Startable – Healy Jones’ & Prasad Thammineni’s Blog

Betaworks is another newer seed fund with a different model, as mentioned in PEHub. The group focuses on “new media” opportunities. They are really innovating with the structure of their fund – they are actually not a fund. Instead, they have organized as a company. It sounds like they want to be some sort of new media holding company, with some operations internal to the business (either by acquisition or by founding it internally) or by making seed investments in startups.

When making seed investments (as quoted in the PEHub interview) they “invest as little as $25,000, though our average is in the hundreds of thousands of dollars. We mostly join rounds that are a million dollars or less altogether, and we typically participate with early-stage investors that we work with again and again and again.” This is a great spot, as it is clearly underserved.

It’s clear that they focus on internet and online media companies, with investments/ownership of bit.ly, Stocktwits and Twitterfeed.

I think this is an interesting model. I kind of like it. Build it, buy it or invest in it. Pretty fun options.

I guess my one fear as an entrepreneur pitching to this group is, will they try to develop the idea on their own, since they have developer resources and ambitions of becoming a holding company? I’m assuming they will try to handle this sort of an issue like top tier VCs do, and try to avoid these types of conflicts – but it’s to say from their web site how they approach such competitive issues when evaluating investment ideas.

Their web site is not at all like the traditional VC or angel investment group. I appreciate all the cool stuff on the site, but it is a bit confusing to figure out what their thesis, check size and current areas of focus are.

MobileCrunch pointed me to a new seed fund, Right Side Capital Management. The interesting thing about this fund, as reported by MobileCrunch and as mentioned on the fund’s site, is that they want to make 100+ investments a year – with minimal due diligence. I’ve mentioned before that I think that there is space for innovation in the early stage financing world, and WOW it looks like this team is trying to do it!

Supposedly they will make investments based off of an online application with potentially no face to face interaction. This is kind of crazy, since trust in the team is the most important. This seems like a pretty serious experiment in early stage investing. If it works then has this investment team found the equivalent of an ETF to actively managed mutual funds?

I’m not really sure who the founders of the fund are (I actually wish they would have more detail on their bios; when I was a VC the bio with no company name or position really annoyed me.) But it’s also not clear how much operation or next fund raise help they will offer, so I don’t know how to think about them in terms of helping the company get to the next level. With 100 investments a year I’d think that they would be too busy to actually provide any real guidance to their portfolio companies.

I guess I’m pretty skeptical that this is going to work, but I appreciate the willingness to try something totally new and wish the team at RightSide luck! It’s a cool idea in a space that needs innovation (and capital…)

I’m happy to announce (a bit belatedly) that Pixily is now called OfficeDrop. Changing the company’s name was a pretty big deal, but it has gone smoothly. There is much more to it that just finding a domain that we could purchase and redirecting URLs. The biggest thing for us was getting feedback from customers and getting their buy in on the new name concept. So far so good!

I hope to post on our journey to find a new name soon, but have been so darn busy that I haven’t had a chance!

Congrats to William and the great guys at AccelGolf for formally announcing their seed funding. Will did a great job leveraging his experience at TechStars into some solid angel funding, which should really help him grow the business. This is another TechStars Boston company doing really well! I hope the new class will also have a successful company forming session…

Dharmesh Shah (a longtime lurker on my blog – but he did comment once!) made a seed investment in Backupify, a provider of backup services back in June. Backupify has just received a larger angel investment of $900k from First Round Capital & General Catalyst (as well as some other really well known angel investors like Jason Calacanis).

Why am I mentioning this? Because it’s important to get the word out about Boston’s angel investment community. Dharmesh and the other initial angels invested $125k in the first round, and Dharmesh is a pillar of the Boston startup community.

I was out with a well known startup’s development group the other night, and one of their VCs from the West Coast was out with them. He and another investor (acting individually, not as part of a VC fund) invested over $500k in a young developer’s startup after just a couple of breakfast meetings. Obviously this was in Silicon Valley. There is just not a lot of this fast decision making angel investing in New England. The West Coast VC made it pretty clear that he thought that investors in Boston would never be able to make these sorts of fast, company forming investments.

He’s correct, in that we don’t have a lot of the “have breakfast, get a check to start a company” investors in NE. So I think it’s important to celebrate the investors who do make company forming investments. I don’t know how much research/effort went into Dharmesh making the initial investment in Backupfiy, but regardless, he helped get something going and we should all be proud that there are investors in Boston who do this sort of a thing.

Finally, TC mentions that Backupify is looking to move HQ…  Let’s make them feel welcome in Boston and see if they will move up here!

I may be a bit crazy, but I more think that Google Buzz is trying to fight Wave and Tweetdeck. Am I nuts? Most of the play for Buzz seems to be forcing things through your gmail inbox.

I like the idea of pre-populating your friend list. Of course this makes sense.

I am a little concerned about some of the sharing things… in the introduction to Buzz video Google highlights how it will share topics that weren’t in your friend group if a lot of your friends commented on it. But I could see this backfiring a la Facebook Beacon (hey, I wasn’t invited to this party that everyone is commenting on or hey, looks like my wife just found out I’m asking for advice on the location of her surprise birthday party.)

What is the purpose of Buzz? I’m sure it is the same as most of Google’s strategy – get as much data as possible so that the core search product can be improved. Mobile is probably the most important part of this play (in my mind.) To get an idea of how Google is watching you (i.e. collecting data) check out this part of the Google intro to Buzz video.

ComScore is reporting that ecommerce actually shrank in 2009 due to a major decline in travel spending (via Online Media Daily). Online retail spending decreased 2% year-over-year to $209.6 billion.

Weighing down the broader numbers, travel e-commerce spending dropped 5% in 2009 to $79.8 billion, while retail — non-travel — e-commerce spending actually remained flat at $129.8 billion.

The holiday period grew vs. the previous year, so this is a good sign.

Another interesting point is that Bing grew search volume share to 10.7% from 8.3%. I believe that a viable competitor in the search space is important, so I’m hopeful that Bing will be able to produce good enough results to bring over a real volume of people.

Vivek Wadhwa has started yet another interesting conversation on startups – this time on the dearth of female leaders in the IT space. I left a comment on Brad Feld’s blog in response to his response… and here is my response to Brad’s response and the original article. I guess it’s my response².

The original point is summed up by Vivek as: women make great entrepreneurs but represent a tiny % of leaders at technology startup companies. (That’s not a direct quote, that is me summarizing in a 7th grade book report style.) As usual, Vivek has done a real study and has numbers to back up his conclusion.

Brad nicely hits the point: This is “about innovation, competitiveness, and entrepreneurship.” (That is a direct quote.)

This whole point is something that my wife and I talk about a lot. She is at a tech startup; as am I. (We have some fascinating dinner conversations around HTML and the SalesForce Force.com API.) My comment on Brad’s blog pretty much explains where we are coming out on this issue:

Brad, I think a large part of the problem is pretty easy to understand. My wife and I both work at different startups; last night we were both at work pretty late. She didn’t finish up until around 10:30; I got done an hour or so before her but kept working for a while. We don’t have kids, but this lifestyle is not going to be possible when we do. Our highest performing women tend to marry high performing men (in my case I got lucky with my wife…). Since the burden of taking care of kids tends to fall on the woman, and since our best and brightest women are marrying men who have similar hard working lifestyles, something has to give. And it is usually the women’s careers.

There has got to be a business model taking top tier women with kids and getting them back into the workforce part time. That may be my next startup, but I’d be happy if someone else beat me to it.

This is a real issue. A couple of points that I see as “proof” that our best and brightest women are leaving the workforce: 1) A very high percent of female MBAs drop out of the workforce and become full time moms, much more than other professional female grad schoolers and 2) At the venture firms where I’ve worked, not a single one of the male partners’ wives worked. This is dozens of women, many with advanced degrees and who had very solid careers prior to doing the whole mommy thing.

I know that a lot of these women love being moms, but would also like to participate in the workforce. They are people who added a ton to the places they worked, but who don’t have the 70+ hours a week to commit now. There has to be a way to get them to find fulfilment both as a mom and as a startup exec.

TechCrunch is reporting on thefunded.com’s most liked VCs from 2009. While I’m happy to see some of my coworkers from Atlas on the list, it was another point that jumped out at me:

…there was a lot of turnover in VC firms in 2009.  When TheFunded sent emails to all the investment pros in its directory, 38 percent either bounced back or replied with an automated message saying they’ve left their firms.  None of those people are on this list.  And about one or two firms a week became inactive, or 9 percent of the 4,005 firms listed in its directory.

As a means of comparison, I recently sent out a large scale email (several thousand addresses) that had a 19.3% bounce rate. So, I believe that the bounce rate experienced by thefunded is statistically significant, which means that this is yet another clear indication that the venture capital industry is shrinking pretty aggressively.

What does this mean for entrepreneurs? Well, once again, it is important to find a fund where you will have a stable funding base + a partner who doesn’t leave. (Per an earlier post, here is what to do if the partner who is on your board leaves the VC – a summary: freak out.)

Some quick tips to make sure you are “picking” a funding group and partner that are stable.

• Look for funds that have raised capital in the past one to two years. If the new fund is a ton smaller than the previous, you may want to wait a few months to see if the partnership adjusts its roster as a result. If the fund is getting bigger this is a sign of a more stable partnership.
• Figure out if you partner is a decision maker or a junior partner who is wearing training wheels. Decision makers are harder to jettison from a fund.
• If the partner has had a recent success, they are more likely to have real authority within their partnership, so are less likely to leave (i.e. get forced out) in the near term. Awesome IPOs or M&A from his/her individual investments at the fund are great indications of a partner who is important to the fund.
• Ask. If you are getting really serious (i.e. the fund is giving you a term sheet or has just done so) you are within your rights to ask how stable the partnership is and how likely the partner is to stick around. Just ask politely, perhaps something like “I see this as a long term partnership with you and the fund; it is important to know that you are going to be here for the long haul over the next few years…”