I become a venture capitalist in September 2007 – exactly 6.5 years ago.
I spent my first year developing proprietary deal flow and learning the business and then the Sept 2008 / Lehman Bros collapse / financial meltdown happened.
As a result I didn’t write my first venture capital check until March 2009 – exactly 5 years ago. That company was Invoca, which just announced a $20 million fund raise led by Accel.
I remain a huge supporter and am very proud of our accomplishments and hugely optimistic about our future.
5 years ago. It turns out it actually takes time to build a high-growth business with differentiated intellectual property and roll out large, enterprise-class marketing solutions. I remember a few years ago people (LPs mostly) used to ask me why I didn’t have any realized returns to show. At the time I pointed out:
“If I had realized exits almost certainly it would be because I invested in a company that failed. Lemons ripen early, great companies take time.”
Still. It was frustrating having to answer what I considered an obvious question to people who I thought would have known better.
In 2010 somebody posed the question on Quora, “Is Mark Suster a Successful Venture Capitalist?” I thought it was a fair question and I gave an honest answer at the time. I divided success into the phases of venture capital and 18 months into writing my first check here was my view (details on each in the link above).
1. Sourcing high-quality leads: 9/10
2. Working with early-stage teams: coaching, mentoring, setting strategy, rolling up sleeves: 9/10
3. Helping companies get to next financing round successfully: I was just beginning this phase in Sept 2010 and said so.
Not just the $20 million round at Invoca, the $70 million I helped us raise at Maker Studios, but I was intimately involved with the earliest funding round at DataSift and every subsequent round which has recently announced $42 million led by Insight Venture Partners and $70 million in total.
4. Getting Exits / Driving LP Returns: This was always the knock on me. The monkey on my back. “Ok, so this guy can write a blog and source deals but can he make any money?” Yup. Heard that knock many times. And in an industry measured by a decade rather than a year it’s hard to refute so you mostly just move on in the conversation. This is what I wrote on that Quora answer from Sept 2010
“I think the best VCs help drive exits alongside their entrepreneurs. I have done 6 VC investments – all within the past 20 months. None have exited. That’s normal. If they did it would be because there wasn’t a huge outcome.
But the truth is only time will tell whether I’m financially a successful VC and I’m comfortable in my skin saying that. Any VC 3 years in saying otherwise would either be exaggerating, lucky or an extreme outlier.”
So it’s now March 2014 – 5 years since I started investing. How is my scorecard looking? Here is the first 3 months of 2014 …
And now this just in …
This investment started with Dana Settle (Greycroft) and I each putting in $750,000 into a young company doing less than $1 million in sales and has blossomed into one of the fastest growing companies in Los Angeles if not the entire country. Because it’s video it is understood so poorly by the normal tech elite but the company has an amazing combination of content production, marketing, talent management and technology (tech team of nearly 60) and I can’t think of a better partner and home to develop this great company than Disney. I feel confident in saying that Maker will perform to any even higher level in the years to come as a result of this partnership.
And while of course the founders & management deserve all the credit for Maker’s success and will no doubt get their accolades in the press, from an investor perspective, Dana & I were hugely active in the company for years behind the scenes in recruiting, PR, product strategy, M&A, etc. And while the press always likes to mention the other big media investors who participated in the investments (Time Warner, Canal+, Astro, Singtel, Elisabeth Murdoch, Robert Downey, Jr. – there were many), the reality is that Upfront & Greycroft were the largest shareholders in the company.
As a result of this activity I have now personally returned significantly more capital in my 5 years than I have invested. I have huge confidence in the companies that I’ve backed that are still active.
I’m already back to work. I am closing 3 new fundings in April (2 new, 1 follow-on).
At a minimum, I’m glad to have the “exit question” off my back in 2014. I helps me be even longer in the positions I am still in.
All I could think about this morning was this …
featured image from 500px
(Cross-posted @ Both Sides of the Table)