Archive for the ‘Investments’ Category

The Mission is Heating Up

Sunday, October 2nd, 2011
The Mission

San Francisco's Mission District

It’s been awhile since I last blogged, but I finally unpacked my last box from my cross-country move so I’ll now be able to prioritize writing here again. Don’t worry, my monthly intake of It’s-It ice cream sandwiches still roughly matches the monthly unique visitors to this site, but for the loyal few who actually read this stuff, you’re about to get a whole lot more material to help end your insomnia.

Anyway, lots has changed with me over the past few months. New job, new schedule, new city. It’s great. I also found an apartment in the Mission neighborhood of San Francisco which I liked when I moved in, but am appreciating more and more every day.

I decided to live here because the neighborhood felt like an interesting mix of New York’s Lower East Side and Spanish Harlem, but in a much better geographic location (it also didn’t hurt there’s easy access to the freeway I take to work). It’s certainly residential, but there are also scores of restaurants, shops, and other amenities that I had grown accustomed to after eight years in the Big Apple. Some call this part of town “seedy,” but I prefer my next door neighbor’s description of “gritty.”

What I didn’t expect to find in the Mission is a thriving technology entrepreneurial scene. Southern Silicon Valley (about 30 miles south of San Francisco and home to Google, Yahoo, Facebook and many others) has long been a hotbed for innovation. However, workspaces there tend to be office parks instead of airy lofts, and there isn’t exactly much going on in terms of night life for the budding entrepreneur. Consequently, a decade or so ago more and more startups began settling in the SoMa (short for “south of Market Street”) part of San Francisco. Real estate there was cheap and living in the city was exceedingly more attractive for most younger people. The city was also making a concerted effort to bring commerce to that part of town through the building of a new baseball stadium (Go Giants!), and construction of affordable housing for teachers and other civil servants.

Although SoMa is arguably still the center of San Francisco’s tech scene, the Mission is really heating up. What’s attractive to startups is that the Mission has many dynamics not found anywhere else in the Bay Area: true mixed use real estate, diverse socio-economic groups, and high population density (not to mention awesome burritos). SoMa has also gotten pretty pricey so it’s typically less expensive to rent office space in the Mission too. In concert, these factors make the Mission far more fertile than other parts of San Francisco if you’re building a mobile app or other consumer-facing product.

And don’t just take my word for it… i/o Ventures runs their incubator here, Yardsale (a YCombinator peer-to-peer community application used the Mission as its testing ground), Blockboard (a Battery Ventures portfolio company) is in beta on Valencia Street, and even other VCs like my friend Sarah Tavel from Bessemer call the Mission home.

I really like it here.  Let me know if you’re in the neighborhood; I’d love to show you around.

My Interview with “The Wall Street Journal”

Monday, November 1st, 2010

Yep, that really is Snooki from "Jersey Shore" featured in dots in The Wall Street Journal

An article I was interviewed for ran earlier today in The Wall Street Journal.  Check out the full text of Alex Hotz’s piece here: “Three Reasons Why Venture Capitalists Are Investing in New York Startups” (my quote is in the last paragraph of the “East/West Mentality” section).

The WSJ’s hedcut artists aren’t exactly asking to sketch my mug (although they did recently for the never classy Nicole “Snooki” Polizzi), but since I have the full transcript from the interview I figured I would publish it here for better context.

The WSJ’s questions are in bold and my answers are in italics.

First, do you think there’s a difference in the startup cultures in NYC and SV? If so what? How would you describe the differences?

There are absolutely differences – gigantic differences – but the nuisances seem more generational than fundamental. Specifically, today’s New Yorkers didn’t grow up in technology entrepreneurship and instead most “immigrated” into it. In other words, they haven’t always been tech people. This non-native “upbringing” means New York still has some learning to do about founding and growing startups. With that said, NYC’s naïveté is dissipating as an increasing percentage of New York’s workforce – especially in terms of engineering talent – has spent its entire career in tech entrepreneurship in NYC.

Do you think Valley VCs are more likely to accept an entrepreneur who has failed as long as their idea was new and interesting? Is New York less forgiving?

I don’t think there is any difference in how the two VC communities look at failed entrepreneurs, but there are profound differences socially. Friends and family in the Valley are more tolerant of a loved one whose startup just went under than New Yorkers are.

Are New York entrepreneurs and VCs more focused on the bottom line than SV? Is SV more invested in ideas…creating new platforms/products/etc?

I hear this a lot from my friends in Silicon Valley, but I don’t really understand their pejorative tone. I actually think the recession coupled with the decreased cost to get a business off the ground have pushed all VCs to be more focused on the bottom line. Consequently, this phenomenon is perhaps accentuated in New York because the city doesn’t have as long a history investing in ideas without fully baked business models.

Does NYC have the same sense of community as SF? Sure there’s the Ace Hotel and NY Tech Meetup, but is the scene as vibrant as SV?

The community in the Bay Area is more organic than in New York, but that doesn’t mean it’s more vibrant. NYC’s entrepreneurs and investors alike are double-booked almost every night between networking events, competitions, mentoring programs, and on and on. Additionally, the city government has focused on fostering the tech community here through NYC BigApps, a ~$20mm seed investing program, and other incentives for startups in terms of rent and taxes. Also, TechStars is opening an outlet in NYC, the TechCrunch Disrupt conference over the summer was a huge success, and our mayor is one of the most successful technology entrepreneurs of all time.

How does finance affect the startup ecosystem in NYC? Do you think Wall Street still poaches the best engineers? Are New York investors influenced by a Wall Street mentality?

Finance affects the entrepreneurial ecosystem in a variety of interesting ways. Sure, some engineers who are capable of creating new companies instead go write code for hedge funds, but the smartest and most intellectually curious engineers are joining or creating startups. Wall Street previously offered stability, but in the wake of what happened to Lehman Brothers, Bear Stearns, Merrill Lynch, etc., joining a startup is less risky than ever before.

Chris Dixon has written about creating a startup culture like SV in NYC…do you think that’s possible? What does NYC need that the Valley has? What should New York avoid….if anything?

The single largest thing the Valley has that NYC doesn’t is a dearth of technical talent. This is changing, however, as more and more college graduates realize commuting to a nondescript office park is a distant second place to the New York lifestyle.

In your blog post you suggested that New York needs some big exits to cement its ecosystem. What companies do you think stand the best chance of doing that?

Just to name a few: Buddy Media, Conductor, Etsy, FourSquare, Gilt Groupe, RecycleBank, and SecondMarket. The companies themselves are less important than having employees of those firms see a startup from creation to exit and then leverage this knowledge to do it again and again. In the Valley, Paypal, Google, and now Facebook all have former employees who have left to start exciting new businesses; this is what New York needs to cement the ecosystem.

Anything else you’d like to add?

There are two other noteworthy phenomena:

First, the prevalence of Boston investors seemingly spending half their time in NYC (and likely the other half on the Acela). Polaris set up a Dogpatch Labs outpost here, Matrix Partners has made several investments in NYC, and others such as Spark Capital and General Catalyst have been particularly active. I keep hearing rumors from the folks that track this sort of stuff that New York will soon pass Boston as the second largest recipient of VC investment dollars…

Second, media/marketing is a huge driver of NYC entrepreneurship (and an important differentiator from Silicon Valley). Most of the largest advertising agencies are based in New York and these folks are constantly exploring new ways to reach and engage with their end customer. This mindset is why companies like Buddy Media and Conductor (both mentioned above) thrive in NYC. To put it another way, everyone in New York may not understand tech entrepreneurship, but everyone certainly understands marketing and how important doing it well is to growing a company.

Scutinizing a Seed Investment Bubble

Sunday, October 31st, 2010

A few days ago, the Center for Venture Research released its Q1Q2 2010 Angel Market Analysis Report.  This study was subsequently covered by a number of media outlets (including The New York Times, The Wall Street Journal, and VentureBeat).  The report’s subtitle asks “where have all the seed investors gone?” and goes on to assert that the total dollar amount of angel investments in the first half of 2010 decreased by 6.5% over the same time in the prior year.  Additionally, the report claims there was only a 3% increase in the number of deals during the same period.  I’m not going to argue the seed/angel/super-angel sector isn’t potentially overheated, but this single report at first seemed to contradict sentiment in the market as well as a few other sources.

Contradicting CVR's 3%: seed deals (<$1mm) as reported by CrunchBase

Specifically, CrunchBase, the database maintained by TechCrunch (Silicon Valley’s most widely read technology and investing site), tells a slightly different story.  Sure, CrunchBase has some shortcomings because the data is user-reported, relies heavily on SEC Form D filings, and contains other systemic errors, but this source still tends to be directionally significant for what is happening within the investment community.

Unlike the CVR study which shows a 3% gain from 1H09 to 1H10, CrunchBase indicates an increase of a whopping 135%.  Additionally, the number of deals cataloged in CB climbed by 44% from 2H09 to 1H10.  Some of this discrepancy is explained by reporting biases, but this difference is so substantial that there are likely much deeper problems with one – or both – of the sources.  CrunchBase seems more consistent with the conventional “gut feeling” of those actively investing in technology startups, but the methodology employed by the Center for Venture Research is more statistically sound.

Maybe the bubble has indeed burst: seed deals (<$1mm) by quarter as reported by CrunchBase. Note that 3Q10 is -58% from 1Q10

Nonetheless, looking at more granular CrunchBase data seems to suggest that the overall theme of a slowing/contracting seed investing environment articulated in the CVR report is in fact accurate.  It’s difficult to measure this precisely (namely because of the issues mentioned above), but the chart to the right shows seed deals by quarter – as opposed to half – in CrunchBase.  Although Q1 of this year was particularly strong,  the fervor has seemingly died down and returned to near the historic average.

I’m confident strong founders with good ideas will always be able to find angels willing to back them in the most nascent stages of company formation.  However, the bubble-like environment of the past several quarters appears to have subsided even if disparate sources don’t agree on the timing and extent of the decline.

Note:  CrunchBase data is as of October 31, 2010 at 12:39pm EDT.  The analyzed portion of this database includes: (1) only U.S. based companies, (2) deals where investment amounts for the entire round were less than $1 million, and (3) companies with data for geographic location, investment date, and round size.  Black and orange colors are in support of the Giants trying to win their third game of the World Series later today (oh, and I guess for Halloween too).

What I Did on My Summer Vacation

Friday, August 6th, 2010

This coming fall, a significant number of American school children will surely participate in the seminal back-to-school exercise of describing what they did on their summer vacations.  Since I’m concluding my last summer vacation ever (sniff, sniff), I figured I would put together some of the highlights of my venture capital internship with Greycroft Partners.  Here’s some of what I did – in no particular order:

Met a ton of people

Just based on the business cards I’ve amassed, I had meetings with over 200 people in about 50 business days.  It’s been crazy, but really fun.  This stack of cards (pictured is the real pile) includes everyone from aspiring entrepreneurs to CEOs of Fortune 500 companies and all sorts of folks in between.

Got entangled with Russian Spies

Okay, okay.  That’s a picture of one of the other Russian spies, but it sure makes for a better image than dowdy Cynthia Murphy‘s mug shot.  Alas, Cynthia Murphy became a very important person in my life not for spying on Greycroft partner Alan Patricof, but because she was nabbed by the U.S. authorities the day before she was supposed to process my payroll paperwork.  When you’re a graduate student in the country’s most expensive city, getting paid on time is a big deal.  Anyway, her arrest meant I got paid two weeks late, but at least it makes for a decent story.

Partied with rap stars

This is embarrassing to admit, but MC Hammer’s album “Please Hammer Don’t Hurt ‘Em” was the first CD I ever bought with my own money.  Weeks of saved allowances went into that purchase, and it was so worth it.  MC Hammer was rad when I was nine years old (oh, and I *might* have also owned a pair of “hammer pants” – awful).  Anyway, since the height of his music career he had a very public decline only to rise again as, in the words of my brother Tim, “the king of Twitter.”  This picture was taken last night at the Ink Hotel and despite MC Hammer’s attire (nobody had a suit jacket on except him and will.i.am), he was very down-to-earth and personable.  I’m glad I liked him because the nine year old me would have been devastated if MC Hammer wasn’t a good guy.

Learned Los Angeles is actually pretty cool

Having grown up in northern California, hating LA is in my blood.  However, spending some time with Greycroft’s Santa Monica-based team when they visited NYC has me realizing there are some awesome people out there.  I still hate the Dodgers and the fact Los Angelenos insist on driving everywhere, but other than that they’re pretty cool.  Here’s Dan “The Danimal” Murillo buying a miniature cupcake.  I wanted to use the much better photo I have of Josh Yang (the LA summer intern and ninja extraordinaire) from a conference, but that pic has been “intentionally misplaced.”

Witnessed @alanjpatricof‘s first tweet

He threw me under the bus and claimed I “forced” him to get on Twitter (not true!), but I still witnessed Alan setting up his account and composing his debut tweet.  I hope he becomes a regular user because if there’s anyone who can maximize the hilarity of 140 characters, it’s him.  Sorry @marissa_alex!

So these are just some of the highlights from a fantastic summer.  I also spent time digging into exciting new sectors, conducting diligence on active deals, and working with portfolio companies, but those activities don’t make for as lively a blog post.  Nonetheless, Greycroft is an awesome place to work.  I learned much more than I ever could have anticipated and picked up a great new crew of friends/colleagues.  Greycroft is also hiring a pre-MBA associate so be sure to apply if you want to join a great team.

Hot or Not?: Technology Entrepreneurship in New York City

Wednesday, April 28th, 2010

Screen Shot 2014-05-28 at 8.40.36 PMAs I’ve mentioned previously, I’m in a great Venture Capital Seminar class, and below are some of the salient excerpts from my final paper. I wrote this piece because for the past six months, prominent players in the New York City technology community have loudly – and increasingly – asserted that NYC is “hot,” or “exploding,” or “insert any other dramatic adjective here.” The individuals making these claims are as smart as they are savvy, and are astutely aware of the value of increased attention on the blogosphere. Although provocative, these declarations have generally lacked hard evidence and usually have been inspired by biased anecdotes from a select few.

As a result, this paper initially set out to go beyond one-off observations by analyzing concrete macroeconomic data about technology entrepreneurship in NYC. As part of this process, I conducted 35 interviews with local investors, start-up founders, and government officials. It might be a long list of some of the who’s-who of New York, but it is unfortunately far from exhaustive. Additionally, macroeconomic data at the city-level is expensive and time-consuming for local governments to generate. Thus, the most recent information does not include the very robust entrepreneurial periods of 2009 and 2010.

These logistical issues, coupled with the confines of an academic environment (i.e. deadlines and page limits), prohibited me from painting the complete picture of what is happening in New York City as I originally intended. Instead, this is a start, and I look forward to further exploring this analysis and discussion for many years to come on this blog.

NYC History: Fur Traders to Rap Stars

New York City has always been this continent’s leader in commercial activity; after all, before New York was New York, it was New Amsterdam. New Amsterdam was among the first European settlements in the Americas and was founded exclusively for Dutch fur trading in 1613. By the end of the eighteenth century, entrepreneurial immigrants in America were in control of Lower Manhattan and built the New York Stock Exchange, established the country’s first commercial zoning laws, and figured out a way to effectively transport its growing population. This industrious group of early New Yorkers instilled an enviable work ethic as well as unwavering optimism throughout the “land of opportunity.”

By the twentieth century, media and publishing joined finance as some of the city’s largest and most influential sectors. This helped maintain optimism in New York and even inspired Frank Sinatra to famously sing “if I make there, I’ll make it anywhere.” This optimism continues today through rapper Jay-Z whose #1 single states NYC is “where dreams of made of, there’s nothing you can’t do in New York.”

New York is also home to immigrants from every nation of the world, and more languages are spoken here than anywhere else on the planet. As Kofi Annan, former Secretary General of the United Nations, once said to President Bill Clinton, “the U.N. isn’t just in New York City, New York City is the U.N.”

If the lifeblood of an innovative environment lies in that community’s optimism, eagerness to defy odds, and diversity, New Yorkers have entrepreneurship wired into their DNA. However, other variables such as (i) the amount of capital available for investment, (ii) the ability to attract and retain employees, and (iii) leadership in several subsectors to foster a community, are essential to turning ideas into thriving companies.

Early Dollars: Vibrancy of the Startup Investment Community

Angels and Seed Funds

In terms of investors, New York has a plethora of seed funds, micro venture capitalists, and wealthy individuals to financially help companies at the most embryonic stages. The Center for an Urban Future, a nonprofit that studies the overall health of New York City, estimates that these angel investors and their associated funds have “$250-500 million available for investment” over the next decade. Assuming an average angel/seed investment of $250,000 (which is conservative), this current aggregate pool of capital will fund somewhere between 1,000 and 2,000 companies in NYC. Of note is that most of these funds are small and tend to diversify risk by co-investing with other angels. This practice increases overall activity, and hopefully speeds the rate at which this pool is deployed.

However, getting funding is only part of a thriving technology startup community; entrepreneurs need advice and guidance as much as they need money. In this area, New York appears to only have a nascent, albeit growing, network of experienced early-stage investors. In the words of outspoken entrepreneur, Matt Mireless of SpeakerText, “good luck finding angels in NYC who understand early-stage tech investing. Technically, they’re out there somewhere… But I haven’t seen them.”

Mireless also scolds the tight knit nature of the angel community in New York because although it enables easy collaboration amongst investors, it also means entrepreneurs do not have as many chances to impress this group. Mireless says there is “no learning on the job; you better wow them right out of the gate” or they will talk to each other and the company will never get funding. Although many in the community would disagree with him (or at least say they’re over the top), the crux of Mireless’s thesis appears true. In short, the money is out there for young companies in New York City, but the community needs more seasoned very early-stage investment professionals and outlets for mentorship.

Traditional “Series A” Venture Capitalists

Once startups pass the initial funding hurdle and build a proof of concept, many will require more substantial capital from a VC. For businesses competing in sectors common to NYC (see the below section analyzing the leading technology areas in New York), these investment sizes tend to creep into the low seven digit range, and the active VC firms in NYC often form syndicates of two to three firms per deal. Unlike other hotbeds of entrepreneurship – such as Silicon Valley, Boston, or the Research Triangle – venture capitalists in New York are reasonably accessible. This accessibility means that even entrepreneurs with poor social networks – but exceptional products – can still get meetings with investors.

Conversely, many entrepreneurs complain there are not enough investors in NYC capable of writing “real” Series A checks. The evidence suggests they are probably right (see below), but many non-NYC based firms have slowly crept into the five boroughs to fill this investing gap. Some Boston VCs that are active in New York include Matrix Partners, Spark Capital, Polaris (through Dog Patch Labs), Softbank, and General Catalyst (far from a complete list). Silicon Valley investors are also increasing their time in New York with Battery Ventures being particularly active. Finally, other tri-state area firms such as Edison and Updata, both of New Jersey, have enriched the entrepreneurial community of New York by investing here for many years.

Despite this interest from firms based outside the Big Apple, it is difficult to determine what percentage of these non-NYC firms have earmarked assets for investments in New York. Confounding this ambiguity further are firms like Bessemer which are based locally but have offices around the globe. Consequently, to assess how much “pure” New York VC money exists, I assembled the following table:

Large VC Funds in NYC (last two vintages)

This is back-of-the-envelope; don’t forget to read this disclaimers to this data!

As mentioned in the caption, this data is simply a back-of-the-envelope analysis using public sources.  In fact, I previously worked/interned for two of these firms and back then loved laughing at how wrong outsiders could be when trying to draw conclusions from fuzzy private information.  I would never reveal confidential data, but I think this analysis – although likely extremely incorrect – provides some interesting insights.

With that said, this data comes from Capital IQ and details the two most recent funds for venture capital firms that meet the following three requirements: (1) the most recent fund exceeds $100 million, (2) the firm’s primary offices are in New York City, and (3) the firm has a bias to invest in NYC above other regions. In the far right column, I also attempted to estimate the capital that remains from the most recent fund (note: assumes half of the fund is reserved for follow-on investments, fees, etc. and the remainder is invested equally over five years. This equal allocation clearly happens infrequently in reality and five years is likely too long, but I tried to estimate variables that seemed consistent with trends in NYC).

As shown, all but one New York VC will need to raise a new fund in the next few years, and the aggregate estimated Series A capital available for investments in new startups is $197 million. Considering VCs have likely delayed deploying capital through the economic crisis, there is a respectable amount of dry powder remaining. Also, capital will increase further once fundraising returns to traditional levels. Interestingly, the data suggests the sum of NYC venture capital funding closely approximates the sum of angel/seed capital available (although this ignores entry by non-native firms as mentioned above and the creation of new vehicles such as AOL Ventures).

Scaling Headcount: Educational Support & Finding Talent

Perhaps even more difficult for startups than finding helpful investors is attracting and retaining talented employees. New York has the largest consolidated workforce in the country, yet, like any other city, has challenges matching candidates with companies that can fully leverage employees’ skills. Also, Silicon Valley has long been a draw for the best engineering talent because that is where the startups were. However, as Fred Wilson of Union Square Ventures likes to half-joke, “nobody graduating in the top of his or her class from MIT, Carnegie Mellon, or Columbia actually wants to move into the California suburbs at age 22, buy a car, and commute every day to a nondescript office park. These kids would much rather enjoy the New York lifestyle of living in Williamsburg and hopping on the subway to code in an airy loft/office in SoHo.” As a result, the tide of this “westward migration” of technical talent is starting to turn due in large part to changing practices at New York’s schools as well as altered attitudes about the financial services sector.

Powerhouse Academic Institutions

In my chat with Mayor Bloomberg, he pressed that NYC’s universities have created “legendary inventions with no real companies.” Although this represents some hyperbole, Columbia, NYU, Pratt, Parsons, SVA, etc. are poor incubators for commercial enterprises. For example, in 2007, the most recent year for which data is available, the Center for an Urban Future noted that “NYU was number one among all U.S. universities with $791 million in royalties, while Columbia was number two, with $135 million. No other university topped $100 million.” Further investigation by the CUF suggests New York schools are unwilling to “swing for the fences” like Stanford, Harvard, and MIT do. This is a fundamental problem for New York – both inside and outside of schools – and an issue discussed in more detail in the below conclusion.

The Curse of Wall Street

Thousands of high-quality engineers and computer scientists might graduate from New York’s world class schools every year, but “these individuals have historically flocked to write algorithms for hedge funds rather than work on manipulating open APIs,” says David Lerner of Columbia University’s Technology Ventures Lab. With these Wall Street jobs come high wages and annual cash bonuses and the top talent is not accustomed to being paid in stock options. This is a hindrance for New York because founders make significantly below market salaries until they have a successful exit, and although the long run financial benefit might be on the side of founders, the difference in the interim is so stark (i.e. the dramatic change in lifestyle) that few technologists are willing to take the plunge. The collapse of the financial community has changed this slightly with so many “quants” out of work, but the attitude is still pervasive in NYC.

Technology Leadership: Finance and Media + 5 Exciting New Sectors

New York has always been a center for finance and media, but from these two behemoth industries have emerged five sectors where New York is currently leading the technology world:

1) Advertising Technology. Google acquired NYC-based DoubleClick for its superior ability to match advertisers and publishers down the long tail of the curve. Out of this firm, a number of other companies like ContextWeb and MediaMath have been spawned or encouraged. Additionally, New York businesses outside of technology spend huge portions of their budgets on advertising and web promotions so it is not coincidental that the leading search marketing firms (such as Conductor, Altruik, and Clickable) are also based in Manhattan.

2) Advancements in Finance. Maybe Goldman Sachs’ innovation of credit default swaps is not a praise-worth advancement in recent news, but New York is home to the most innovative “fintech” firms in the world. SecondMarket, an online portal for shares in private companies, is the first of its kind to scale and is now experiencing significant network effects. Fynanz (a private student loan platform) and ProtEquity (a firm focused on creating downside protection tools for homeowners) both could not be born anywhere else.

3) Next Generation E-Commerce. New Yorkers have always needed to be creative to survive, so serving as home to the next generation of e-commerce is a perfect fit. Gilt Groupe, Etsy, VillageVines, Kickstarter, Quirky, etc. are redefining how transactions are sourced and executed in our changing economy.

4) Creative Content. In addition to finance, media is the second logical strength of New York. NYC is home to the cutting edge of what some have coined “Creative Content 2.0,” with Gawker, The Huffington Post, Daily Candy, Thrillist, LearnVest, JauntSetter, and countless others are eroding marketshare daily from “old school” media.

5) Collaboration & “Real” Social Interactions. New York City’s diverse neighborhoods, bustling restaurants, and crowded bars are examples of how the city’s residents crave social interaction. Maybe people like to get out because the apartments are so small, but NYC is the ideal playground for entrepreneurs developing tools that enable individuals to collaborate. FourSquare, Hot Potato, and Meetup all embody New York’s leadership in this sector.

Moving Forward: New York’s Key Areas for Improvement & Potential Solutions

Mentorship & Employee Development

To support younger and less experienced entrepreneurs, programs like Silicon Valley’s Y-Combinator and TechStars need to take hold in New York. I would like to see the Mayor’s office fund these initiatives, but VC firms should consider financing them too. These efforts will attract more entrepreneurs to NYC (and keep the ones we have) while providing tools vital startup success.

Also, the gap between new and seasoned entrepreneurs seems unfathomably wide in NYC. We need to close this. The Columbia Venture Community has already started formal mentorship programs, but opportunities for informal meetings and hands-on learning need to be more commonplace. Perhaps the Ace Hotel or Tom & Jerry’s can play the role of Buck’s of Woodside in Silicon Valley to facilitate this.

Need to Swing for the Fences

The most common remark shared by all three groups of people I interviewed was that New York needs, in the words of Joe Einhorn (CEO of Thingd), an “ecosystem for a few runaway successes.” As California has seen with the “PayPal Mafia,” and more recently with Google and Facebook, big successes lead to the next generation of new startups when employees leave and start new companies. These departing employees can tap an established network to avoid “reinventing the wheel” and also offer an opportunity for creative talent to remain in the economy and not get bored or retire to a desert island.

DoubleClick was a homerun, but it would be phenomenal for New York City to see other thriving businesses such as FourSquare, RecycleBank, Etsy, Gilt Groupe, and SecondMarket go public or be acquired for multiple hundreds of millions of dollars. These exits are the essential next step in furthering the community.

Crowd-Sourcing Will Go Mainstream

Thursday, April 15th, 2010

A few days ago, I finished reading “Game Change” which is John Heilemann and Mark Halperin’s controversial account of the 2008 U.S. presidential race. This book has become fairly popular amongst political junkies of all stripes (it’s been on The New York Times bestseller list since its publication and The Huffington Post lamented how difficult it was to find a copy when it first came out).

Frankly, the authors seem most concerned with revealing the alleged – but certainly provocative – thoughts and statements of the different candidates’ inner circles, but I enjoyed the tome for the implicit argument that “crowd-raising” and “crowd-sourcing” have fundamentally changed the way our society functions.

Not every supporter of Barack Obama in the 2008 election could give $2,000 at once, but millions of people gave $20 multiple times. Linked together, over a period of time, small donations had a massive impact. This pooling example provides insight into how capital and knowledge can be similarly harnessed to create powerful change in other areas. Specifically, if tools existed to link people with spare time and suitable skills to projects that benefit from their contribution, society and business may be able to cumulatively make advancements using resources we already have.

Americans, in particular, are busy. However, even in the most hectic of days, there are free moments found in blocks of just a few minutes. Aggregated, this spare time can have enormous social or commercial impact. Sitting in an airport (like I am right now), waiting in a doctor’s office, riding the subway, etc., are all opportunities for harnessing the “crowd.”

I’ve come across a number of interesting companies developing different types of models in this space so drop me an email if you want to discuss this sector further. Some of the great ideas include models to help struggling bands record their first albums as well as new product development forums that allow contributors to participate in the financial upside. The revenue models for nearly all of this field still need to be proven, but it’s an exciting sector to follow nonetheless.