Keeping Web Focus, Social Leverage Raising $15M for Micro VC Fund
Howard Lindzon, the entrepreneur, hedge fund investor, and CEO of Coronado, CA-based StockTwits, is raising capital for a new and slightly more formalized version of Social Leverage, an investment partnership he runs with Tom Peterson of Phoenix, AZ.
Lindzon told me recently the two have been successful enough in recent years to attract interest from outside investors. As a result, Lindzon and Peterson are now in the process of raising $15 million for a new pooled investment fund called Social Leverage Capital Fund, according to a recent regulatory filing. Social Leverage has occasionally been described as a “micro VC” focused on Web deals, and now that description will fit better. They have raised about half of their goal so far, Lindzon said.
“The idea is to continue to do what we’ve been doing for the past few years,” Lindzon said. Most investments from the fund will continue to fall between $100,000 and $500,000. Instead of investing just their own money, though, the longtime business partners are taking in capital from a small number of other investors. Lindzon and Peterson are serving as general partners of the fund.
Lindzon said he still sees plenty of upside in his preferred areas of investing, especially in Web video and Web publishing. He’s focused mostly on content created for the Web, especially in areas like financial data, data visualization, innovative algorithms, and social networking technologies like StockTwits that help create and support online communities of investors.
Asked to give some examples of recent investments, Lindzon said he’s invested in The New Hive, an unconventional Web publishing company in San Francisco, and Little Bird, a specialized search service based in Portland, OR.
The New Hive, which moved to San Francisco from Seattle, enables users to create multimedia “expressions.” Each expression has its own URL, and can be shared through email, blogs, websites, and social media networks like Pinterest, Facebook, tumblr, and Twitter.
Little Bird uses Twitter and other online sources to identify the most-trusted and authoritative experts in a given field. Founding CEO Marshall Kirkpatrick is offering the technology as a subscription-based research tool for business customers. The startup was known as Plexus Engine until last month, when the company changed its name to Little Bird and raised $1 million from a group of angels that include Lindzon, Dallas Mavericks owner Mark Cuban, and other well-known angel investors.
Lindzon said they also plan to follow the Social Leverage philosophy of investing in exceptional entrepreneurs, and, as the website explains, “bringing our own entrepreneurial expertise, relationships, and marketing experience to the fore. Our portfolio companies benefit from our hands-on involvement in all stages of development. More pointedly, social leverage is about leveraging our extensive network of industry relationships and expertise to help grow great companies and build great products.”
So what is Social Leverage, exactly?
“If you do a little bit of research, you’ll see the last 30 years have been dominated by financial leverage,” Lindzon said, referring to the kind of economic power wielded by traditional banks and investment companies. In contrast, he said, social leverage takes advantage of the enormous power of online information and relationships. “With social leverage, I don’t need an office, I can use my laptop and iPhone at Starbucks,” Lindzon said.
“Financial leverage is important—that’s how the world got built,” he adds. “But Apple didn’t need financial leverage, and now they’re the biggest company in the world.”
The power of social leverage also means that Lindzon doesn’t sit around waiting for entrepreneurs or their lawyers to knock on his door in search of funding. Lindzon picks his own deals, using the power of social leverage.
“If a guy like me can meet Fred and Brad,” Lindzon said, referring to Fred Wilson, managing partner of New York-based Union Square Ventures, and Brad Feld of the Boulder, CO-based Foundry Group, “there are really no excuses not to learn this stuff. We really don’t know how fast we can move.”