Of Venture Socialism and the Future of VCs—The Story of Jo Tango and Kepha Partners
This is a story of a different breed of venture capital firm—one so different it practices venture socialism. At least that’s how the founder of Waltham, MA-based Kepha Partners, Josaphat “Jo” Tango, describes it. (Before all you entrepreneurs beat a path to his door thinking he shares more of the wealth back with you, let’s just say it’s not quite what you think—read on.)
To me, though, it’s also a story of coming out from under a rock, or maybe of the rock itself coming out—“Kepha” meaning “rock” in Aramaic. Ever since Kepha closed a $50 million fund in spring 2007, I’ve been trying to get the press-shy Tango to talk about his unique firm. Finally, last week, after Tango announced the hiring of his first investment partner, former Atlas Venture IT partner Eric Hjerpe, he agreed. Our conversation marked what he says is the first detailed interview about the firm—its history, and its investment philosophy—he’s ever given.
Since this is a blog, here are some tags to set the scene: Immigrant, Driven, Yale, Harvard, Bain, Bezos (almost), Highland, Kepha, $50 million, $100 million, Investments, Entrepreneurial Advice, Hjerpe, Venture Socialism, Venture 2.0.
That’s the Tango-Kepha story, in rough chronological order. Tango was born in Indonesia (his family is ethnic Chinese) and moved to the States when he was three. He paints a picture of a classic American immigrant family. “We landed in America with a few suitcases, with $1,500, and I grew up in the Bronx [and] in Brooklyn, and my parents always said, ‘If you can ever be an entrepreneur, do it,'” he says.
Which is what he would ultimately do with Kepha. But first, there was Yale (summa cum laude in economics and poli-sci), and Harvard Business School (Baker Scholar). He worked five years at Bain. Then, in 1997, a West Coast venture capitalist Tango didn’t recognize—it turned out to be John Doerr of KPCB—recruited him to Seattle to work at a company called Amazon.com. Says Tango, “I was going to report to Jeff Bezos…kind of be chief of staff and help launch the non-book businesses.”
But Tango and his wife didn’t want to leave New England. Enter Highland, with an appealing offer: try being a VC, and if you don’t like it, become an entrepreneur-in-residence, or start a company. “They just left it very open,” Tango says.
He started at Highland as an associate in early 1998 and 18 months later became a partner. Over some nine years there, he focused mainly on early-stage venture, often engaging with entrepreneurs before a business plan was written. His investments included StreamBase Systems, Vertica Systems, and Virtual Iron; he was also involved in Ask Jeeves (NASDAQ: ASKJ), Digital Market, and NextCard (NASDAQ: NXCD).
Tango found he loved being a VC. “My hobby is my passion. I love starting companies,” he says. By 2007, at age 38, he felt the time was right to start his own fund. “In my family’s culture you haven’t accomplished much until you’ve started your own businesses. I just felt like I had to try,” he says. Plus, his brother-in-law, just 42, had recently died overnight of a brain aneurism. “That got me thinking about things,” Tango says. “It just made me realize that you can only start something new at certain points in your career. Life doesn’t last forever.”
He had no investment partner, so he hit the road alone looking for limited partners for a $50 million early-stage fund. “Everyone thought I was crazy. They’re like, ‘You want to raise a venture fund and you’re by yourself—are you nuts?'” His answer: “Yes, probably. But here is the market as I see it…”
In retrospect, Tango says he was lucky with timing—the economy was pretty good. “We were over-subscribed, about 3X, in ’07,” he says. Last fall, at the urging of a major investor and before the full effects of the downturn were felt, he doubled up to $100 million. All previous investors backed the doubling—and nearly all joined the new round, with almost everyone at their pro rata shares or above. “The timing could not have been better. I think we had dumb luck twice now in a row,” he says.
Kepha focuses on pre-seed, seed, and Series A companies—what its website calls “the foundation, or rock, of venture capital.” Which brings us to the name. “I wanted something that was memorable, short, and no one had had already,” Tango says. “I actually had to go to a dead language, Aramaic, to find something.”
Starting Small, Taking It Slow
So far, Kepha has worked in depth on seven companies (or ideas for companies)— three it … Next Page »