Author’s Note: Though not dealing in particular with the history of high tech or venture capital, the annual Venture Capital Panel held at Boston’s historic synagogue, Beacon Hill’s Vilna Shul, is nevertheless an important event on the calendar of Boston’s high tech community. The panel was preceded by a 45-minute networking session, and was followed by a short question-and-answer period.
I have covered this discussion for a few years now, and it always is enlightening as both a retrospective on the previous year and as a forecast of the coming twelve months. To that end, I have included selective responses from the panelists. This particular group, moderated by the Boston Globe’s Scott Kirsner (author of its “Innovation Economy” column), included the following participants:
Scott Kirsner started off the discussion with a soul-searching, two-part request of the panelists: Your greatest satisfaction in investing, as well as your biggest regret in passing on an investment.
Jonathan Seelig responded that his biggest regret was not investing in Hub Spot, a Boston-based Internet marketing firm. He mentioned also that he originally hails from Vancouver, Canada, and during one trip there saw a queue outside a retailer called LuluLemon Athletica, a manufacturer and retailer of yoga-inspired athletic wear. He wanted originally to invest in it but hedged. It went on to be wildly successful and is based all over the United States and Canada.
He then added he was very proud to have been an original investor in ZipCar, a successful car-sharing company based in the Boston/Cambridge, Massachusetts area. He sits on its board and is pleased about its profitability and other accomplishments.
Rob Go mentioned his biggest regret was passing on investing in Groupon, the Internet coupon site which has basically become an Internet phenomenon. However, he took great satisfaction from investing in SkillShare, a New York City-based company where professionals share their expertise on just about any topic through a remote-learning model.
Scott Kirsner then inquired as to what the biggest story in venture capital for 2011 was. Rob Go responded that he thought the IPO for LinkedIn, the professional networking site which, on the day of its opening (May 26) was worth a reported $9 billion, was the most significant story of 2011.
Jonathan Seelig said he thought the most important factor was that there was over $8 billion raised for new businesses last year – and that the trend lately has been that the amount of money available for venture investing has doubled each of the past four years. That would indicate we are in a healthy investment period.
Jo Tango mentioned that the diversification of duties of venture capitalists was a significant development. He stated that the recent recession had forced VCs to be more creative and inventive in their business dealings.
Scott Kirsner next asked a broad question about notable trends in Boston-based venture capital. Is the region on the upswing? Rob Go asserted that there was a shift of focus on the part of Boston-area investors toward New York City. He said that this started in 2007-8, coinciding with the most recent economic downturn. He suggested that New York City was a more insular investment community and this, together with the fact that they have a lot of money, allows them to be more selective about making the best deals.
Fred Destin said he thought that Boston needs to be more aggressive and active in venture investment. Talent from Boston-area firms is too often lured away. Boston needs to be more aspirational in its approach to venture capital. He next suggested that so-called “angel investing” (definition), which he and Atlas specialize in, should contain multiple platforms – allowing for small start-up companies to not be overlooked in the investment process. He added that some might require only between, say, $2 million and $3 million to “get them across the finish line.”
Jonathan Seelig clarified the term “angel investor” by asserting one needed to have started or run a company that gives a good money cushion for investment. He mentioned that Silicon Valley has an advantage over theBoston area in this sense because there are exponentially more individuals who are in that position. He closed by saying angel investment was the “social currency of the region”; that is, angel investors are often guided by a sense of social or cultural responsibility.
Scott Kirsner followed up with a question about what particular sectors the panelists invested in. Fred Destin said that he was not “thematic” in any sense with regard to his own investments, and that as an angel investor, he was open to different vehicles.
Jo Tango said that his preferred genre of investment was “data mobility” – (Companies he’s invested in include StreamBase Systems, Vertica Systems, and Virtual Iron; he was also involved in Ask Jeeves (now Ask.com), Digital Market, and NextCard).
Rob Go is focused largely on education and education delivery systems. As mentioned previously, he invested in SkillShare; but has always been interested in the media, technology, and entertainment sectors – as well as the intersection of K-12 consumer-directed education and eCommerce. He suggested this area lends itself to intuition; that is “you’re rowing and you can’t see land; but you can tell where the currents are moving.”
Jonathan Seelig noted that it was a difficult question for him. He finds influence of social networking sites “interesting”; but really believes that purchasing decisions as influenced by “friends” is more complex that it appears on its face. Social media does provide a “framework for influence” that’s quite subtle and where connections are not obvious.
Scott Kirsner asks “What’s the mood with consumer internet startups”? Rob Go suggested that these consumer internet startup companies, of all funding levels, have a long way to go before their potential is realized; but that the “wind is at our back.” (For instance, companies like Zynga, Groupon, Facebook, Twitter, and Foursquare are examples of sophisticated and well-funded consumer internet startups). He added that in typical education investments, an investor should know the intricacies involved in navigating school districts. The profile of such an investor is quite different than your usual software engineer. It is difficult to make money efficiently in this investment area – school districts are not analogous or compatible as to their own needs. They have little interest in other school districts.
In closing, I’d note that happily, Vilna Shul was filled to capacity that evening. There were 170 reservations placed through social media, and the networking session beforehand, from my own perspective, was very beneficial (and fun!) Every year I’ve gone to these panels, they have been thoughtfully sponsored by Goodwin Procter law firm in downtown Boston. They have been a great friend of these events, and very much deserve a mention. And of course, Doug Levin, who capably organizes all of the panels (in addition to running his own start up) is the steady hand who makes it all possible.