Seismic Capital is already shaking things up in the Los Angeles venture market with its democratized capital structure, where investing in startups is open to all, regardless of income levels.
That’s because it created a Reg A+ framework for its first fund, enabling unaccredited investors to invest a minimum of $1,000, in addition to a traditional offering for accredited investors.
The initial capital it plans to invest will be $100 million, Seismic president Eric White told L.A. Inno.
The first recipient, which received $10 million, was Game Cloud Network, a startup that helps companies connect brands, consumers and influencers through games.
The goal for the initial fund is to do 10 to 12 investments, with another three or four this year, White said.
The Seismic team
Seismic Capital is made up of a team of investors with extensive experience.
White spent years as an investment banker, raising billions of dollars for various companies. He’s also been an advisor to several venture capital and private equity firms.
Steven Weinstein, who serves as CEO, has three decades of experience in capital markets, financing, VC, PE and real estate.
And Alice Neuhauser, who serves as CFO, has a broad range of experience in financial management, business development, strategic planning and corporate oversight.
Seismic Capital also has a group of about 12 advisors, which it relies on to advise on the deals and serve as mentors to the portfolio companies.
Seismic's vetting process
To be eligible for an investment from Seismic, a startup needs to have a product and at least one customer.
Before deciding on Game Cloud Network as its first investment, Seismic interviewed and vetted more than 500 startups, White told L.A. Inno.
Seismic does a deep dive on those that show potential, working with a team of former Lehman Brothers bankers on due diligence and valuations, as well as marketing studies for exit strategies and regulatory issues. Seismic has a tech diligence team as well, which examines patents. And it has a legal team to work through agreements and do more due diligence.
One of the things Seismic’s team looks for is a good fit personality-wise. As Seismic takes an active role in the back-office functions of the startups it invests in — like HR, accounting, marketing and strategic planning — it wants to have a good relationship with the leadership teams of these companies.
With Game Cloud, Seismic developed “a great relationship," White told L.A. Inno. Game Cloud’s CEO Aaron Baker is a “terrific leader” and the company is growing substantially, White said.
Another enticing aspect about Game Cloud, which launched in 2019, was that one of Seismic’s advisors, Demetrio Cuzzocrea, was part of the gaming company’s leadership team.
“That was helpful for us in receiving insights early on,” White told L.A. Inno. “Not every deal's going to work out that way.”
White declined to disclose any revenue numbers but did say that the gaming company exceeded its initial projections, attributing this to Game Cloud’s “impressive” client base.
Revenue in the global games market is projected to exceed $396 billion this year. It's expected to show a compound annual growth rate of 7.7%, resulting in a projected market volume of $533 billion by 2027.
Seismic's investment strategy
While Seismic is mainly focused on pre-Series A investments, its goal is to be a long-term investor in its portfolio companies.
“If there's a Series A, B or C, we want to be there for them as well,” White said.
Seismic is open to investing in mostly all industries, but mainly focuses on tech including fintech, medtech and edtech, as well as gaming, fitness and media.
Another differentiator for Seismic is that it does not create any deadlines or benchmarks for returns for its portfolio companies.
“Unlike other VCs, we are not milestone-based and just want to help the companies continue to grow and reach the potential that the companies’ founders set out to accomplish,” said White.
