DC Needs a Fred. Any Takers?

FredWilson cropped.pngProfiled in Sunday’s New York Times, Union Square Ventures‘ Fred Wilson is a legend of contemporary venture capital — a title previously reserved for West Coast luminaries like Moritz and Doerr, and maybe a couple others. At Web 2.0 Expo in New York last week, Wilson was greeted with cheers usually reserved for celebrities. . . or rock musicians.

We don’t need a celebrity here in DC. But it would be great to have a venture capitalist with a fraction of Wilson’s passion, commitment, and drive. It’s not so much that he’s an investing legend. . . what’s amazing is his sheer devotion to his companies, his followers, and everything Web 2.0.

By his own admission, Wilson’s had his share of bad calls. But most of that goes back to The Bubble, when he was at Flatiron Partners. I was at a startup (liveprint.com) pitching Flatiron in 1998. I met Wilson briefly back then, as well as the firm’s the most vocal partner, Jerry Colonna; the partner who ended up leading our investment was Bob Greene.

Flatiron’s highest-profile investment was probably deliver-to-your-door service Kozmo.com. I remember getting a Kozmo.com hat. Kozmo raised $100M, before its legendary implosion. I left liveprint.com after the first Flatiron (~$3M) round, before an additional ~$40M bought all those Aeron chairs, and the chairs were acquired (along with the rest of the company) by Kinko’s in a transaction so complicated that no one knew what they had until a check arrived in the mail.

According the NYT profile, Flatiron wrote off a third of its investments.

But Wilson returned, humbler and smarter. To me, he’s the quintessential early-stage VC. Why? Because he’s so focused on his space, and passionate about his companies. True, he’s been accused of shilling for them . . . but from an entrepreneur’s standpoint, the benefits of having such a high-leverage, high-profile investor on your team is literally worth millions (not to mention what you’ll save on not needing a PR firm.)

Just watch Wilson work. He uses nearly every one of his portfolio company’s products — twitter (6,571 follow him @fredwilson), disqus, tumblr. Add these to his blog (A VC), and he’s one of the most prolific posters on the planet.

DC needs a Fred.

Or maybe a Josh. Josh Kopelman, though less vocal than Wilson, has put his money where his mouth is, on behalf of the venture fund he founded just outside Philadelphia, First Round Capital. In fact, First Round has made no fewer than 57 early-stage investments, nearly triple USV’s portfolio.

Or maybe a Bijan. Or a Brad.

And this isn’t just about attitude. There are clear metrics here. Several mid-Atlantic firms talk about their ‘seed’ programs. But the litmus test is: name the ones routinely doing investments in the $250k – $1M range. For most firms, the funds are just too large for the math to work — invest a $250M fund $500k at a time, and you end up with 500 startups in your portfolio. That’s a helluva lot of board meetings.

Which is why First Round usually doesn’t take a board seat. (Most VC firms have a six-seats-per partner limit.) This is about volume (or more accurately, statistics). Quicken the cycle of investment, trim the due diligence, invest more with the gut . . . and let the odds work in your favor over a larger statistical sample. Though time will tell, based on initial exits, it seems these guys are doing pretty well.

So while it’s good to see them on the East Coast (Silicon Valley has sufficient players that none is noteworthy) — and Baltimore, DC, and Northern Virginia are certainly within their flying radius — it’s just not the same as having our own local VC hero. I mean, how sad is it that a local meetup was organized for DC Fans of Fred? (Full disclosure: I was there, and met some great, like-minded entrepreneurs.)

And perhaps more than anything else, these guys get Web 2.0. Unlike most VC firms, USV is not only not afraid to invest in pre-revenue companies, they will invest before a revenue model is even figured out (twitter, tumblr, disqus). So who out there will claim this mantle? Anyone? Anyone?

Working the Workshops


Web 2.0 Expo New York 2008

There are tons of informative sessions at Web 2.0 Expo. I especially like the Day 1 workshops. Maybe it’s the no-break, three-hour block . . . the fewer tracks . . . or the reduced traffic, since a good many folks opt out of Day 1 to save money. Shame.

If you’re a coder, there are solid technical workshops. But even though I’ve started up several companies, today I made a beeline for the startup and financing workshops. Why? Mainly because the scene/climate is constantly changing. But also because, just as with a pitch meeting, you always come away with some useful nuggets.

At the Web 2.0 Expo in San Francisco in April, it was ‘Starting Up: Strategies for Financing & Growing Your Web 2.0 Startup,’ put on by Rob Hayes of First Round Capital and Jeff Clavier of Softtech VC. Today, it was ‘Casing the Startup Joint: Real Life Examples of Startup Opportunities, Issues, and Strategic Decision Making,’ presented by Albert Wenger of Union Square Ventures, along with Charlie O’Donnell of Path 101 (Charlie was formerly an analyst with USV).

[Fellow East Coast startups take note: Both USV (New York) and First Round (just outside Philadelphia) are early-early stage VCs. Both are on my radar for CHALLENJ -- but despite what First Round says about investing on Powerpoints, I don't plan to approach either until our app is built; USV makes it clear they want something working.]

Here are a few random nuggets from today:

- Shift from hard-coded documents to live ones Although crafting a clear (if not pretty) business plan is still advised (if for nothing else, it gets everyone in the company on the same page, so to speak), VCs would rather see your competitive analysis in a wiki. “It also tells us that you have an ongoing process for tracking competitors,” according to USV’s Wenger. And if your .ppt deck doesn’t change nearly every time you deliver it, by definition it’s stale.

- Reduce your risks before applying Be mindful of the four buckets of risk before you approach any investor: 1) Team, 2) Technology; 3) Market; and 4) Capital Requirements. Says Wenger: “We can handle one — maybe two — but that’s it. (I’m working on my team — any killer PHP coders out there?)

- Rejection by one VC firm has no reflection on your business Suck it up. Firms like USV do fewer than 20 investments a year (and some of them are later stage). If they pass — presuming you’ve been sufficiently persistent — move on. (The corollary to this of course is, if 40 firms pass on your deal . . . it’s time to retool.)

- State of angel investment The thin g to remember — and it’s good news — is that the number of angel investors is 10x the number of VCs. But you have to work a lot of venues to find them, since most don’t hang out a shingle with wings on it — uncles, friends of the family, doctors, they all count. The bad news? When Wall Street flails (as it’s doing right now), even the wealthy get skittish. As O’Donnell puts it, “The rich tend to write fewer checks when they feel less rich.”

Lastly, it’s always interesting to hear the war stories from other startup CEOs. To be honest, I’ve made enough mistakes that I don’t learn all that much in these ‘true-confession’ sessions . . . but there’s something comforting in knowing that really smart people also did some dumb things.