AGILEVC My idle thoughts on tech startups

March 25, 2009

The folks over at Spark Capital announced a new seed investing program earlier today called Start@Spark.  Members of the Spark team and various others have already started talking about the program, which will make seed investments of up to $250K in very early stage companies primarily in New York and Boston.
I personally think this is an exciting development and one that bodes well for all of us in the startup ecosystem here in the Boston area.  I’ve been to countless formal events and informal forums which have touched upon the elements of the Boston startup world that could be improved, particularly for startups in the internet & digital media space.  Most folks, including me, seem to agree that better seed investment is among a number of areas in which we can continue to develop.
I say “better” rather than “more”… we already have a large number of active angel investors and some Boston area VC firms also make seed stage investments.  The VC firms in this area who do make seed stage invesments are often backing proven entrepreneurs with whome they’ve previously invested with as opposed to exceptional younger entrepreneurs.  And a signifiant portion of the angel investing activity is in other sectors, is completed only after a lengthy VC-like due diligence process, and/or is done only after companies have launched products or even began generating revenue.  This isn’t a criticism of the angel community here in Boston, arguably I think it’s actually much more organized and structured than Silicon Valley where I used to work.  
But the net impact of these dynamics is that comparatively few very early stage internet & digital media companies, especially those launched by young entrepreneurs, get off the ground here in Boston.  In fact lots of these would-be Boston startups end up moving to the West Coast, most famously Facebook but there are literally dozens of other examples.
One thing that Silicon Valley has which I think we may lack a critical mass of here in Boston is what I and others refer to as “super angels” in the internet & digital media space.  There are a few Boston folks like Dharmesh Shah and Don Dodge whom I’d put in this category, but there are literally hundreds in the Valley many of which have now become very well known for their angel activities (Ron Conway, Ram Shiram, Reid Hoffman, Marc Andreesen, et al).  IMO what distinguishes these super angels is a) ability and willingness to invest in very early-stage startups (i.e. take alpha product or even “Powerpoint” risk), b) a willingness and process to make very quick (days or even hours) investment decisions, c) a willingness to back exceptional people even if they’re first time entrepreneurs, and d) capability to provide raw internet & digital media startups w/ advice and guidance even if only with a small portion of their busy schedules.
My selfish hope is that Start@Spark will help fill some of this void in the Boston area, so that in the long run more exciting companies launch here, stay here, and grow here.  That would benefit all of us… existing startups looking for partners, VCs like myself looking to fund later rounds beyond seed stage, recent college grads looking to join startups in the internet & digital media space, etc.  The proof will of course be in the pudding of long term investment returns, but if even a small handful of the startups seeded thru Start@Spark turn into big companies then I imagine this strategy will payoff nicely for Spark as well.