I’ve been thinking a lot about what Angelist means for the entrepreneurial ecosystem, especially here in Boston where I live. I continue to think that seed/angel investing is a pretty local endeavor, and even more so when one is hoping to lead rounds or be instrumental to catalyzing a financing or boosting the long-term prospects of a company.
Which is why I’m pretty psyched about Angelist syndicates, especially in relation to the Boston startup community. Boston is an incredibly rich ecosystem in almost all regards. There is an endless river of talent (especially technical), the most VC dollars per capital of any major market, and many pillar companies in a lot of sectors that matter. But what I’ve always thought was lacking was a larger # of high-quality angels of meaningful scale.
Specifically, I’m thinking of angels who are both “native” to many of the sectors that are most exciting today AND are able to invest in a reasonably large number of companies and at large enough dollar amounts to catalyze rounds. There is no specific threshold here, but for argument’s sake, lets say ~10 investments per year, and $50K-$100K+ per investment. It’s a pretty high bar for most people to be putting $500K – $1M to work in early stage startups each year. But it’s pretty critical to a thriving eco-system, and it’s something that exists in pretty good numbers Silicon Valley.
What does exist in Boston in increasing numbers of really strong entrepreneurs who are just getting started in angel investing. These are individuals who have really deep domain knowledge in a few areas, can add a ton of value to entrepreneurs, and are independent thinkers and willing to put their own capital against very raw startups. Guys like Nick Ducoff, Roy Rodenstein, Jen Lum, Bob Mason, Brian Shin and dozens of others.
But most of these folks write relatively modest checks (eg: <$50K) so it’s time consuming to assemble a $500K+ round from building blocks of that size.
Enter Angelist Syndicates. Through this platform, these angels are able to amplify the weight of their investment activity in a way that is reasonably efficient for all parties involved. And if they so choose, they can also earn a carry for their efforts, which only seems fair given the work that their followers would benefit from.
If I were less actively engaged in the local startup market and had an interest in participating in the emerging tech ecosystem, I would be seeking out these individuals and joining their syndicates. It’s still too early to really know how this will all shake out, but I can definitely see a favorite future where high-quality angels and their syndicates create a more fruitful entrepreneurial ecosystem in the Boston market. And this will probably be true for quite a few other ecosystems as well.
I’ve been thinking a lot about how Venture Capital firms can innovate on what I’ve been calling “Product Delivery”.
A lot of VCs are starting to be more creative about their “product”. That is, what they are offering to entrepreneurs and how that makes them stand out vs. other investors. This is a great development for entrepreneurs, and I think it’s nice to see larger funds put their management fees to work to produce meaningful and programmatic help for founders.
But I’m talking about something a bit different when I say product delivery. I’m thinking more about the internal practices of a venture capital firm to help it do what it does more successfully.
Basically, every VC firm does the same things. At NextView, we call it “Source”, “Select”, “Win”.
1. SOURCE: Find the best possible investment opportunities
2. SELECT: Choose the best possible investments opportunities to chase
3. WIN (a): Actually win the deal you are chasing
4. WIN (b): Help the company itself be as successful as possible
What I’ve been shocked to find is that many (most) VCs I think go about the same general activities to accomplish all these things. I rarely hear about a “how” that has surprised me as something really interesting or innovative.
Normal companies make product delivery innovations all the time. Think about how much companies like Amazon or Wayfair invest in their capability around shipping and logistics, for example. Or, less operationally intensive but also impactful, think also about the 20% time of Google to foster out-of-the-box inventiveness or the red telephone at Kayak designed to instill an obsession about customer feedback in the development team.
Closer to home, one much earlier stage company I admire on this front is Yipit. One of the core product delivery challenges of any company is successful recruiting of technical talent, especially in New York. Yipit is fairly unique in their product delivery in that they are glad to hire folks with non-technical backgrounds and put them through their own boot camp to get their productively contributing production code quickly. It’s pretty amazing that a company of their scale can do this, and helps them bring in really high octane people.
My favorite example of product-delivery innovation in venture capital/PE is Summit Partners. Summit is a growth equity firm, so quite different from what we do at NextView. But I admire the company a LOT for the way they innovated on their sourcing model. For those of you who are unfamiliar, Summit is probably the best firm in the world at outbound sourcing. Essentially, they create lists of target companies in sectors of interest, then have an army of analysts call the companies on a regular basis, track ongoing metrics, and make the long-term sell on why they should take money from summit if/when they ever raise capital. These are companies that are usually privately owned, profitable, and in pretty random places, which is part of why this method works so effectively.
What I love amount the summit model of sourcing is that ANYONE *could* do it. Anyone can hire a bunch of analysts, make a list, and have them start hitting the phones. But Summit was the first firm to think of this as their core product delivery innovation. They have built a machine and playbook around this and are “slaves to their process” as I’ve heard it described. Many other firms have hired Summit alumni to replicate their process because it just works, but few firms have matched their long term record of success in leveraging this model effectively.
I think about Summit all the time when I think about product delivery for our firm. How do we take some things that all VC firms should do (or things only a few could do) and make it a core part of our product delivery process?
It’s a continuous process of innovation for us, and something we push ourselves to think about all the time. In my next post, I’ll touch on some of my thinking around “selection”, which is related to this, and I think becoming more and more important as the market for early stage financing is getting more and more open.
Labor Day is over, time to get to work! Summer is always the time when large numbers of new participants in the tech ecosystem arrive and start to get their bearings. This is why this was created, and why I try to refresh it every year with the most interesting meetups, companies, and folks to follow online.
Boston is a great place to start and build a company. There is a wealth of resources that are unique to this town and a vibrant community of hackers, product designers, business people, and investors at various stages in their career. However, Boston is a transient town, especially for the student population that refreshes a large number each year. It’s also surprisingly difficult for students to get plugged-in to everything that is happening in the local tech ecosystem. This guide is designed to help you hit the ground running and is a starting point for your entrepreneurial journey in Boston. So without further delay:
Large Tech Meetups:
- Web Innovators Group: Quarterly Demo-Style meetup in Cambridge draws over 1000 members of the startup community each time. The Grand-daddy. Alumni have been funded by Sequoia, First Round Capital, Accel, Trinity Ventures, and others. For example: Dropbox, Reddit, and Birch Box, to name a few.
- Mobile Mondays: Boston chapter of the world’s largest Mobile professional community.
- Founder Dialogues: Eric Paley plays talk show host on this recurring fireside chat style event that has featured Boston’s BEST founders.
- MITX: Non-profit trade association hosting many events focused on digital marketing and internet business. Next major event? Future M on Oct 16
- Mass TLC Unconference: Large annual conference put on by the MA Technology Leadership Council
- Xconomy Events: Steady stream of quality events organized by Xconomy,
- Nantucket Conference: Invite-only conference of the most important local innovators
Online Resources and Newsletters:
- Bostinno: Great coverage of local startup happenings with a growing network of local writers.
- VentureFizz: Comprehensive newsletter with funding announcements, best local blog posts, and other local tech happenings.
- Greenhorn Connect: Excellent collection of BOS tech events and resources.
- OnStartups: One of the largest online startup communities founded by HubSpot founder Dharmesh Shah.
- MIT 100K
- MIT Start Lab
- HBS Startup Tribe
- Harvard iLab
- Babson Entrepreneur Resource Center
- Northeastern IDEA Venture Accelerator
- Olin College Foundry Program
- Boston College Venture Competition
- FRC Dormroom Fund (expected to arrive in Boston shortly)
Smaller, High Quality Meetups and Places to Learn:
- Open Coffee - Weekly informal meetup started by Bijan Sabet and Nabeel Hyatt. No agenda, just come by and talk tech at Voltage
- http://foundermentors.com– Not a meetup, but a great mentorship program started by serial CTO Sean Lindsay
- WebInno Supper Club – Regular, small dinner series around very specific topics. Topics have included “Leveraging Pinterest”, “Mobile Commerce”, and “Facebook Advertising”
- Future Forward – High quality, invite only conferences for tech leaders and executives, both increasingly open to bringing in young blood.
- Learnlaunch Events – Well run meetup focused on the emerging edtech scene.
- Intelligent.ly - Classes on startups and tech run by practitioners
- General Assembly – Boston branch of tech classes and workshops started in NYC
- Startup Institute – Practical training program to prepare you to join a startup. Great for recent grads or career switchers
- Lean Startup Circle Boston – Meetup dedicated to the lean startup and customer development methodology
- Boston Hardware Startup Meetup – Meetup organized by the founders of BOLT
Coworking Spaces and Accelerators
- TechStars Boston – Boston chapter of TechStars. Now doing 2 classes each year!
- Dog Patch Labs – Shared workspace operated by Polaris Ventures
- Summer@Highland – Student focused accelerator. Birthplace of Gemvara, Handybook, and other terrific companies
- Startup Leadership Program – International mentorship program with over 100 startups participating
- CIC - High quality, flexible office space. Different plans for different budgets all in a great facility.
- WorkBar Boston - Flexible co-working space near South Station.
- MassChallenge - Startup competition and accelerator. Beautiful space in the South Boston Innovation District.
- AngelHack – Hackathon with cash prizes
- Hack/Reduce – Big Data Hackspace
- Space With A Soul – Coworking space for mission-driven companies
- BOLT – Accelerator and mentorship program specifically for hardware startups
- Learnlaunch – Accelerator and mentorship program specifically designed for education startups
- Koa Lab – Shared workspace in Harvard Square founded by serial entrepreneur Andy Palmer
- Greentown Labs – Entrepreneur community and accelerator focused on Cleantech
- Paypal Start Tank – Coworking space within Paypal’s Boston office
- Bocoup Loft - Coworking and events
- And here is another pretty comprehensive list of co-working spaces in town
Entrepreneurial Development Firms
- Thoughtbot - Web application development and design. Ruby specialists.
- FreshTilledSoil - User Interface Design
- Terrible Labs – Ruby on Rails, Web and Mobile
- Filament Group – User Interface and Design
- Raizlabs – Mobile Development
- Intrepid – Mobile development
- Extension Engine - Software engineering and design
Places to Hang
- Crema Cafe - Great coffee in Harvard Square. Favorite spot for Eric Paley, Antonio Rodriguez, and Rich Miner
- Andala Cafe - Central Square hangout. Free wifi.
- Henrietta’s Table - In the Charles Hotel. General Catalyst is right upstairs.
- Paramount - Favorite breakfast spot for the Beacon Hill VC crowd.
- VentureCafe - Networking venue within the CIC
- Voltage - Coffee shop in Kendall. Home of OpenCoffee Cambridge
- Tatte Bakery – Coffee shop in Kendall, also with constant VC and entrepreneur traffic
- Thinking Cup – Popular coffee Shop for the Park Street / Downtown BOS crowd. My personal favorite, but no wifi
- Barrington Coffee – Fort Point Channel
- Flour – Bakery and Coffee Shop in Fort Point Channel
Journalists and News
- Scott Kirsner - Tech journalist of the Boston Globe. See his innovation economy blog and follow him on Twitter.
- Dan Primack - Formerly of PE Hub, recently poached by Fortune. Not Boston focused, but definitely follow his reports of PE and VC financings and the state of the venture market. @danprimack.
- Jonathan Marino – PE Hub
- Gregory Huang - Xconomy
- Andrew Amato - BostonInno
- Dan Rowinski – Boston based writer for Read Write Web
- Kyle Alspach - Mass High Tech / BBJ
- Barb Darrow – Boston based writer for GigaOm
- Dennis Keohane - Venturefizz
- Walter Frick - Harvard Business Review
Looking for Office Space?
- T3 Advisors: Real estate brokers with deep VC relationships. Worked with HubSpot and Boundless. Talk to Greg Hoffmeister
- Jones Lang Lasalle: Global commercial real estate services. Worked with Wordstream and Flipkey . Talk to Bryan Sparkes.
- Cushman and Wakefield: Global commercial real estate services. Worked with Kyruus and Tripadvisor. Talk to Matt Malatesta
Small and Growing Startups
This is a new section this year. In the past, I included a short list of companies to watch. The problem is that the list ends up being a bit duplicative, because great companies tend to continue being great. So, this year, I’m doing something different. I’m listing instead companies that are A) under 100 employees AND B) adding >10 employees in the next 3 months. Of course, growing teams is not an indicator of success – so there are probably many terrific companies that will not be included for now because their teams are not currently expanding (but might do so soon!) It is impossible for me to be comprehensive, but please let me know if your company should be included here
- Aereo – Online TV (backed by Highland, FRC)
- Belmont Technologies – CAD in the Cloud (backed by Northbridge and NEA)
- BitSight - Risk Management (backed by Flybridge and Menlo)
- Cloudant - Database as a service (backed by Avalon)
- Clypd – Video Advertising (backed by Atlas, DataPoint, Boston Seed)
- Coachup - Marketplace for Coaches (backed by General Catalyst and Founder Collective)
- Consumer United – Online Insurance (backed by Spark)
- Custommade – Marketplace for Customer Products (NextView Portfolio Company)
- Data Gravity – Big Data (backed by General Catalyst, CRV, A16Z)
- Evolv Technologies – Advanced Imaging Technology (backed by General Catalyst and Bill Gates)
- Fiksu – Mobile App Marketing (backed by CRV)
- Gazelle – Consumer re-commerce (backed by Venrock)
- GrabCAD – 3D Community and Collaboration (NextView Portfolio Company)
- Gridco Systems – Power Distribution Systems (backed by General Catalyst and Northbridge)
- Hadapt – Big Data (backed by Bessemer and Atlas)
- Hopper – Travel (backed by Atlas)
- Infinio – Storage Performance (backed by Highland, Bessemer)
- Insight Squared – SMB Business Intelligence (NextView Portfolio Company)
- Jana – Mobile Marketing (Backed by Spark)
- Kinvey – Moble PaaS (Backed by Atlas, Avalon)
- Kyruus – Big Data for Healthcare (backed by Highland, Venrock)
- Linkable Networks – Card-linked Advertising (backed by Bain and Kepha)
- Localytics – Mobile Analytics (backed by Polaris)
- Objective Logistics – Workforce Optimization (NextView Portfolio Company)
- Plastiq – Payments (NextView Portfolio Company)
- SessionM – Mobile Marketing (backed by CRV, Highland)
- Stackdriver – Cloud Infrastructure Monitoring (backed by Bain)
- Swipely – Merchant Loyalty (NextView Portfolio Company)
- VM Turbo – Virtualization Management (backed by Bain, Highland)
- VoltDB – Big Data (backed by Kepha and Sigma)
- Wordsteam – Internet Marketing Software (backed by Sigma)
- Yesware – Email for Salespeople (backed by Foundry Group and Google)
40 to Follow on Social Media (This isn’t a list of the “best” investors and entrepreneurs, but the folks who are consistently creating good social media content and are active in the community.)
- Antonio Rodriguez – Matrix Partners, HP (blog, @antrod)
- Kent Bennett – Bessemer (@kentbennett)
- Bijan Sabet – Spark Capital (blog, @bijan)
- David Beisel – NextView Ventures, Venrock (blog, @davidbeisel)
- Peter Boyce – General Catalyst (@badboyboyce)
- David Skok – Matrix Partners (blog, @bostonvc)
- Eric Paley – Founder Collective, Brontes (blog, @epaley)
- Jeff Bussgang – Flybridge, UPromise (blog, @bussgang)
- Lee Hower – NextView Ventures, LinkedIn (blog, @leehower)
- Rich Miner – Google Ventures (@richminer)
- Scott Maxwell – OpenView (blog, @scottsnews)
- Hugo Van Vuuren – Xfund (blog, @hvgo)
- Fred Destin – Atlas (blog, @fdestin)
- Jo Tango – Kepha (blog, @jtangovc)
- Anthony Tjan – Cueball (blog, @anthonytjan)
- Larry Cheng – Volition (blog,@larryvc)
- Mike Hirshland – Resolute (blog, @vcmike)
- Bob Davis – Highland (@BobDavisHCP)
- Aaron White – Venrock (blog, @aaronwhite)
- Rob Day – Black Coral Capital (my lone Cleantech rep in the list) (@cleantechvc)
- Ric Fulop – Northbridge (@ricfulop)
Entrepreneurs and Thought Leaders:
- Andrew Mcafee – MIT Professor (blog, @amcafee)
- Bill Warner – Avid, Techstars, Angel investor (@billwarner)
- Rob May – Backupify (blog, @robmay)
- David Cancel – Founder of Performable and Compete (blog , @Dcancel)
- John Gallaugher – BC Professor (blog, @gallaugher)
- Dharmesh Shah – Co-founder and CTO, HubSpot (blog, @dharmesh)
- Jennifer Lum – Apple, Quattro, MCube (@lum)
- Katie Rae – TechStars, Microsoft, Eons (blog, @ktrae)
- Tom Eisenmann – HBS Professor (@teisenmann)
- Wayne Chang – Twitter, Dropbox (blog, @wayne)
- Sravish Sridhar – Kinvey (blog, @sravish)
- Cort Johnson – Terrible Labs (@cortlandt)
- Nick Ducoff – Boundless, InfoChimps (@nickducoff)
- Dave Balter – BzzAgent (@DaveBalter)
- Mike Troiano – Actifo (blog, @miketrap)
- Aaron O’Hearn – Startup Institute (@aaron0)
- Dan Allred – Silicon Valley Bank (@dgallred)
- Sarah Hodges – Intelligent.ly (@hodges)
- Sheila Marcelo – Care.com (blog, @smarcelo)
- Semyon Dukach – Angel Investor and Entrepreneur (blog)
- Ty Danco – Buyside FX, Angel (blog, @tydanco)
- Nicole Stata – Boston Seed (@nstata)
My old colleague from Ebay, Michael Dearing, was a fantastic executive, and is now a terrific investor and teacher at Stanford. He’s starting to release some of his content into the wild, and it’s definitely worth the time to check out (or even to attend a class).
He recently put together a 3-part video tutorial on the basics of pricing. Really simple, clear, and powerful fundamentals that matters to every entrepreneur. Check them out here:
Over the past couple years, there has been an emerging bifurcation in the seed investing market. We’ve noticed this both in the industry broadly, as well as in the companies that we have invested in or seriously considered. Essentially, there are 2 flavors of seed rounds that are emerging (EXCLUDING seed extension rounds, which are a whole other story). We’ve come to describe these as “Genesis Rounds” and “Institutional Seed” rounds. Basically, “Genesis Rounds” look like this:
- <$600K, and sometimes, substantially less
- No team aside from founders
- Mostly angels with occassional participation from small/seed funds
- Usually convertible note
- Runway <12 months
“Institutional seed” rounds on the other hand tend to look like this:
- >$750K. More often these days, there are more like $1.5M or even more
- Post-product, early customer data, somtimes real revenue
- Several employees in addition to founders
- Institutional seed investors or larger VC funds
- Often priced equity, but often convertible note
- Runway >12 months
Sometimes, companies only need to do one of these two rounds. But I’m finding that more often than not, companies need to raise both of these sorts of rounds before being able to raise a “traditional” VC-led series A. What I am finding interesting is watching the way valuations and difficulty of raising has changed for these different flavors of seed rounds.
8+ years ago, the “Institutional Seed” rounds didn’t really exist. There were only a handful of funds doing seeds for a living, and thus, cobbling together enough angels to invest $1.5M in a round was very challenging for most. Most seed rounds tended to look like “genesis rounds”. This market gap, coupled with the capital efficiency of software brought on the rise of seed funds. This led to a period of seed stage exuberance, and that led to higher valuations, larger rounds, etc.
Over time, many seed rounds started to look like “institutional seed” rounds, even for companies that were very very raw and frankly, were not deserving of so much capital at such high prices. But ultimately, this has come to roost over the past several years as the series A Crunch has pummeled a bunch of these companies and their investors. As a result, many seed funds have pulled back, started making later stage investments, and even focusing more on mini-Series A’s with a syndicate of seed funds. What I’m seeing now is that “institutional seed rounds” tend to be bigger, and go into companies with much more meat on the bones. These rounds also tend to get done on pretty high valuations (although lower than in the last couple years).
What this means for entrepreneurs today is that the “genesis rounds” are much harder to raise, especially if you are a relatively unproven founding team. Yet, most companies need “genesis” capital to get off the ground, recruit your first couple team members, and start building something interesting. As a seed investor, I think this actually has led to “genesis rounds” becoming more attractive. Valuations are better, there is less competition, and if you knock it out of the park, the potential for a meaningful valuation step-up at the next round is much higher (which leads to less overall dilution for founders). I would say historically, the risk/reward of genesis rounds were not very good. The risks were not commensurate with the valuation relative to institutional seed rounds. But I think these might be coming closer into line, and I’m personally taking a closer look at more earlier and smaller rounds.
On top of all this is just personal preference, because I think the most rewarding part of VC is being part of the genesis of great companies. That’s why I really try to never “pass” on an investment because it’s “too early”. If it’s too early for a seed fund, then who the heck is it NOT too early for?