VC Industry


Today I’m announcing that GRP Partners is doubling down on the Twitter ecosystem by investing in DataSift, a company who provides a real-time data platform and tools to third-party developers and corporations.

Our goal is to make the enormous volume of real-time information more manageable for the 99% of companies that lack the infrastructure to process these volumes in real time. Think of DataSift as turning the fire-hose into a cost-effective and manageable tap of running water. Or in utility speak, they are transmission and we are last-mile distribution.

And better yet, the company has a product that will turn the stream into a lake. What does that mean? The Twitter stream like most others is ephemeral. If you don’t bottle it as it passes by you it’s gone. DataSift has a product that builds a permanent database for you of just the information you want to capture.

Finally, DataSift has an enormous about of historical data already stored we we can help you go back and retrieve some older data for analytical purposes.

We’re co-leading the $6 million investment with Roger Ehrenberg at IA Ventures in NY and one of the most respected early-stage investors in the country in “big data” companies. As a former hedge fund guy, Roger immediately saw the value in helping companies better sift through the masses of data; often to gain better insights into financial information. I couldn’t think of a better partner at DataSift.

GRP Partners has made clear its commitment to big data & cloud services with recent investments in Factual,

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This is the final part of a 3-part series on the major changes in the structure of the software & the venture capital industries.

The series started here if you want to read from the start.

Or the Cliff Note’s version:

Open Source & Cloud Computing (led by Amazon) drove down tech startup costs by 90%
The result was a massive increase in startups & a whole group of new funding sources: both angels & “micro VCs”
With more competition in early-stage many VCs are investing smaller amounts at earlier stages. Some are going later stage to not miss out on hot deals. I call this “stage drift.”
The opportunities for tech startups today are more immense than they’ve ever been with billions of people now connected to the Internet nearly all the time.

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In this three-part series I will explore the ways that the Venture Capital industry has changed over the past 5 years that I would argue are a direct result of changes in the software industry, not the other way around. Specifically, Amazon has changed our entire industry in profound ways often not attributed strongly enough to them.

I believe the changes to the industry will be lasting rather than temporal change. Venture capital is in the process of its own creative destruction with new market entrants and new models of innovation at the precise moment that our industry itself is contracting.

I will argue that when the dust settles, although we will have fewer firms, each type well end up more focused on traditional stage segments that cater to the core competencies of that firm. The trend of funding anything from the first $25k to funding $50 million at a billion+ valuation is unlikely to last as the skills and style to be effective at all stages are diverse enough to warrant focus.

I will argue that LPs who invest in VC funds will also need to adjust a bit as well.

Rewind
When I built my first company starting in 1999 it cost $2.

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This article originally appeared on TechCrunch.

2 preamble issues having read the comments on TC today:
1: I know that the prices of startup companies is much great in Silicon Valley than in smaller towns / less tech focused areas in the US and the US prices higher than many foreign markets. I acknowledged this in the article. You can be pissed off, but I don’t set prices. I’m just making the commentary.
2: As expected at least one person accused me of writing this post because I want to see lower valuations. That’s stupid. I can’t control the market. When prices are too high I just pass. Simple. I wrote this because over the last decade I’ve seen a destructive cycle where otherwise interesting companies have been screwed by raising too much money at too high of prices and gotten caught in a trap when the markets correct and they got ahead of themselves.

I said both in the article but felt compelled to provide a statement up front for the skimmers.

I have conversations with entrepreneurs and other VCs on a daily basis about fund raising, the prices of deals, how much companies should raise, etc.

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This is part of my series on Raising Venture Capital.

I’m sure I’ll spark the ire of some VC’s for saying so, but there is certainly such a thing as black-out days in venture capital.  It’s worth you knowing this so you don’t waste your time.  It’s also very important to understand so that you can properly plan when you raise money.

Let me first tell you the black-out periods and then I’ll explain why.  It is very difficult to raising venture capital between November 15 – January 7th.  It is also very hard to raise VC from July 15 – September 7th.  (you need to have had your first meeting even earlier.)  If you’re thinking about raising VC and have not yet started the process, you’ve probably already missed the boat for 2009.

If you’ve had your first partner meeting but haven’t had the full partner meeting then you had better schedule it for Monday, November 23rd.  Full partner meetings are almost always on Mondays and if it isn’t already booked yet for Monday, November 16th (e.g. this coming Monday) obviously that’s not going to happen.

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Montgomery & Co Projects Deal Volume to Grow by 167% in Just 2 Years with No End to Growth in Sight

On the third Wednesday of every month I co-chair a meeting called the SoCal VCA (venture capital alliance), which represents participants from all of the top venture capital firms in Southern California as well as prominent members of the Tech Coast Angels (TCA).  We meet to discuss trends in the industry and to find ways to work together to help with SoCal deal syndication – somethings that happens automatically on Sand Hill Road in NorCal due to proximity.

We feature a prominent speaker at every event.  This morning we heard from Jamie Montgomery, CEO of the venerable Montgomery & Co investment bank who is at the heart of what is going on in M&A for venture backed companies.  They do around 7% of the total VC-backed deals in the US per year or just under 40 deals / year on average (present year excluded!)

I have to admit that I was greatly encouraged by Jamie’s outlook for venture backed companies, which if true will be a welcome relief for our industry.

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