4 NYC startups, 3 Valley Firms = a New New York
It’s official: New York City is an Internet product town.
When Silicon Alley emerged in the mid-90s the idea that top tier West Coast venture firms would invest in New York City companies was as likely as Michael Arrington cracking a smile.
While Andressen Horowitz, which joined Union Square Ventures in funding Foursquare, has decades before they can catch up to the Sequoia or Kleiner Perkins track records, most internet pros would give them blue-chip status. Ditto for Vinod Khosla (See Khosla invests in Hunch, and ZocDoC) who is an ex-KP partner and was already a tech hall of famer in the 90s. Now word comes that Accel has joined Insight in SquareSpace.
During the Web 1.0 era, enormous investing lead to very little long-term value creation. Only Doubleclick lived to be a multi-billion dollar acquisition and that was after it was taken private at a fraction of its share price. iVillage managed to get a $600mm exit after trading for below cash through the early part of this century, but by comparison to the great Internet companies’ market caps, that’s a pittance. In any event, NBC probably overpaid. There were others (Tacoda and 24/7 come to mind), but for the most part venture investing in New York was futile and many, many first-time entrepreneurs left the industry.
The iconic internet companies that remain, Amazon (Kleiner), Ebay (Benchmark), Yahoo (Sequoia), Google (Sequoia and Kleiner) were funded and created on the West Coast. For a long time, under the genius leadership of Bob Pittman who was a kind of Jim Clarke of the media industry, AOL thrived, but then it too failed to see the emergence of the Web as the platform of choice and, eventually, was crushed by a combination of Yahoo, Google, and cable companies. Even the second tier of internet Hall of Famers — Facebook (Accel, Greylock), MySpace (Richard Rosenblatt), and YouTube (Sequoia) were California-based.
Historically, the West Coast VCs simply didn’t fund East Coast companies. Those were the rules. When the dotcom bubble burst, NYC was written off as terrible place to do business because Wall Street would always have the best engineering talent, Manhattan was too expensive, and (my favorite) the city life itself was too much of a distraction.
But then something happened about 6 or 7 years ago. The west coast style of investing started finding New York City based champions. It started with Fred Wilson reinventing his career at a fast and furious pace at USV. With Brad Burnham, he launched a small fund and immediately broke through with the sale of Delicious to Yahoo. Then they invested very early in Twitter, Zynga, Etsy, Tumblr, Boxee and now Foursquare. Meanwhile, John Borthwick and Andy Weissman were cooking up Betaworks to reestablish the incubator as a viable business model and they immediately hit it with Summize. John was early to tout the twitter ecosystem and they partnered up with RRE, who until Betaworks was considered reasonably old school. No longer. All of these firms are product-first investors. They chase the large user base.
That is a prominent investing thesis in Silicon Valley and, soon, the DNA started to cross-pollinate. Betaworks found kindred spirits in Jeff Clavier, AlphaTech, and Chris Sacca. Caterina Fake ended up in New York.
But the biggest change was the arrival of the first generation of Internet kids who wanted to be entrepreneurs. Sam Lessin (Drop.io), David Karp (Tumblr), Dennis Crowley (FourSquare), Michael Galpert (Aviary), Nate Westheimer (AnyClip), Andrew Kortina (Venmo), and the Blip.tv crew decided to live in New York.
It was unusual. Even Mark Zuckerberg had moved to Silicon Valley. This crop of entrepreneurs obsess about product. They don’t know what companies are going public and have not rushed to hire people before their IPO.
The 1.0 crowd focused on business models and public markets. We did stupid things like build cool offices, hire expensive PR firms, and try to drum up short-term revenue gimmicks. Ours was a prospectus-oriented strategy — designed for investment bankers, not the Internet consumer. That is how bubbles are created. When it became about the money, Silicon Alley, Silicon Valley (and the larger internet industry) was temporarily derailed. The most egregious sign of this banker-first mentality was Enron. Their implosion lead regulators to make changes.
Ironically, an unintended consequence of Sarbanes-Oxley was that it shut down the public markets to startups. Internet entrepreneurs stopped thinking about getting rich quickly. Instead, they built popular, useful, scaleable products.
Look, there have been no liquidity events for Boxee, GiltGroup, Tumblr, FourSquare or Bit.ly. Only time will tell if any of these companies can enter the Internet Hall of Fame. But New York has changed. It’s a product town.
Just ask the rock star vcs: Vinod, Mark, and Jim Breyer.
Tennis Therapy
My father and I snuck out of the hospital today and played an 80 minute set. I won bringing my lifetime record to 2-176. But I’m 2 for my last 6 and with him rapidly approaching 74 and my new Babolat raquet I feel my best days are ahead of me.
Mom’s cancer has me far more familiar with Washington DC traditions than I have been in years. How could I have forgotten about the joys of playing in 100% humidity? When we returned drenched in sweat, the receptionists and candy stripers gave quizzical looks. Who walks into a hospital looking like they just left the gym?
Meanwhile, the doctors have finally figured out that Mom’s narcotic cocktail was creating some discouraging side effects. Nobody wants to feel pain, but having cancer doesn’t mandate a trip on the Magical Mystery Tour. Our conversations made me flash back to freshmen evenings in the woods at Hampshire College.
With some reductions, she’s considerably clearer. There is light at the end of this week’s tunnel. Hopefully home for the weekend.
Where I’ve Been
Amtrak somewhere in Delaware — Last week, I ran into a friend who promptly asked, “Where have you been?”
9 months ago my mother got sick. A month later, the diagnosis was cancer. A month after that, we learned it was terminal. Nobody was more shocked than my mother. After all, she reasoned, her mother was turning 100 this year. Why wouldn’t she live for another 25 years?
The decline has been precipitous. She’s always tired. During two treatments of chemotherapy she reminded me of Nicholson’s MacMurphy after he was lobotomized in the final scene of One Flew Over the Cuckoo’s Nest. Towards my grandmother’s birthday in May, she regained some strength and was able to stand and deliver a lovely toast. She went to work frequently for a while working on staff issues and thinking about a transition. But this past month it’s been more days in the hospital than at home.
When I was 10, I asked my mother a lot of questions about death. My other grandmother was sick and, like many kids, I was trying to understand mortality. My mother told me, “If I ever get really sick, I think it would be better to just jump off a bridge. I’d be doing it for you of course. Watching people die is horrible.”
Jet forward 33 years and it turns out my mother is fighting it with family support. My dad has left her exactly one night in 9 months. My sister, a nurse, flies home for a week nearly every month and I ride the train to DC frequently. For a time, I competed for the FourSquare mayorship at Johns Hopkins.
So Where Have I Been? Working in New York or traveling to Israel and California. I’ve been at Little League games and out to dinners with my wife. I’ve been to the Catskills for 4th of July. But mostly I’ve been lost in thought. Not entirely anywhere.
Why don’t New Yorkers Bike to Work?
It’s a beautiful day with no humidity and it took me 5 minutes to go the twenty blocks to my office. Later, I will bike 3 minutes to a midtown meeting, and 7 minutes home. It’s so easy, I’m literally stunned how few people do it.
Here are, in no particular order, the reasons people list for not biking and why they are wrong:
1. It’s too dangerous. I’m scared.
Get over it. You can crawl along in the new bike lanes and just by paying really, really close attention nothing will happen to you. If you must, get some mirrors for your handle bars so you can see cars behind you. Hold on with two hands and you can break to avoid anything. Taxis are probably equally dangerous. I don’t have data, but I do know you should get over your fear.
2. My bike will get stolen:
Maybe, but mostly not. Look, remove all your quick release technology, buy a chain or kryptonite, and try to park in reasonably crowded places. It can get stolen, but if it does who cares. You pay 90 bucks a month for the subway and when you throw in the cab rides you have to do because you’re wiped or drunk or whatever, you spend plenty of money on non-bike transportation. I’ve (knock on wood) been biking for years and have never had a theft. Warning: Get a cheap bike. Ride a pricey one that looks amazing and you’re asking for more trouble.
3. I hate getting sweaty before work.
Well then slow down and you won’t get sweaty. I’ve learned to not ride hard to every meeting. Even if you crawl on your bike it’s the fastest transportation there is. Especially crosstown. Stop making excuses.
4. It might rain.
So you get wet. Jesus.
5. I live in Brooklyn.
Yes, so now it’s actual exercise. How great is that?
6. There is no six.
Just spend a few hundred bucks on a bike and star pedaling. Manhattan is pretty flat. You don’t need to be in shape. God knows, I’m not. If our whole industry pedaled to work it would make a noticeable impact on the NYC environment. People would be more inspired. Perhaps there would be a network effect or a viral loop or some other cool Internet type of thing.
Nate's Sex And the City2 Review
If you love to hate yourself….
Israel Reinterpreted
While I was in Israel last week, a debate erupted in The Jerusalem Post and then the blogosphere about Ambassador Michael Oren’s invitation to be commencement speaker at Brandeis University. Apparently, some Brandeis University students objected to the selectionof Oren because they disagreed with the current Israeli government’s management of the ongoing conflict. Daniel Gordis, among the my most eloquent conservatives I have ever read, saw this as an opportunity to challenge the loyalty of jewish students on American campuses. It’s a pretty powerful piece. Of course, it took one day to find out that Gordis had massively overplayed his hand.
Enter Ilan Troen, the Chairman of the Israel Studies Program at Brandeis, to set the record straight. Turned out Gordis had hijacked the small protest at Brandeis to inflame the passions of Israelis and American Jews who have bought into the mistaken black and white narrative of us vs. them.
To be sure, I witness plenty of misguided anti-Israel sentiment in multiple political circles and have sensed some of these discussions to be tinged with anti-semitism. These incidents are more than unpleasant — they are frightening.
However, these periodic conversations obscure the reality of modern Israel and modern American Jewish life. Things are not black and white. They are gray. I think gray should be celebrated.
In my office in Jerusalem, there are 20 people who voted many different parties into the Knesset across Israel’s wide political spectrum. Some believe in a two state solution and some think the country will never have peace. But they are united in their efforts to make AnyClip a great company and in their loyalty towards each other. Despite Milluim (mandatory annual military reserve duty) their lives are not dominated by middle east conflict. They are trying to figure out how to improve search or create metadata for films. When they are not working, they hang out with their kids, play basketball, and go to the movies. To a large degree, my Israeli colleagues are just like us.
And increasingly so is Israel. Make no mistake, there is an intimacy among Israelis that must originate in that unique national purpose, the shared military service, and a society that lives through continuous wars. But despite those differences with American life, many, many Israelis have moved way beyond the simple Hatfield/McCoy narrative to see themselves as part of a broader global society.
At the annual JVP meeting last week, I met limited partners from Germany, Netherlands, and Belgium. Portfolio CEOs talked knowledgeably about doing business in India, China, Indonesia, and Brazil. This economic expansion can’t really happen if the whole world is trying to destroy Israel as some on the right would have us believe.
Recently, a friend of mine joined a delegation of Israeli officials and business people to open the Israel pavilion at the World Expo in China. He reported that China treated his colleagues as if they were heads of state stopping traffic for their motorcades and closing major tourist attractions so the Israelis could have private walk-throughs. This was not for security purposes, but done to show respect and a sign of Israel’s rise as a global economic power.
Lost in the bipolar coverage that portrays Israel as a militant, colonial power or as the place that protects Jews from the next genocide attempt is the reality that the country is growing, changing, adapting, and making a net contribution to global civilization. This should be explored and even celebrated. Those that stick to the ancient narrative do modern Israel and Israelis a disservice.
AnyClip One Year Later
A year ago, I flew to Israel to make some sweeping changes at AnyClip.
For starters, gone was the two year old company name PopTok along with 4 executives and a bunch of others who had been a part of the very family-oriented culture here. I’ll never forget that morning. Tough way to start a trip.
The next day my co-founder Nate Westheimer arrived and the mood abruptly changed. He was full of compassion for the team but determined to set a new course. We began work that day and when, after 10 more days, Nate departed Israel with the team full of enthusiasm and vitality. AnyClip was on its way.
Without question, AnyClip is the most exhilarating, challenging, and complex startup that I have ever managed. We set a BHAG (Big Hairy Audacious Goal) to index the world’s entire film catalog. We dream that one day we will see and share any moment from any film.
Some of my most respected mentors told me that it was a naive, almost foolish vision. Pick your poison they claimed: it’s legally impossible, altogether too expensive, and technically overwhelming. To top it off, we would face the complexity of building a cohesive team with 2/3 of the employees separated by 7000 miles, 7 hours, and only sharing a 4 day work week (Israel is open Sunday and closed Friday).
Well, we’re still here.
We went to TechCrunch 50 with a prototype that was completed 4 months after Nate arrived in Israel and emerged a finalist. AnyClip is engaged in meaningful negotiations with almost every major studio. We have completed two still unannounced deals with major indies and are in final redlines with a handful of others. We launched our live product in March and passed 75k users in our first month — this before we have meaningful video content. Our traffic goals are ambitious: grow an order of magnitude every year for the next 3 years. 100 MM users by the end of 2013. Difficult? Sure. But not impossible — this is the movie business. We work here because we believe in the magic.
Credit for our early success reaches far and wide. The PopTok team never wavered in their enthusiasm. Morale could have plummeted and people could have gone through the motions. Instead, they worked their asses off to launch a new product from scratch. In particular my management team of Amit Kahn and Maor Gillerman kept the team together and focused. We were fortunate to add Eyal Gersht in time for the release of the prototype and eventually the product. But AnyClip is really a team effort and this includes Guy/Dima/Moti//Efrat/Avia/Kfir/Itai/Miriam/Or/Itai/Tania/Yulia and now Sagie. They are complemented by dozens of metadata creators too numerous to mention here.
In America, the Aaron Cohens (Chris and Fisher), Gabi (our hardcore, overworked designer) Greg, and my right hand Jenaveve have formed an amazing culture. We just finished a month in my apartment between office spaces and didn’t miss a beat despite Ry and Georgia wanting to play as with me, them, or their friends from 4pm on. Our itinerant office life now moves to Times Square for the summer and our downtown crowd sucked it up and moved in yesterday. We’re a block from Red Lobster.
Meanwhile we are professionally represented by Hollywood pros who understand their town. The High View Media crew (Rich Goldberg, Rob Jacobson, and Phil Schuman) together with Brad Sorensen (Indie Man) have provided me with an education and a chance to make this work. We’re following the Yellow Brick Road. And we’re aided by Fandango founder and former CEO Art Levitt who has made an enormous, positive impact on the company as an outside director. He’s a true mentor and he believes.
The most credit goes to our founding investors Erel Margalit from Jerusalem Venture Partners and Mickey Schulhof from GTI. They wooed me for 3 months prior to my arrival at Poptok. By then I had some visibility into the challenges of this turnaround. It would have been very easy for them to give up on this investment. Last Spring, the economy was a disaster and venture capitalists were pruning portfolios. Nate and I articulated the vision for AnyClip and on that alone they doubled down. It was a big risk, particularly given the fact that Nate and I were outsiders pitching a completely new company.
And that’s what I love about my investors — particularly JVP. The venture business is hit driven and the partners here know AnyClip could be huge. I always tell VCs we could return your fund. But investors prefer to pay up for more certainty. I get that. So we’ll see.
Finally, I want to single out Nate. He has lead a multi-national team and built the foundation of what we hope will become the standard for sharing film moments. Simply put, without Nate’s vision and leadership, we would not be here.
Startups have risks. Our job as entrepreneurs is often risk mitigation. AnyClip’s challenges are intensely daunting. We must navigate Hollywood, author incredibly complex search algorithms, scale a massive metadata creation factory, and release AnyClip products on many platforms. I should confess I have lost a little sleep this year.
But any moment from any film ever made. Are you kidding me? Now it’s our holy grail. Feels appropriate to have penned this post in Jerusalem.
Master the VC Game
Last week, I interviewed Jeff Bussgang about his first book Mastering the VC Game at the innaugural 0260 Conference. Mastering will become a manifesto for many in our industry. As a veteran entrepreneur, I learned a lot that I did not know and reaffirmed some things that I did. For now, f you are seriously considering raising capital or are running a startup that is backed by investors you should read the book. It will save you thousands of dollars in legal bills and relieve you of potentially crippling decision making.
THE IMPORTANCE OF FACE TIME
Jason Calacanis wrote a great lesson for startup employees that has me thinking about our organization at a time of geographic disruption.
One week ago, we had to vacate our office. For the past week, we’ve been homeless while we negotiate our new lease in the Flatiron District. As a result, my colleagues and I have been shuffling between my apartment, the Ace Hotel (kind of a cliche), other homes and an assortment of coffee establishments. BTW, we’re probably another week or two from moving in so if you have any ideas in manhattan that we could crash at let my main guy Matt Lehrer know.
This first week has been just ok. At one level, the quiet makes me feel immensely more productive. It’s probably no accident that this geographical dissonance has led to some new blog entries. I feel the productivity of less distraction. On the other hand, I miss the continuity and camaraderie established by physical space.
This liminal period raised my awareness of the my distance from our Israeli team. I’ve struggled to get there this spring for some personal reasons and I can feel less of a connection.
I had such a great call with them today, but you just don’t get the spontaneity with the time difference and we only share 4 of the 5 work days together. The overseas relationships need structured management proceseses and that means adhering to a consistent schedule. That doesn’t jive with a startup that is opportunistic about meetings, traveling a lot, and trying to be very open to partner schedules.
Obviously, in this modern, global economy. People are going to work all over the world in different environments. Some work is better completed on Amtrak or my living room sofa than in my office. I feel deeply liberated and grateful for the digital productivity tools from email to mifi.
However, Our community should not underestimate how important human connections and face time can be. People are more likely to find meaning in their work if they treasure the relationships they form inside a company. Happy people and employees generally emphasize the people they work with more than the money they make or the work they do.
Ask yourself how many of your friends say, “I love my job because I make so much money.” How many investment bankers give up because the work is boring or the people are unpleasant? How many waiters and retail salespeople quit for the same reasons? Money is why you accept. People are why you stay.
In this sense, our corporate well-being and my own personal happiness could correlate with signing a lease. Who knew real estate brokers and therapists had so much in common?
