Great post. Clear and meaningful. Curious about what would drag you all the way over to London... methinks media.....
Tom Hughes
· 3 years ago
I think this is a great working example of how a "cluster" works, and why societies, as they progress, tend to form these clusters. In the past, clusters would form around artisanal or manufacturing competencies; now it seems as if the 'competency' is innovation itself, the ability to enable it with supplies of money and talent, and then to profit from it. It also reinforces my sense that, as we advance in technology, the importance of in-person contact (that is, contact not mediated by technology), goes up. I was just re-reading Goldhaber's "Attention Economy" speech, he saw this coming in 1997; IT allows us to 'synthesize' attention-paying, and as synthetic attention becomes easier and cheaper, genuine attention becomes more valuable.
Lloyd Fassett
· 3 years ago
There may be another contributing factor to your statement: "I am simply better at making local investments. 5.8 times your money is a lot better than 2.5x."
The Venture business is driven by hits, and your analysis includes 26 investments. 1/2 by volume were local but the amount invested was 37% not local and 63% local. One deal, like GeoCities at $4B can skew a small set like that. If Geocities was not local, what would the return multiples be like?
That being said, I also agree with your main thesis that if you can be local, getting more face time and access to your network will help entrepreneurs. But that's also not very scalable.
Do venture firms that spread their partners out geographically have different numbers? For example, there are a few who have offices in both Northern and Southern California and aren't their some with outposts in China now? Wouldn't that be a more effective way of creating scale and leverage from your point of view while meeting the needs of your entrepreneur customers than the basic model of alll the partners being in the same place?
I would have more expected the standard for technology and web centric VC’s to be where the money is raised in places like NY and invested through a geographically distributed network of partners, but that’s not the way it is. The standard seems to be like asset based VC’s where they like local deals where the products are physical, assets are present and the businesses are much more mature than start ups. I wonder why the VC standard isn’t more like public stock markets and bond markets that have always been organized around sales and management networks through widespread geographies.
Daryn
· 3 years ago
From an entrepreneur's stand, I also agree with the importance of geography.
We are currently seeking seed funding, and have had a lot of interest from local investors here in Seattle. We could easily fund our round locally, however, we've been seeking out Bay Area investors.
Why? Simply because of their proximity to other aligned interests. Seattle has the money, and it has a good community of resources for sure, but it is also a small town. We see a bay area investment as our gateway into a much richer pool that we could possible find in our own backyard. I'm more than willing to make the 2.5 hour flight every week or two to make it work.
You, as the VC, likely don't have the bandwidth to lose those hours travelling across the country/globe to each investment. And it'd be a big mistake, I think, to work with a company where you may not get the level of communication that is needed to make things work.
However, as a founder, who's sole interest is in making my company succeed, I would certainly travel cross-country on a regular basis to meet with the right advisor/investor. (And wouldn't even think about making a geographically-distant relationship if I didn't think it had that amount of added value to it.)
Leith @ Birth of a Startup
· 2 years ago
I just came across your blog, and found this post really interesting, as its a topic I'm been ruminating over lately, as you can see from this blog entry.
I'm based in Sydney, and am working stupidly hard at a day job so I can finance my startup I work on at nights, and would love to have funding to 1) be able to work on this full-time because I would enjoy that more, and 2) to give my business the best chance it has at succeeding. But the seed capital market in Australia isn't great, so I plan to access international markets when I am ready. However, from what I have been reading, this search for funding will be difficult if I plan to remain based in Sydney.
Its encouraging to read that you don't exclude startups based outside the US... maybe one day soon I shall have to convince you about the merits of investing in Sydney :-)
Leith @ Birth of a Startup
· 2 years ago
Oops, I didn't include the link to the blog post I referenced. Here it is:
All Comments
Great post. Clear and meaningful. Curious about what would drag you all the way over to London... methinks media.....
I think this is a great working example of how a "cluster" works, and why societies, as they progress, tend to form these clusters. In the past, clusters would form around artisanal or manufacturing competencies; now it seems as if the 'competency' is innovation itself, the ability to enable it with supplies of money and talent, and then to profit from it. It also reinforces my sense that, as we advance in technology, the importance of in-person contact (that is, contact not mediated by technology), goes up. I was just re-reading Goldhaber's "Attention Economy" speech, he saw this coming in 1997; IT allows us to 'synthesize' attention-paying, and as synthetic attention becomes easier and cheaper, genuine attention becomes more valuable.
There may be another contributing factor to your statement: "I am simply better at making local investments. 5.8 times your money is a lot better than 2.5x."
The Venture business is driven by hits, and your analysis includes 26 investments. 1/2 by volume were local but the amount invested was 37% not local and 63% local. One deal, like GeoCities at $4B can skew a small set like that. If Geocities was not local, what would the return multiples be like?
That being said, I also agree with your main thesis that if you can be local, getting more face time and access to your network will help entrepreneurs. But that's also not very scalable.
Do venture firms that spread their partners out geographically have different numbers? For example, there are a few who have offices in both Northern and Southern California and aren't their some with outposts in China now? Wouldn't that be a more effective way of creating scale and leverage from your point of view while meeting the needs of your entrepreneur customers than the basic model of alll the partners being in the same place?
I would have more expected the standard for technology and web centric VC’s to be where the money is raised in places like NY and invested through a geographically distributed network of partners, but that’s not the way it is. The standard seems to be like asset based VC’s where they like local deals where the products are physical, assets are present and the businesses are much more mature than start ups. I wonder why the VC standard isn’t more like public stock markets and bond markets that have always been organized around sales and management networks through widespread geographies.
From an entrepreneur's stand, I also agree with the importance of geography.
We are currently seeking seed funding, and have had a lot of interest from local investors here in Seattle. We could easily fund our round locally, however, we've been seeking out Bay Area investors.
Why? Simply because of their proximity to other aligned interests. Seattle has the money, and it has a good community of resources for sure, but it is also a small town. We see a bay area investment as our gateway into a much richer pool that we could possible find in our own backyard. I'm more than willing to make the 2.5 hour flight every week or two to make it work.
You, as the VC, likely don't have the bandwidth to lose those hours travelling across the country/globe to each investment. And it'd be a big mistake, I think, to work with a company where you may not get the level of communication that is needed to make things work.
However, as a founder, who's sole interest is in making my company succeed, I would certainly travel cross-country on a regular basis to meet with the right advisor/investor. (And wouldn't even think about making a geographically-distant relationship if I didn't think it had that amount of added value to it.)
I just came across your blog, and found this post really interesting, as its a topic I'm been ruminating over lately, as you can see from this blog entry.
I'm based in Sydney, and am working stupidly hard at a day job so I can finance my startup I work on at nights, and would love to have funding to 1) be able to work on this full-time because I would enjoy that more, and 2) to give my business the best chance it has at succeeding. But the seed capital market in Australia isn't great, so I plan to access international markets when I am ready. However, from what I have been reading, this search for funding will be difficult if I plan to remain based in Sydney.
Its encouraging to read that you don't exclude startups based outside the US... maybe one day soon I shall have to convince you about the merits of investing in Sydney :-)
Oops, I didn't include the link to the blog post I referenced. Here it is:
http://www.birthofastartup.com/2007/02/am-i-disadvantaged-being-based-in.html
now it seems as if the 'competency' is innovation itself, the ability to enable it with supplies of money and talent, and then to profit from it.