Posts Tagged ‘First Round Capital’

Mint.com: A Vindication of the Super-Angel VCs

September 16, 2009

Check out this follow-up story to the feature I wrote on super-angels back in May.

Mint.com: Nurtured by Super-Angel VCs
Intuit is acquiring a startup conceived by a “25-year-old kid” and funded by First Round Capital, a new breed of high-risk, early-stage venture capitalists

By Spencer E. Ante

Intuit’s purchase of Mint.com was a big win for Mint CEO Aaron Patzer and the rest of the 38-person staff he assembled to run the personal finance Web site. Yet the $170 million acquisition also vindicated a new breed of early-stage investor that is betting aggressively on startups while big-name venture capital firms conserve capital and shy away from risk. These so-called super angels are trying to reinvigorate venture capital by taking it back to its roots, when firms were smaller, nimbler, and more adept at helping to build companies from the ground up.

Mint.com owes much of its success to one such investor, First Round Capital, which opted to back the fledgling company at a time when other VCs demurred. Indeed, the Mint.com acquisition is First Round Capital’s largest exit, beating out the $100 million sale of portfolio company Powerset to Microsoft (MSFT). And although First Round Capital would not quantify the return on its investment, co-founder Josh Kopelman says the Mint.com deal generated the highest return of any deal the firm has done. Previously its best return came when eBay (EBAY) acquired StumbleUpon for $75 million, which generated more than 14 times First Round Capital’s original investment. “I don’t think this changes our strategy,” Kopelman says. “It is continued validation for our approach.”

Read the rest of my BusinessWeek story here.

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Need Money for Your Startup? Meet the Super-Angels

May 24, 2009

Need money for your startup? Then you should read my new feature, “These Angels Go Where Others Fear to Tread,” in this week’s issue of BusinessWeek.

The story is about a new and increasingly prominent class of investors, which I call super-angels, who are financing startups as big-name venture capital firms conserve their cash. Over the last few years, these firms have funded hundreds of startups, including top outfits such as Facebook, Digg and Twitter.

My story focuses on First Round Capital and its co-founder Josh Kopelman. But there are a growing number of these firms, including Baseline Ventures, Soft Tech VC, Maples Investments, Felicis Ventures, True Ventures, and others.


[Risk-takers: First Round’s partners Howard Morgan, Chris Fralic, and Rob Hayes]

Since there seems to be more super-angels popping up every week, I am going to start a sort of wiki list of the firms, which I hope you all will add names to. Check out the story here.

I also sat down with BusinessWeek assistant managing editor Jim Elllis for an interview about the story in our new weekly video podcast. Check it out here.

The Great Skills Mismatch: Wall Street Quants Thumb Their Nose at Tech Startups

May 3, 2009

There’s an emerging structural shift in the U.S. economy that has created a serious mismatch between employers and employees in today’s economy. That’s the provocative thesis of this week’s cover story in BusinessWeek, “Help Wanted.”

This is a big deal that could have major repercussions. Among them, says my colleague Peter Coy, are:

The unemployment rate is likely to remain distressingly high because many people who want jobs will lack the appropriate qualifications. Second, inflation could pick up sooner than expected if employers are forced into bidding wars to recruit the few people who are qualified for the work. Third, if unemployment stays high it will put additional political pressure on Congress and the Obama Administration to push through fixes that could make matters worse in the long run, such as insulating workers from the cost of long-term unemployment to the point where they lose their appetite for work.

I was one of several reporters and editors who helped Peter write this cover. I learned a few interesting things while reporting the story, which led me to believe that this shift was having a real impact. One thing I learned is that the thousands of laid off workers from Wall Street, many of whom have high-level math and computing skills, are so far not that interested in leaving finance and going to work for a tech startup.

Consider this one story from venture capitalist Fred Wilson. Last fall after Lehman Brothers fell, Wilson, cofounder of the New York venture capital firm Union Square Ventures, backed an experimental Web site called www.leavewallstreetjoinastartup.com. (The other venture capital firm that backed the site was First Round Capital.)

The idea was to try to lure some of the talented software engineers who had been laid off on Wall Street to technical jobs at the two dozen New York-area companies that his venture capital firm was financing. Wilson was fishing for quants.

But it wasn’t the game-changer the VCs were hoping for. Wilson only filled a handful of jobs. “It wasn’t the panacea I thought it would be,” says Wilson.

It turns out that the learning curve was too steep for many financial engineers who were not well versed in the ins and outs of online advertising and analytics. Plus, many Wall Street refugees are not prepared to accept a massive reduction in their salary.

“For a lot of people who used to work on Wall Street they have a large personal burn rate,” says Wilson. “For them to take a job that pays a lot less they have to make a meaningful change in their lifestyle. And that is an issue.”

What does this mean for tech companies? I think it means that it will most likely be hard to poach seasoned talent from the financial world for the next few years. Most of the Wall Street folks I know who have been laid off are still looking for jobs with financial firms, though they are more likely of the smaller, boutique variety. Some of them are finding jobs. Not all of them will, though. Wall Street just won’t be big enough to absorb all the people who have been laid off or fired. That restructuring process is probably going to take a few years to play out.

Meanwhile, if I was a tech company, I would focus on trying to poach talent from other tech companies, or I would look for recent graduates or younger employees with tech skills that can be retrained much more easily.

This is the hope of President Obama. In a lengthy interview in the New York Times magazine with David Leonhardt, President Obama says that one healthy consequence of the financial crisis will be that college grads with math skills won’t automatically want to become derivatives traders. “We want some of them to go into engineering, and we want some of them to be going into computer design,” said Obama.

The President also is aware of the skills shift. In the interview, he said one of the biggest constraints holding back his plans for building electricity smart grid is a lack of “trained electricians to lay down those lines. . . Somehow we have not done a good job of matching up the training with the need out there. And that’s one of things where government can help, help to guide and steer our education process in a way that meets future needs and not just the needs of the past.”

So I would expect to see more talk and action from the Obama Admin. on this skills mismatch and retraining issue. He clearly sees it as a economic problem and priority.

Startup to Watch: Knewton Raises $6 Million from Bessemer Venture Partners and Accel Partners

April 8, 2009

Yesterday, New York-based online education startup Knewton announced a big fundraising win with a $6 million B round.

Bessemer Ventures led the round and original investors Accel Partners, First Round Capital and angel investor Reid Hoffman put in some more money.

Knewton currently offers LSAT and GMAT prep courses online but the company is pursuing a much more ambitious vision. Its larger goal is to use its adaptive learning technology as a platform for online education that could be used by textbook publishers, schools, companies and other third parties. If the company pulls off this trick, it could be one hell of a business. After all, education is a multi-trillion industry.

“Education is the last of the information industries to move online,” says Knewton CEO Jose Ferreira, a former venture capitalist and derivatives trader at Goldman Sachs. “When it breaks, it breaks fast. And that’s going to happen in the next five years. All the education content will go online in the next 10 years. And textbooks will go away. The question is who is going to power that platform. It’s probably going to be one or two companies.”