Boston Venture Firms Dominate New Mentoring Program for New York Startups
If you want to build a program to nurture early-stage startups in New York City through regular meetings with investors, legal and financial advisors, and experienced CEOs, where do you turn for mentors and sponsors? To Boston, naturally.
Of the 11 founding members of the new First Growth Venture Network, five—Battery Ventures, Charles River Ventures, Flybridge Capital Partners, Highland Capital Partners, and North Bridge Venture Partners—hail from the Bay State.
The network, unveiled today, will admit a handful of New York-based startups each year—the exact number has yet to be determined—and connect them with mentors, and potential investors, through a series of social and team-building events. Each startup will also be matched with a team of industry-veteran advisors that includes at least one venture capitalist, one angel investor or successful senior executive, and one legal/financial advisor, according to the group’s chair, Edward Zimmerman.
The big Boston contingent in First Growth is a reflection of the fact that so many Boston-based venture partners already consider New York an important fishing grounds, says Zimmerman, who created the Tech Group at New York-based law firm Lowenstein Sandler and is an active angel investor. (He’s the founder of both AngelVineVC, a consortium of East Coast venture funds and angel investors, and GrapeArborVC, a New York-based team of 12 angel investors.)
Over the last 18 months, Boston-based venture partners have been “spending more time in New York looking for backable companies,” Zimmerman says. That’s partly because of the digital media explosion—traditionally one of New York’s strengths—and partly because the economic crisis has stimulated young businesspeople who might otherwise have pursued careers on Wall Street to try entrepreneurship instead, he says.
“The golden handcuffs have come off,” says Zimmerman. That’s led more Boston-area VCs to swoop in looking for talented startup executives—so in a sense the new mentoring program is “just a way to help what’s already happening,” he says.
But there are also other interpretations. Jeff Bussgang, a general partner at Boston’s Flybridge Capital Partners who is also a founding member of First Growth, puts it this way: “The deals we see in Boston typically center around MIT or Harvard, which have created this really nice ecosystem and mentorship network, between all the business plan competitions and things like the Deshpande Center. So we’ve seen the formula in Boston work really well, and we want to recreate it in New York.”
Also, there’s simply more capital in Massachusetts, chasing a finite set of backable entrepreneurs. (In fact, venture firms put $10,257 per worker into infotech-related companies in the Bay State in 2007, according to the University of Massachusetts’ Donahue Institute; only California attracted more investment on a per-capita basis, with $11,361 per worker, compared to a national average of $2,780 per worker.) New York is “not as crowded at the early stage,” Bussgang says. “So a lot of people have been taking the Acela back and forth.”
The First Growth network is already accepting applications for the program’s first year, which will begin in September and will consist of two semesters, September to December and January to June. According to Zimmerman, the group will meet four times per semester for roundtables, networking, and cocktails. Participating startups will also be in frequent touch with their advisory teams outside of these formal meetings.
For startups, there’s no cost to apply or participate in the program, and the network’s sponsors won’t require startups to hand over an equity stake in the companies, as is common among venture incubator programs such as Y Combinator in Mountain View, CA, TechStars in Boston and Boulder, CO, and Dreamit Ventures in Philadelphia. “This is not so that [startups] will get funded by someone in the network; it’s not about funding speed dating,” says Zimmerman. “It’s about building mentor relationships vertically and building a network of high-quality entrepreneurs horizontally.”
At the same time, though, the whole program will be very much a venture-funding audition for the participating entrepreneurs. “Any entrepreneur who goes to a wedding and sits at a table next to a venture partner who doesn’t think that’s an interview ought to reconsider being an entrepreneur,” says Zimmerman. “If you move that into this context, being in a room with 40 CEOs and VCs, you ought to anticipate that how you behave in this room is going to have some ramifications, and optimize how you behave in a way that way that impresses the heck out of everyone.”
The year of networking meetings will begin and end with practice funding pitches by each startup. But participating startups won’t be pressured to accept funding from venture firms inside the First Growth network, Zimmerman says. “It will not only be kosher but encouraged” to look for outside capital, he says. “This is not shooting fish in a barrel.”
Curiously, the two Boston-area venture firms that probably have the highest profiles and the longest lists of portfolio companies based in New York—Spark Capital and General Catalyst—are not members of the First Growth network. That could be seen as a sign that these firms consider their New York connections to be strong enough already—or that their Boston-based competitors feel a need to increase their own deal flow in the Big Apple. But Zimmerman isn’t buying either of these interpretations. “I wouldn’t characterize any of the [First Growth member firms] as not having deal flow in New York,” says Zimmerman, who adds that the network “has relationships” with both General Catalyst and Spark.
For the record, the non-Boston founding members of First Growth include First Round Capital of New York, Valhalla Partners of Vienna, VA, Grape ArborVC and AngelVineVC (both based in New York), Lowenstein Sandler, and GCA Savvian, a multinational technology-oriented investment banking firm.
As you might guess from the names of his angel-investing groups, Zimmerman is a wine enthusiast. As First Growth explains in an announcement today, the name First Growth is borrowed from the Bordeaux wine classification system of 1855, and is meant to evoke an analogy between building startups and cultivating grape vines.