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A Peek Inside the NYC Venture Capital Ecosystem

Written By: Mariya 21 July 2010 Other Posts By: Mariya

Last night, AOL Ventures and Betaworks hosted a “reverse” demo day where VCs, not entrepreneurs, did all the pitching. RSVPs for the event filled to capacity with minimal publicity, but I managed to snag a last-minute seat. Most firms at the event are based in New York and focus on seed or Series A funding of early-stage technology ventures, although many are domain and location agnostic. Read on to meet the VCs!

Union Square Ventures

Well known as investors in Twitter and early backers of Foursquare, which recently raised $20 million in Series B funding, Union Square Ventures is lead by Brad Burnham, Fred Wilson, and Albert Wenger. The three partners bring together a diverse range of expertise. Brad’s got a deep understanding of markets, Fred is the consummate deal guy, and Albert is a talented technologist.

USV invests in networks of engaged users and companies that have a data asset and can change their industries’ market structures, not just make them more efficient. The firm stays away from enterprise technologies and other markets that may have gatekeepers blocking or slowing adoption.

Firm WebsiteCrunchBase Profile

Portfolio Companies: Twitter, Foursquare, Etsy, Zynga, and more

RRE Ventures

Stuart Ellman and James D. Robinson the Third AND the Fourth (confusing, I know!) founded RRE Ventures in 1994. The firm manages $850 mil today across four funds and seeks to identify talented entrepreneurs in large, interesting markets, including Consumer & Digital Media, Financial Services, Mobile, and consumer-facing Green Tech. RRE’s partners enjoy solid relationships with many multinational companies that they leverage to help their companies strike profitable deals, and the firm’s partners also aren’t averse to doing silly things with their CEOs, such as doing a bike ride from Seattle to Portland while wearing snazzy-looking hunting jackets.

Firm WebsiteCrunchBase Profile

Portfolio Companies: Betaworks, Buzzfeed, Venmo, Xobni and more

Metamorphic Ventures

Metamorphic is a $20 M venture fund that focuses on digital and transactional media companies providing B2B services. Their typical investments range from $250k – $750k and the partners look to work with capital efficient startups with low burn rates. Part of the firm’s investment approach to is offer incubator assistance to their startups.

Firm Website / CrunchBase Profile

Portfolio Companies: Turiya, Chango, FetchBack and more

True Ventures

As the sole California-based VC at the event, Jon Callaghan started his presentation in true West Coast fashion by showing us a picture of the gorgeous California beach where he and his co-founders first got the inspiration to start True Ventures, a VC-firm that puts entrepreneurs first. All of the partners have been entrepreneurs before converting to the dark side, and three are active CEOs in the same industries as their portfolio companies. The company spreads its $195 million fund across very early-stage high-growth technologies investments and initial investments range from 250k – 2.5 mil. The firm prides itself on serving its customers (the entrepreneurs), valuing their time, and not blocking early founder sales.

Firm WebsiteCrunchBase Profile

Portfolio Companies: StockTwits, Meebo, GigaOm, and more

Greenhill SAVP

Greenhill SAVP is the $102 mil VC arm of the boutique investment bank, Greenhill & Co. According to Brian Hirsch, Greenhill SAVP’s Managing Director, the fund has achieved a 3x realized return on their portfolio in the last decade and seen the revenues of their portfolio companies explode from $21 million at the time of investment to $200 mil today. But Brian isn’t one to brag about his firm’s achievements. Instead, he let his entrepreneurs put together a hilarious video mash of testimonials from their experiences with Greenhill.

Firm WebsiteCrunchbase

Portfolio Companies: MobileCommons, ReachForce, TraffIQ, and more

Venrock

David Pakman, ex-entrepreneur and partner at Venrock, wants to help early stage internet and digital media companies solve tough problems in big markets. His $2.5 billion firm invested in Smartling, a crowdsourced website translation startup, because 80% of internet traffic is non-English-speaking and the translation solution is low-cost yet massively disruptive. They also invested in BillFloat, a company seeking to help the 40 million Americans who have trouble paying their monthly bills, and Castlight, a health care transparency tool that addresses the persistent problem of out-of-control medical costs.

Firm WebsiteCrunchBase Profile

Portfolio Companies: AppNexus, Gazelle, Smartling, and more

IA Ventures

IA Ventures was founded by Roger Ehrenberg when he discovered that the quantitative trading firms he was incubating were running up against Big Data challenges. Despite being just 7 months old, the firm’s already made several investments in early stage Big Data focused startups across a variety of verticals with the belief that extracted information from unexplored data sets has the power to transform entire industries.

Firm WebsiteCrunchBase Profile

Portfolio Companies: FluidInfo, CrowdSpot, Metamarkets and more

First Round Capital

Chris Fralic, Managing Partner at First Round Capital, makes sure that his portfolio companies form a constructive community and share value with each other. When Aaron Patzer of Mint.com experienced database scaling issues at TechCrunch 50, he shot off a plea for assistance to the First Round CEO community and achieved a resolution within hours. First Round also provides a number of other tools to their entrepreneurs, including office hours, an exchange fund to help CEOs diversify their holdings to other companies, and SecondRound.com, a database of funding sources to help companies raise their next round. Thus far, every $1 invested by First Round has been followed by $27 from other firms in following rounds.

Firm WebsiteCrunchBase Profile

Portfolio Companies: Hot Potato, Xobni, StumbleUpon, ModCloth, and more

Lerer Ventures

Lerer Ventures is run by the father and son media team of Ken Lerer, co-founder of The Huffington Post, and Ben Lerer, co-founder of Thrillist. The $7.5 million seed-stage fund was just started in January of 2010 yet has already made 17 investments ranging from $50 – $200k and and plans to have 30 by year end. Jordan Cooper, a venture partner at the firm, describes the mission of VC as “helping entrepreneurs chase down big fucking dreams”. For their investments, Lerer Ventures looks for entrepreneurs who have vision, creative thinking, change the world ambition, and hustle and execution. If you’ve got a particularly weird idea, Jordan is all ears.

Firm WebsiteCrunchBase Profile

Portfolio Companies: FluidInfo, Venmo, Betaworks, and more

DFJ Gotham Ventures

Danny Shultz of DFJ Gotham believes that attackers always have the advantage over incumbents. While a generalist IT investor, DFJ Gotham focuses on seed ($100-$500k) and Series A ($1M – $3M) investment opportunities in category-leading companies that have the potential to become large (at least $100 M of revenue) and disruptive in their markets. The $6 billion firm manages 23 funds with 150 VCs and 550 portfolio companies across the globe.

Firm WebsiteCrunchBase Profile

Portfolio Companies: Drop.io, Solvate, Medialets, and more

Spark Capital

Mo Koyfman, Principal at Spark Capital, believes that VCs should be personally engaged in their startups and be active users of their portfolio companies’ products and services. The firm is stage-agnostic and doesn’t think any idea is too green to be invested in, particular if they’re potentially disruptive in the convergence of media, entertainment, and technology.

Firm WebsiteCrunchBase Portfolio

Portfolio Companies: Boxee, Aviary, Venmo, and more

So Who Gave the Best Pitch?

Entrepreneurs are always being graded on their ability to pitch their companies, so how did our VCs do? Given that all the VC firms offer more or less the same basic product (MONEY), I as an entrepreneur wanted to learn more about the personality quirks, domain expertise, and supplementary services that each firm provides.

Most Enjoyable Pitch: Brad Hirsch of Greenhill SAVP. While perhaps his entrepreneurs deserve most of the credit for producing hilarious testimonials, Brad was the only VC at the event that conceived of engaging the audience with a video mashup. If only every VC looked like the Old Spice Guy…

Most Convincing Presenter: Jon Callaghan of True Ventures. Maybe it was the relaxed Californian attitude, or perhaps the single word PowerPoint slides. Whatever the cause, every VC firm that pitched claimed to put the entrepreneur first, but Jon actually made me believe it by illuminating his firm’s investment philosophy and the management team’s entrepreneurial backgrounds.

Honorable Mention: Stuart Ellman, of RRE Ventures, for unabashedly showing off a picture of himself wearing a shiny hunting jacket on top of skintight biking pants.

What’s Next for the Entrepreneur?

You’ll notice that all of these VCs do early-stage investments and some are among the horde of new microcap firms that have launched or started a new fund in the past year. There’s been plentiful debate about whether this trend of seed-stage investing is leading to a microcap bubble and a coming super-seed crash. According to an EarlyStager article by Sarah Tavel of Bessmer Venture Partners, at least 13  VC or incubator firms have launched just in the first half of 2010, including two – Lerer Ventures and IA Ventures – that presented last night. Compare this to 2009 and 2008, which saw about 7-8 funds launched in a comparable time period.

Bubble or not, the trend towards smaller, more agile firms making earlier-stage investments and providing intensive partnering and incubation is one that definitely benefits entrepreneurs. All of the firms that presented aim to work actively with the entrepreneur and pride themselves on having partners with entrepreneurial backgrounds themselves. If you’re deciding whether to let a VC invest in your seed round, you might not have to worry about the “go big or go home” mentality of many larger firms if you work with a savvy, entrepreneurial VC.

ADDENDUM (07/23/10): For those interested, David Lerner of Columbia Technology Ventures has put together a comprehensive map of the NYC early-stage investor ecosystem, including VCs, angels, and entrepreneur-backed investor groups.

Do you have experiences with any of the VC firms mentioned above? Let me know in the comments below or engage me on Twitter.

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  • http://www.zelkovavc.com/ Jay Levy

    While we weren't able to send someone to present at this event Zelkova Ventures is also an early stage vc in ny. We have been around since 2007 and have made about 20 investments.

  • mayava

    Hi Jay. Thanks for letting us know about Zelkova Ventures. I'm going to be writing another article on investors that take a very hands-on approach to their investments, via incubator/accelerator programs, institutional co-founding, etc and find Zelkova's “team-based model” quite interesting. Can you send me a blurb on some of your portfolio partnerships? mariayava[at]gmail[dot]com

  • http://foundersblock.com/anecdotes/getting-caught-mid-pivot-lessons-from-the-imercive-postmortem/ Founders Block » Blog Archive » Getting Caught Mid-Pivot: Lessons from the Imercive Postmortem

    [...] met Keith Nowak at the recent VC Demo Day event and he was kind enough to share the story and lessons of how his  startup, imercive, ran out [...]

  • http://www.garywhitehill.com Gary Whitehill

    Mariya:

    Great post. It's interesting to see that First Round Capital wasn't there?

    There are also a proliferation of venture capitalists from Philadelphia coming up to NYC for their deal flow. As an example, First Round Capital's office is new to town as we continue to see the NYC entrepreneurial ecosystem becoming stronger and more solidified each day through the efforts of angels, super angels, venture capitalists and our events such as Entrepreneurs Roundtable, Ultra Light Start-ups and New York Entrepreneur Week (NYEW).

    http://www.garywhitehill.com/

  • mayava

    Hi Gary,

    First Round actually was there. The blurb is between IA Ventures and Lerer Ventures. Chris Fralic came in to talk about the extra services they provide for their entrepreneurs, including their CEO community, office hours, and exchange fund services. Very impressive firm. Have you worked with them before?

    Additionally, can you send me a list of the Philly firms you refer to that are coming to NYC for their dealflow? I'm working to create a comprehensive map of the VC ecosystem on the East Coast.

    ~Mariya

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