I am taking the time to look (again) at where we are, what we set out to do and try to reason a bit on our forward path. We are somewhat at a crossroads. I guess there are some possible definitions of what we may want to do:
- be successful – plain and simple, no matter what type of investment
- stand out for building a (rapidly) growing portfolio
- be considered an early stage fund – what ever this means in today’s environment
- or all of the above – if that is possible
I know that Aymerik’s attitude is towards some sort of syndication – that’s also what he is “allowed” to play with Innovacom. Those restrictions set by their policy became a virtue, i.e. be a co-investor and not the lead.
On review of our current portfolio, we are ironically stronger in co-investment than in picking early stage winners. What are the lessons learned – in particular from the VocaLoca case? We did not control the spending rate of the management team, and the management team has not developed the company to a point where co-investors can be brought in at a plausible valuation for the next stage of the company’s development.
The VocaLoca management team blew through the money before we ever woke up. Yes, it is normal to run out of money, change direction, change the team etc etc etc . The hard part though is to experience the “running out of money” before anything tangible happens. As investors, we are alone and having a difficult time to find follow-on investors: the case is not simple (enough), there has been no execution, and there is total management disagreement (disarray). This is the worst of all scenarios.
We might get luckier with Zmarket . . . but who knows. The parameters are slightly better. But we are alone again, and time is running short to attract the next set of investors.
All the current proposals we are looking at are in this nebulous space of Internet/software services: Opentable.com, Fusion, Fotowire, 365Media etc etc. In my opinion this is the hardest category to figure out where this is going as supposed to a “clearer” product category like SAN Valley. Too many things have to click, the hardest being to establish a new market paradigm. In Fotowire’s case though, if done right, we have at least connection points to existing players rather than redoing the world.
Under no scenario should we make an investment only with Upstart Capital and Innovacom Venture Capital. We are limited by the $3MM and are bound to hit the fence (e.g. VocaLoca, Zmarket). So much for early stage: We simply aren’t big enough as a fund to sustain the “early stage” alone!!!
Besides the work . . . if we convince ourselves of Fotowire and some others – we need at least to have enough players in there – or not do the deal. Vocaloca was simply too much from the seat of the pants: we kind of liked them . . .
Source: Michael Spindler