Enterprise 101: Secure the moneybag

Wendy Wahl, chief executive officer of TraceDetect,
logged more than 45 hours in the past eight months
asking investors for one thing: money.

By Tricia Duryee
Seattle Times Eastside business reporter

That’s 20 presentations, 90 minutes each. Not to
mention getting asked back by half of those investors
to do it again.

All for a $650,000 investment.

Call it the education of an entrepreneur.

Wahl isn’t the first to endure the raising of capital, but
in doing so, she’s joined the ranks of others who have
the stories and scars to prove it.

She didn’t know what to expect in August when she
started looking for financing for TraceDetect, a
Seattle startup that builds low-cost portable devices
that detect metal in water, dirt and other material.

Maybe a couple presentations, a hand shake, then a
check? Or maybe verbal commitments followed by
term sheet, a formal document outlining the deal? However it would be accomplished, she had an
undying confidence — even during the equivalent of a venture-capital drought — she would get
the task done.

"I can’t see it not happening; the opportunity is too good," she said late last year. After all, the
company, operating out of a small office in Fremont, used a patented technology developed at
the University of Washington that allows other businesses to test soil or water in the field and get
results on site, without having to send samples to a lab. She figured investors would be interested
as soon as they learned that the company already had a revenue stream and that the technology
was not in the battered Internet sector or the overfunded wireless industry.

But the task proved complicated and tiring, something she likened to running a marathon. "You
know you are hurting yourself, but you do it anyway," she said.

Before her search, Wahl had sunk more than $40,000 of her own money into the company, left a
lucrative job at Microsoft and hadn’t been paid in two years. Co-founder William Dietze had
contributed $80,000. (TraceDetect was also working on a device that can test for high levels of
lead in children’s blood and urine. The National Institutes of Health granted $748,000 over two
years to help develop it.)

In January, she thought she had raised the money, the company’s six-member staff colored in the
rest of the thermometer on a chart showing how much was raised to date. But two weeks before it
was to close, the deal crumbled and one of the lead investors pulled out.

"I didn’t realize how long it would take to close that puppy," Wahl said. "So much of fund raising is
watching other people make decisions based on other people’s actions."

That left Loretta Little, director of WRF Capital, a division of the Washington Research Foundation,
which invests in companies with ties to the University of Washington.

"It was hoped that we would close in February, but instead we had to get the white out, out," Little
said. The thermometer was redrawn. Complicating the deal was the departure of one of
TraceDetect’s executives: the vice president of sales and marketing. Also, Wahl had a ski accident
that left her face bruised and arms cut and bleeding. Although still capable of performing her job,
she said it made some investors question her level of commitment.

Without the expected financing, the company needed cash. WRF gave TraceDetect a bridge loan,
and Silicon Valley Bank extended the company a $15,000 line of credit.

Wahl replaced the departed employee, adding two new executives: Hillary MacDonald, who has a
background in chemistry and electrical engineering, is now director of product development, and
Mary Baker Anderson, formerly of HomeGrocer.com, is the part-time chief financial officer.

She made more presentations, in front of organizations like Angels with Attitude and Puget Sound
Venture Club. Wahl mostly ruled out most institutional venture capitalists because they either were
not knowledgeable about her industry or it was too early in the company’s life cycle for VCs to
invest.

"I just want someone to write a check, so I can get back to work and make a good product!" Wahl
said, showing her frustrations in early January. Three months later, she revised that statement: "I
want someone to write me a very BIG check!"

It took casting a wide net to collect enough. WRF led the deal by investing $200,000, Angels with
Attitude invested $150,000 and Metropolitan Mortgage in Spokane, $100,000. Other investors
included Melissa Widner, a venture capitalist at SeaPoint Ventures; Vijay Vashee, an angel and
former Microsoft employee; and Chris Somogi of Somogi Ventures.

Wahl said the fund raising was a major distraction, but the introductions to investors led to new
advisory-board members and mentors.

It was also a drain, personally, especially the nights she’d wake up at 3 a.m. to work. "What I
realized is if I ever had a job, like a job-job again, nothing would ever upset me because I am still
going to get a paycheck," she said.

Tricia Duryee can be reached at 206-464-3283 or [email protected].

Copyright © 2002 The Seattle Times Company

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