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January 7, 2013

This year will mark the third year of NextView’s existence. As a founder, it feels like a long time, but it’s really a blip on the radar in the scheme of things. As such, I still get asked pretty often to articulate our focus as a firm. Amidst the mass of new initiatives, new firms, new strategies, etc that constantly pop up in the early stage investing landscape, it’s helpful to have a clear articulation of what VC’s are focused on and how they see the world.

Some VCs have very clear “here’s what we look for” sections on their websites.  Actually, growth equity firms I find are best at this, because they have very specific financial criteria that they look for, such as ranges for revenue, ebitda, growth, etc. Here’s a good example from Volition Capital.

We don’t have such a section on our website (yet) and in some ways, the seed/early stage is more amorphous.  It’s harder to articulate strict criteria.  This is why I’ve made a habit of profiling our portfolio quantitatively and why we write summaries announcing pretty much all of our new investments.  Check out these old posts here and here.

So, here is our annual quantitative summary of our portfolio.  But I’ll start first with a bit of a summary of our strategy and approach as a whole.

Our Focus at NextView

  • We focus on investing in seed stage companies.  We almost always invest in the first round of institutional capital for these companies, in rounds that range from approximately $500K – $2M.  We rarely look for opportunities to invest in larger rounds.  We do look for opportunities to invest in smaller rounds.
  • Sectorwise, we focus on internet-driven innovation and believe that we are currently straddling two converging technology waves.  See my recent blog post here for more detail.
  • We typically invest between $250K – $500K.  We have pretty strong guidelines internally about how much capital we want to invest in a given company, at what valuation, and thus, what ownership we are looking for.  We tend to be fairly strict, but not dogmatic about these. See my post here on ownership targets, why they exist, and why almost all VC’s have them whether they say so or not.
  • We have a bias and desire to lead rounds.  This means that we like working as a catalyst for a round, negotiate terms, bring in other investors, and sit on boards.  The fact that each member of our team has worked at larger, institutional venture capital firms is an important asset.  In the seed investing game, there are a lot of great investors to fill in rounds, but when it comes to leading, we find there are fewer than one would think. We don’t need to be the lead, and in a number of cases, we have participated alongside another lead.  But we behave pretty much exactly the same way in those companies as we do when we are the lead and only institutional investor.
  • We invest in about 10 companies each year.  This equates to 3-4 investments that are “led” internally by each partner.  This isn’t a quota. last year, I “led” 2 investments, and I feel zero pressure to “catch up” this year.  We invest in the best companies we can find, and treat each investment the same way – as a full-scale, important investment for us.  We don’t do much more than ~10/year because we don’t have the time to work with portfolio companies and make a meaningful impact unless we are focused in our activities.  We have no junior investment staff, we are a partner driven investor that is focused on each and every portfolio company.  It’s an old fashioned idea, but it’s what we would want if we were founders taking capital from a VC, so that’s the model that works for us.

A Stroll Through Our Portfolio

  • We have made 25 investments.  23 of these have been announced and are on our website. Three of our portfolio companies have been acquired (RentJuice by Zillow, Hyperpublic by Groupon, and One Jackson by TaskRabbit)
  • Geography: 20 / 25 investments are based in the Boston and New York areas.  5 are in other locations.
  • Founders:
    • Repeat Founders: 8
    • First Time Founders: 9
    • Tom Brady Entrepreneurs: 8
  • Source Type:
    • 6 month+ prior relationship: 12
    • Introduced by other entrepreneurs: 6
    • Introduced by a co-investor: 5
    • Other: 2 (includes 1 inbound from a blog post)
  • Stage:
    • Pre Product: 12
    • Live Product, Pre Revenue: 6 1/2
    • Post Revenue: 6 1/2 (the 1/2 is for a company that had revenue, but did a major product pivot as part of the financing)
  • Type of Product and Business:
    • Consumer vs. B2B
      • Consumer: 9
      • B2B: 9
      • Hybrid: 6 (includes payments companies, publisher tools, and marketing/commerce platforms)
    • Business model (intended or actual)
      • SaaS: 6
      • Premium Service: 5
      • Commerce: 5
      • Adtech / Lead Gen: 4
      • Payments: 2
      • Other / TBD: 3
  • Syndicate Composition:
    • NextView + Seed Funds + Angels: 9
    • NextView + Angels: 4
    • NextView + Lifecycle VC + Others: 12

Parting Thoughts:

One of the really pleasing things about doing these summaries each year is to be able to see the consistency of our approach through the first years of our fund. Almost nothing about our approach has changed from a macro level from when Lee, Dave, and I set out to start NextView.  We are still laser focused on seed stage investing, and almost always invest BEFORE traction.  We are still extremely focused on what we consider a really attractive and underserved market on the East Coast with 20% allowance for opportunistic investments in other areas.  And we still look for terrific entrepreneurs of a variety of profiles with authentic founding stories.  This is probably the most rewarding element of our job.  In the last year, we’ve had the good fortune to start working witha 3X entrepreneur coming off a win (Andrew at Lookout), first time entrepreneurs and recent college graduates (Eliot and Dan at Plastiq), and promising “Tom Brady” founders who were up-and-comers from successful startups like AppNexus and SuccessFactors. It’s the people that make this business really rewarding, and ultimately, behind any of these stats are amazing founders and teams that we are fortunate to be working with.

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