At Freestyle, Investing Is A Family-Friendly Alternative to Startup Life

1/5/12Follow @wroush

Josh Felser has three kids. Dave Samuel has four. You won’t hear any highfalutin business-speak from these former tech entrepreneurs about why they started Freestyle Capital, their San Francisco-based seed-stage investing fund. They say they did it because they recognized that it’s pretty hard to create a business and be an involved parent at the same time.

“If we could balance the lifestyle of being a founder/CEO with having large families, we would likely still be entrepreneurs,” says Felser. “But we can’t, so this is the next best thing.”

Felser and Samuel started building companies together 14 years ago, and in one sense that’s what they’re still doing: Freestyle is known as a hands-on fund where startups get recruiting, public relations, and business-development help, as well as cash, in return for their equity. But what gave them the flexibility to become investors, rather than starting over as entrepreneurs once more, was a pair of healthy exits. The Internet music service Spinner, which they co-founded in 1997, was acquired by AOL Time Warner in 1999 for $320 million. Their next venture, the video network Grouper, was acquired by Sony in 2006 for $65 million in cash. (It’s now known as Crackle.)

The pair got back together to start Freestyle in 2009. After a two-year shakedown run in which they invested only out of their own pockets, they’ve now raised $27 million, and have completed 29 investments averaging about $500,000 each. They get investing help from a trio of startup veterans, including Joe Stump, the former lead architect at Digg and the co-founder of SimpleGeo; Lane Becker, the co-founder of Adaptive Path and Get Satisfaction; and David Bill, a veteran of Spinner and the ex-CTO of CoTweet.

For rookie investors, this team has a pretty good batting average: already, seven of the Freestyle portfolio companies—About.me, Backtype, Cardpool, CoTweet, Indextank, SimpleGeo, and Typekit—have been acquired.

I’ve seen Freestyle’s name turn up in so many interesting seed-stage deals since I got to San Francisco that I wanted to meet Felser and Samuel in person and hear their whole story. I visited their Mission District office—which doubles as the headquarters of Typekit, now part of Adobe—back in November. Felser introduced himself as “the talky one” while Samuel is supposedly “the quiet one,” but to be honest, I didn’t notice much difference. In any case, what follows is a compressed version of our conversation.

Xconomy: Is it really easier to be an investor than a founder? How are your lives different now?

Josh Felser: Venture investing is a way to be close to entrepreneurs and have a family without being an entrepreneur or starting a business. We have complete flexibility about work location. As a founding CEO, you have to set the culture and tone in the office, and there is no way to do that, that we have figured out, and to spend time with our young kids. Being an investor, I am still working as hard as I did as an entrepreneur, but I can do it from anywhere. I can go online from home at 8:00 pm and work until midnight.

Dave Samuel: I think that’s definitely true about the lifestyle, but there is also a little bit of ADD in each of us. We are able to have our hands in a bunch of different, great companies. Josh is in charge of five companies per year and I am in charge of five. So we are able to leverage our experience and background across numerous companies.

JF: We sat back and said, ‘What can I do with my life that would at least let me have dinner with my family, and also be part of creating really interesting, world-changing companies.’ There aren’t actually many opportunities to do that, if you try to put those things together. Early stage investing was the best fit.

For the first two years, we were just investing our own money, to make sure we liked it, and we didn’t try to run those companies. We were decent at it, and we were able to check off a lot of the boxes and then raise a larger fund of other people’s money.

X: Why do seed-stage investing? Why not become partners at established venture firms?

JF: You don’t ever stop being an entrepreneur. We enjoy helping entrepreneurs like us get their businesses off the ground. If you are doing the kind of seed investing we strive to do, you are … Next Page »

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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