this space and the IMPLIED story is that the money is fueling growth. I think if it is growth the company is missing a golden opportunity to pre socialize, for the sake of the current investors, employees and new investors. If they need talent this is their cheapest advertising/marketing channel.

            Again, to be clear I’m talking in the broadest brush strokes here and not about any company in particular. But since tech.mn has provided us this forum it seems as good as any to have a dialogue about it since it’s timely and relevant ;-)

            “If you see something? Say something!”

            -dvd

          • Daren Cotter

            > I totally get that a private company doing a private raise does not need to share that information with the PUBLIC per se.

            This is my entire point. Other than the “per se” at the end, which makes your position still ambiguous.

            In 30+ investments in private companies, I’ve never had a company refuse to provide the information you’re describing to investors. It’s a non-existent problem.

            > However, are you saying that a private company raising money somehow has a right to hide it’s use of funds from it’s investors? I don’t think you’re saying that.

            No. I hope investors would choose not to invest in a company who was hiding information. The “market” usually addresses this type of bad behavior.

            However, “not disclosing publicly” is not the same as “did not disclose to investors.” I think your earlier comments unfairly equated the two.

    • http://tech.mn Jeff Pesek

      “I would like to see a “use of funds” infographic with all “capital raise” stories”

      Yeah – I always make it a point to ask, but it’s up to the company’s if they want to answer, and if so, to what degree. In this case, Structural acknowledged the round and that was the extent of it for now.

      • http://thebigidea.com/ TheLittleDuke

        “Sunshine is the best disinfectant”

        Let’s set a new benchmark then! We have all the data in every crowdfunding offering we will ever host. I’ll bake it into The Big Idea business planning tool and competition as well. We’re already implementing a “Lean Canvas” component in the stack.

        Since the data is supplied by the issuers the regulators should be comfortable that the visualization of it is not an endorsement by the portal operator. I’ll float the idea early by Commerce as well as FINRA.

        Overtime INVESTORS could come to demand seeing the infographic: “Show me how my money will be deployed”

        • http://tech.mn Jeff Pesek

          OK, this is a private placement, not a public-facing equity crowdfunding offering. The information you’re asking about is likely requested and supplied to the investors involved – but not the general public because this is (a) not a solicitaiton and (b) not a public offering.

          • http://thebigidea.com/ TheLittleDuke

            I get that — but Issuers should be willing to take credit for the smart deployment of capital. Putting out “we raised $X Million” is vacuous. We have to stop using money as the metric for sophistication. For all we know some companies are just outrunning bad terms from previous rounds.

            I mean even SOME indication of what the use of funds represents versus the assumption that it equates growth would be helpful. While the details might be private, the PR is not.

            My comments are GENERIC and in no way reflect on any particular issuer.

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