San Diego’s Interlock Capital, which up to now has operated as an investor syndicate for funding startups, plans to close its first $3 million venture fund next month — giving local entrepreneurs another avenue to raise money.
Founded by local tech company founders Neal Bloom and Al Bsharah, Interlock Capital’s new fund will join Tech Coast Angels and a handful of others specializing in early-stage seed investments.
“I think the big need is it is not just actual capital. It is the know-how and being able to say, ‘Here is what to do from zero to one,’” said Bloom. “That is greatly missing because so many of our experienced tech entrepreneurs are busy building their own companies that are still at the late stages. They haven’t had their exit yet.”
For startups, landing that initial financing has long been considered one of the toughest hurdles. At the early stages, companies often lack enough customers to validate their markets. Moreover, San Diego startups tend to be run by first-time entrepreneurs — as opposed to places like Silicon Valley where there are a plethora of second or third time CEOs who have a track record for investors to bet on.
Finally, there are few investment funds based in San Diego that target early-stage companies.
The best known is the San Diego chapter of Tech Coast Angels — a group of 300 accredited investors who put $15 million into local startups in 2021.
Interlock Capital aims to mirror Tech Coast Angels. It isn’t starting from scratch. For the past 18 months, it has operated an investor syndicate that matched individuals or groups of accredited investors with entrepreneurs.
About 265 people participated — investing $3.6 million into 17 startups through special purpose entities. Companies funded include e-commerce outfits Crafter and Mercato, and sustainable packaging firm Verity.
The success of the syndicate gave Bloom and Bsharah the confidence to attempt to raise money for a standalone fund.
“We want to raise $10 million, but we said $3 million would be our first milestone where we do a close,” said Bloom. “And now we know we can hit $3 million, and we are doing our first close in mid-February.”
Interlock has already earmarked its first investment out of the fund, backing a fintech startup in Carlsbad. Interlock will continue to facilitate syndication funding as well — possibly investing in tandem in some deals.
“A huge portion of these deals come from our network,” said Bsharah. “As that network continues to grow, we are going to see more unique and interesting deals.”
While Tech Coast Angels have done “an incredible job” funding local companies, adding Interlock Capital’s fund boosts the opportunities for San Diego startups to secure initial investment, said Mike Krenn, head of San Diego Venture Group.
“From my perspective on the outside, I would love for entrepreneurs to have the ability to take more shots on goal,” said Krenn. “There are not a lot of options in San Diego at the seed level. It’s a gap. So, I think it is great if they can pull this off.”