Historically, almost everything I do uses a network model. Foundry Group runs as a network. If you take a look at the Foundry Group partner funds or talk to us about our investment strategy, you’ll immediately see the texture of a network. Techstars is a worldwide network that helps entrepreneurs succeed. All of my ideas around Startup Communities incorporate network theory. If you are involved in any organizations I’ve helped create, such as Energize Colorado, you’ll immediately recognize the network model underlying them.
For me, a network is very different than a social network such as Facebook, Twitter, and LinkedIn. Now that my entire life has shifted to a virtual one, I’ve been playing around with a lot of new network concepts and how they apply to work.
My long time friend Matt Blumberg just launched a new company today called Bolster. It’s a new way to scale your executive team and board. Fred Wilson, also a long time friend of Matt’s, has a great detailed post up today about it titled Bolster Your Management Team And Board that goes through Bolster in detail. A key section from Fred’s post is:
The Bolster team believes that scaling a high growth company means that you need to adapt, grow, and supplement your management team continuously along the way. And a big part of doing that is accessing “fractional talent” which means people that don’t work for your company full-time and permanently. All of this is outlined in the Bolster Founding Manifesto which explains why they started this company.
Sign up for Bolster if you:
While we are not direct investors in Bolster, we are indirect investors in three of Bolster’s investors: High Alpha, USV, and Costanoa. It’s a great example of our investment strategy around a network model.
I know the near term plans for Bolster and there’s an enormous amount of value coming quickly around executive and board hires, especially on the dimension of networks, inclusion, and diversity. I encourage you to give it a try and get involved at the beginning.
As you might have seen in an earlier post, Foundry Group is helping to bring the Helium Network to Boulder. Another Helium fan – James Fayal – reached out to me about his effort to do the same in his hometown of Baltimore, as well as DC and Philly.
I’m hopeful that some of the readers of this blog live in Baltimore, DC, or Philadelphia and are interested in participating in the Helium rollout. If you fit this description, fill out the Mid-Atlantic Application.
James wrote me a little more about his background and motivation for doing this, which follows.
While I’m a consumer product founder by trade, I’ve been involved in various crypto projects since 2013. I’m excited about Helium because it is one of the first projects with significant real-world use-cases and the community has grown exponentially since they started selling hotspots earlier this year.
In short, Helium is building a ‘mesh’ network for LongFi data transmission, which can be used by IoT devices to transmit and receive data over long distances. You can see more about the technology here.
We’re looking to work with 15 – 25 locations in or around the cities of Baltimore, DC, and Philadelphia to host hotspots. We’ll be covering the cost of the unit and work with you to optimize the hotspot’s reach in the area. In return, we’ll be providing hosts with a % of the network’s tokens ‘mined’ by the hotspots.
If we’re successful, we could be one of the first regions of the United States with comprehensive coverage on the network!
To apply to be a host, fill out the Mid-Atlantic Application. Supply is limited and the Helium company is close to stocking out of their current batch of hotspots, but James will do his best to work with as many hosts in the area as possible.
And, if you are curious about the Boulder rollout, I’ve got 47 unallocated Helium hotspots in my office that are going to be provisioned in the next week. We will then start deploying them around town in the second half of January. While we have more than 47 people interested, if you have an interest and haven’t signed up on the Boulder Helium Hotspot Application, go for it so we know about anyone who wants to participate.
If you are asking, “What’s Helium?” here’s a fun video to get you started along with a deeper explanation of the technology.
As an LP in USV, we are small indirect investors. But, as a way to engage with a particular blockchain-based application/technology that we think has meaningful real-world potential, we thought we’d help enable a network in Boulder and see how it works.
We are looking for about 40 locations throughout Boulder (not just downtown) to set up hotspots. All you have to do is connect the Helium hotspot to the Internet. We’ll handle the rest.
If this is interesting to you, please fill out the Boulder Helium Hotspot Application. We are only choosing 40 locations, and we are going to spread them out as best as we can, so if you aren’t chosen, and you still want to be part of this, you can always buy a Helium Hotspot directly.
With yesterday’s announcement that early-stage VC Greycroft has raised a $200 million growth fund, this type of fund has officially become a trend. But before we dig into the dynamics of it, let’s pay homage to the originator of this concept, Union Square Ventures.
In January 2011, USV raised what I believe was the first “opportunity fund.” Prior to this, plenty of VC firms invested across the early stage to late stage spectrum from the same fund (e.g. Battery, General Catalyst, Sequoia, Greylock, Bessemer). Others had separate early stage funds and late stage funds, often with separate teams and economics (e.g. Redpoint, DFJ, North Bridge) typically aimed at different opportunities. But the USV Opportunity Fund was the first time, at least in the post 2001-Internet bubble cycle (or last decade, if you want to put it that way) where an early stage firm created a separate fund to invest in late stage rounds of their existing early-stage portfolio companies. In USV’s case, Fred Wilson explains the strategy extremely clearly in the post The Opportunity Fund.
Greycroft is the latest firm to raise this type of fund. In the last week I’ve talked to two other early stage VC firms who are raising similar opportunity funds. In one case they referred to it as a growth fund. In the other case they referred to it as an opportunity fund.
In the fall of 2013, we raised a similar type of fund called Foundry Group Select. It was a $225 million fund, just like our other three $225 million funds raised in 2007, 2010, and 2013. But we called it “Select” instead of “Growth” or “Opportunity” for a specific reason – we only use it to invest in existing portfolio companies of ours.
USV has done a magnificent job of investing in later stage rounds of their existing portfolio companies as well as later stage rounds of companies that fit tightly within their investment thesis. We decided to drop the second half of that strategy as we didn’t want to spend time being late stage investors. It’s not natural for us as an entry point and we didn’t want to add anyone to our team since keeping our team size exactly the same is a deeply held belief of ours.
The decision to raise this fund came out of a combination of desire and frustration. We have a well-defined fund strategy, based on a constant size of each of our funds. Our goal is to make about 30 investments in each fund (2007 has 28, 2010 had 31) that range between $5m and $15m over the life of the company. Part of this strategy is that we are syndication agnostic – we are happy to go it alone through two or three rounds of a company if we have conviction about what they are doing. We are equally happy to syndicate with one or two other VC firms. Either way, while we focus on being capital efficient (we’d rather not overfund the companies we are involved in early), we are interested in buying as much ownership as we can at the early stages.
As a result, when a company begins to accelerate dramatically, we weren’t in a position to contribute meaningfully to the later stage rounds since we’d likely already have something in the $10m to $15m range invested. That’s the desire part of the equation – we knew we could make money off a later stage investment, but when we were talking about investing an incremental $1m or $2m it didn’t really matter much.
The frustration part was more vexing to us. In a number of our successful companies, we saw a long line of financial investors lining up to follow. None of them would engage as a lead, but all want to participate when a round came together. If a company was raising $30m, we’d have $50m+ of “followers” waiting to take whatever was left. We didn’t find that particularly helpful.
So we raised Foundry Group Select. We explicitly limited it to only companies we were already investors in and on the boards of. As a result, it is literally zero incremental work for us since we are already deeply involved in the companies we are investing in. This led us to an interesting decision – since we recycle 100% of our management fee, why would we charge a management fee on this fund if we are doing no incremental work? The conclusion was easy – we don’t charge a management fee. We only make money when the investments make money, resulting in very tight alignment with our LPs.
To date, we’ve invested from Foundry Group Select in Fitbit, Sympoz, Return Path, Gnip (acquired by Twitter), and Orbotix. It’s been a powerful addition to our strategy without creating any extra overhead on us.
I’ll end where I started – by paying homage to our friends at Union Square Ventures. They’ve led the way on many elements of early-stage investing post-Internet bubble, dating back to 2004 when Fred and Brad raised the first USV fund. As the “opportunity fund” becomes a trend, they’ve once again created something that, in hindsight, looks brilliant.