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January 8, 2014

It’s been a yearly tradition for me to share a semi-quantitative view into our portfolio at NextView.  Three years ago, I published our first “Stroll through the portfolio” and I’ve published updates each year in January.  Here are the posts from 2011, 2012, and 2013.

What I’ve been particularly happy about over the past three years is that we have crafted an intentional strategy and stuck very closely to it from one year to the next.  We are constantly re-evaluating our strategy and processes as a firm, but overall we have remained extremely focused and consistent because we think we offer a good product to our customers (entrepreneurs) which will lead to good results for our shareh0lders (LPs).

Because our data from 2013 is so similar to prior years, I thought I’d do something a little different with this lookback.  I’ll talk about our focus as a firm and what has stayed the same, I’ll talk about some new developments in 2013, and I’ll talk about what is getting us excited about the year ahead.

Our Focus and What Has Stayed the Same

Here is a quick rehash of some of the metrics I’ve shared in the past.  For those who don’t know us that well, I think this is a pretty good reflection of what we focus on and how we work as a firm.

  • Stage: We call ourselves a “DEDICATED SEED FUND”.  This means a few things:
    • We are concentrated.  We make 2-4 investments per year per partner. Each investment matters. We don’t do chip-in investments – each investment is a full-allocation of partner time.  Surprisingly few seed funds operate this way.
    • Seed rounds are what we do. We don’t invest in “syndicates A rounds” as our first point of entry into a company.  We invest in companies that are early – we take the early stage risk and hope to be rewarded for that risk.  1/3 of the companies we invest in are pre-product.  1/3 are post product but pre-revenue. 1/3 are post revenue (but very small scale).
  • Sector: We invest in internet and mobile innovation. Roughly 1/2 of what we invest in is consumer facing, and 1/2 is business facing (and a bunch of our investments are a hybrid of the two). Most of what we do is application layer software, but we do some commerce, enabling technology, adtech, etc.
  • Focus: We focus on “Golazo” companies with capital efficient beginnings
  • Founder Profile: 1/3 First Time Founders, 1/3 Repeat Founders, 1/3 “Tom Brady” entrepreneurs.
  • Syndicates: We have a bias to lead rounds.  We also have a pretty broad range of syndicates that we are a part of. In about 40% of the cases, we are investing with other seed funds.  In about 40% of the cases, we are investing with larger, lifecycle VCs.  In about 20% of the cases, we are going it alone or with just other individual angels.

 What Was New In 2013

  • Scaling beyond early.  We started NextView just a few years ago, so for the first few years of the life of our firm, the companies we’ve been working with have been <2 years old, and mainly obsessed with proving out product-market-fit and building a decent foundation for growth. 2013 was probably the first year that quite a few of our portfolio companies made the transition from being interesting products that delighted customers, to businesses that were positioned to scale.  It’s still relatively early for many of these companies, but it’s nice to see some of our portfolio companies grow revenue significantly with tons of headroom to go. Specifically, a number of our portfolio companies raised some nice series B+ rounds to do this, including InsightSquared ($8M series B led by DFJ), ThredUp ($14M series B led by Highland), and Custommade ($14M series B led by Atlas).
  • Traction in Ad Tech Portfolio. We’ve been looking at advertising related investments since the inception of the firm. Actually, my partner David has been around some significant market leaders from his time at Venrock (board observer at Appnexus) and Masthead (board observer at Tremor). Adtech is a challenging area because it’s highly competitive and it’s difficult for companies to separate themselves from the pack. The flip side is that some of these companies can scale very very quickly, and if you can be #1 or #2  in a meaningful sub-category, you can build companies to a pretty big exit. We met with quite a few adtech companies in the first couple years at NextView, but just didn’t build enough conviction to push forward with an investment.  But in late 2012 we placed a couple bets in pre-launch companies that came to market in 2013 and started scaling rapidly.  First, we invested in TapCommerce, because we believed that they could secure a dominant position in helping retailers manage the massive platform shift to mobile commerce and marketing. Second, we invested in Triplelift because we believed that online publishing is rapidly becoming more and more visual and stream based, and native advertising will prove to be the next major advertising unit on both web and mobile. Both companies came out of the gates fast and have secured (for now) leadership positions in these promising spaces.  TapCommerce has already raised a healthy $10M series A led by Bain to accelerate further and Triplelift was named one of top 5 companies to transform advertising in 2013.  It took us a little while to pick our spots here, but we’re really excited about how these companies are progressing.
  • We moved offices!  Not too far away – just a couple blocks down the road to 179 Lincoln Street.  It’s a bigger space, with nicer amenities while still retaining the startup feel.  It was important for us to move to establish more gravity around our activities as a firm.  Rather than just a collection of three guys doing seed investing, we want to build a platform that a) is destined to be around a long time b) creates benefits for companies and founders in our expanding network, and c) forms a hub for startup activity in Boston. All of these were difficult to achieve in our old space, but can be nicely addressed with our new digs.  Plus, we are also psyched that Techstars and Startup Institute are about to move in next door as well, so we will have a really cool mini-cluster right here on the 4th floor of this building.

Looking Forward to 2014

  • We continue to be extremely excited about investing in great founders that share our ethos and want to change the world. We actually have several new investments that are in the hopper that have not yet been announced, so we are going to come out guns blazing. Our investing approach in 2014 will be very similar to what we have been doing the past three years, but with a couple small (we think good) tweaks.  More to come in the coming months :)
  • In many ways, I see this as a new chapter for our firm. The first few years of a fund is about establishing yourself, developing a strategy that makes sense for your market, and proving you can make some decent investments.  It’s kind of like the seed/series A stage of a startup where you are mainly obsessed with getting some semblance of product market fit.  But beyond that, I think a firm needs to take the next step and show that they succeed repeatably, while continuing to innovate to build advantage in an increasingly competitive market. For my partners and I, 2014 is a year where we really need to be aggressive about building our position as a firm.  We have a white board of new initiatives that we are going to pursue in 2014, and we are hungry to make them happen. Stay tuned – this will be a fun year.
  • http://eastagile.com kenberger

    golazo ! Great usage. (I’m passing through Mexico right now)

  • http://www.dougjq.com/ Douglas Quattrochi

    You wrote, “1/3 [of our investments] are post revenue (but very small scale).” Would you describe this as a niche where angels fear to tread? Or did you out-compete angels vying for these same companies?

    • robchogo

      Not exactly sure what you mean. As a seed fund, we co-invest with angels all the time.

      • http://www.dougjq.com/ Douglas Quattrochi

        Oh, that answers my question. I had in mind that there’s a split between the kinds of companies that VC’s want vs. what angels want. That would not be true in your case if you co-invest with angels all the time. I read NextView’s site a bit more and the “craft brewer” section clarified it for me.

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