Venture capital is not a new institution. In 1946, Gen. Georges Doroit, considered by most to be the father of the venture capital industry, founded American Research and Development Corp. in Boston and in 1959 dropped $70,000 into a little company known as Digital Equipment Corp. Anyone who has spent more than 20 minutes in the New England Technology community knows how that investment turned out (DEC had a reported market value of $37 million when it went public in 1968).
Steady industry growth over the ensuing years aside, the modern technology VC industry came into its own during the 1990s, driven by the Internet boom and a growing network of private equity firms worldwide, with the most well-known and aggressive located on Sand Hill Road in San Francisco and along Route 128 in the Bay State. Through the late ’90s, investors were bold and successful, setting the stage for investment returns exceeding five, eight or even 10 times the original investment.
New England is now home to more than 70 venture capital firms that invested a combined $1.9 billion in the first three quarters of 2005, according to PricewaterhouseCoopers’ MoneyTree Survey.
While this “second coming” of the VC industry is overseen by many of the weathered veterans that were active during the industry’s first boom, more and more young men and women are being indoctrinated into the industry and rising to levels of responsibility that will put them in the position of leading the industry into maturation.
New England is home to many of them. Here is a sampling of some of the up and comers of the local venture capital industry.
Hemant Taneja
Age: 30
Position: Principal
Firm: General Catalyst Partners
Location: Cambridge
Mentor: John Simon (General Catalyst Partners)
Board Seats: SiteAdvisor, JumpTap Inc.
Preferred Stage of Investment: Seed; Series A
IPO or acquisition? Either
Hemant Taneja didn’t always intend to be a venture capitalist. A graduate of MIT, with an M.S. in operations from the Sloan School of Management and bachelor’s degrees in mathematics, electrical engineering, computer science and biology and biomedical engineering, Taneja’s early goal was to stay in school.
“I was on track to become an academic, but in the late ’90s, I became fascinated with building companies,” he said.
That desire brought him to Isovia Inc., where he was co-founder and chief executive officer of the Boston-based mobile software and applications company that was eventually acquired by JP Mobile Inc. in 2001 for an undisclosed amount.
The act of starting and building a business to a successful exit set the hook in Taneja. After serving as vice president of field operations at JP Mobile for a time, Taneja threw himself into the venture capital world, going to General Catalyst as an entrepreneur in residence, and eventually becoming a principal.
In his three years at General Catalyst, he has been part of some 13 deals, in both primary and secondary positions (General Catalyst approaches deals from a team perspective, rather than assigning a single lead), including local companies Vette Corp. of Manchester, N.H., m-Qube Inc. of Watertown and the General Catalyst-founded JumpTap Inc. of Cambridge.
Most of Taneja’s deals are in wireless, but he thrives on the grandiose — technologies that can change an industry and companies run by entrepreneurs that want to be the best in the world.
“When I look at companies, I ask, ‘do they want to be a vitamin or an antibiotic?’” he said. “Are they a must-have or a nice-to-have?”
That doesn’t necessarily mean large deals. Taneja likes to work with lower funding sizes so he can keep a hands-on position with the portfolio companies in which he participates. JumpTap, with a $4 million first round and second round of $21 million, and m-Qube, with a $6.9 million first round, are good examples of the fiscally conservative approach.
Ryan Moore
Age: 32
Position: General Partner
Firm: Grand Banks Capital
Location: Newton
Mentor: Charley Lax (Grand Banks Capital)
Board Seats: Vivox Inc. (Framingham); Glasshouse Technologies Inc. (Framingham); uLocate Communications Inc. (Framingham)
Recent Noteworthy Business Book: “Good to Great” by Jim Collins
Preferred Stage of Investment: First institutional investment
IPO or acquisition? Acquisition
Despite his young age, Ryan Moore witnessed the initial VC boom first-hand. As an investment banker at Robertson Stephens in San Francisco, he routinely dealt with the West Coast VCs during the late 1990s, and it was his interaction with them that put him on the track to venture capital.
From the world of investment banking he went to Mobius Venture Capital, a VC firm that came out of Softbank Venture Capital on the West Coast. There he met Charley Lax, and when it came time for Softbank to launch an East Coast firm, Moore came to New England with Lax to form GrandBanks Capital in 2000.
For Moore, being a VC is all about the entrepreneurs he gets to deal with on a daily basis.
“There is no greater group of people than entrepreneurs,” he said. “They are so passionate and optimistic. It’s a great community to be a part of. One of the best moments of being a VC is when you’re dealing with that entrepreneur or CEO who knows so much more than you about what he is doing, but they look to you for you’re advice and guidance. You really need to be motivated by the challenge and working against the odds.”
As someone who has had dealings with the industry on both coasts, Moore sums up the differences between East Coast and West Coast VCs in terms of the weather.
“We have four seasons here,” he said, “and the weather is always changing, so people become accustomed to it. The weather out west is much more steady, so the people are not used to change, and that makes them (as VCs) more volatile.”
That’s a unique advantage for New Englanders.
“As an investor, you need to be patient and steady,” he said. “There is so much volatility in the business anyway, you can’t be successful if you’re the one panicking all the time.”
Moore’s patience was rewarded this past fall, when he was promoted from principal to general partner and awarded a board seat on the first deal in which he played a lead role, Vivox Inc., in Framingham.
Chip Meakem
Age: 34
Position: General partner
Firm: Kodiak Venture Partners
Location: Waltham
Preferred Stage of Investment: Early stage
IPO or acquisition? IPO — “If you can get there”
Chip Meakem joined the New England venture capital community this past September when he came to Kodiak from Draper Fisher Jurvetson Gotham, where he sat on the boards of industry heavy hitters such as Adobe Systems Inc., Massive Inc. and Pantero Inc. of Waltham.
While he resigned those seats when he came to Kodiak, he is in the process of adding new ones quickly, though none have been announced yet.
Meakem got the VC itch when he was on the corporate side, at Interactive Imagination Corp. of Seattle, where he built and managed Commonwealth Networks, one of the Internet’s first advertising networks.
“I’ll never forget opening up the network on the web and two or three weeks later we had a few thousand sites on it,” he said. “Realizing we had a rocket ship on our hands was just incredible.”
As he works to build his new portfolio at Kodiak, he will be specializing in early-stage companies, the basic model of Kodiak. The firm is focused on developing the entrepreneurial spirit in its portfolio companies, and, in keeping with that theme, it looks for entrepreneurial experience in its partners. Meakem hopes to keep his own technology themes alive and has his sights on developing emerging multimedia companies.
Bijan Salehizadeh, M.D.
Age: 32
Position: Senior associate
Firm: Highland Capital Partners
Location: Lexington
Mentor: Bob Higgins (Highland Capital Partners)
Noteworthy Business Book: “Moneyball” by Michael Lewis; “Blink” by Malcolm Gladwell
Board Seats: Pervasis Therapeutics Inc. (Cambridge)
Preferred Stage of Investment: Early to mid-stage
IPO or acquisition? Acquisition
It’s not just computers, communications and Internet technologies that are driving the VCs’ second life. Medical and health care technology, especially in New England, is a big part of the resurgence. In the first three quarters of 2005, New England VCs have invested $570 million in health care services, medical devices and biotechnology.
Many consider a medical degree or at least some form of life sciences experience a prerequisite for investing in such companies. With IT and communications platforms becoming pervasive in almost every industry, however, including health care and biotech, investors need a working knowledge of both industries to succeed.
Bijan Salehizadeh, a senior associate at Highland Capital Partners, brings a medical degree from Columbia University and an MBA from Harvard to his portfolio companies. The combination is well suited to the unique requirements of the health care investment industry.
“There are fewer and fewer firms doing both things — IT and health care — but I think they complement each other,” he said. “Traditionally, their cycles run counter to each other, so they are a good fit to a technology portfolio. When health care tends to be up, IT tends to be down, and vice versa.”
Like many, Salehizadeh didn’t set out to be a VC. He went to medical school expecting to be a heart surgeon. During school he worked at a couple of small medical device companies and became hooked on venture capital. However, it wasn’t the technologies or the challenge, but the people that inspired him.
As Salehizadeh got deeper into the industry, he also realized that the desires to help people that drove him into medicine could be satisfied as a VC.
“I finally realized that what we work on as health care VCs actually goes directly into that 50-year-old woman with heart disease and helps her,” he said. “There’s something to be said for building companies that are saving people’s lives or making their lives better.”
Jeff Fagnan
Age: 35
Position: Partner
Firm: Atlas Venture Partners
Location: Waltham
Mentor: Jack Gill (Vanguard Ventures); Mike Tyrrell (Venrock Associates)
Noteworthy Business Book: “Freakonomics” by Steven D. Levitt, Stephen J. Dubner
Board Seats: Advanced Electronic Beams Inc. (Wilmington); Bit-9 Inc. (Cambridge)
Preferred Stage of Investment: “The earlier the better”
IPO or acquisition? IPO
Jeff Fagnan was brought into the industry during the days of milk and honey.
“I joined the VC community in April 2000, when Wall Street was at its peak,” he said. “I had a friend who was working with Softbank/Mobius on the West Coast and he was telling me stories of mattresses full of money and IPO parties, but I didn’t really know much about the industry.”
It turns out he was well suited to the industry, and has carved a considerable niche in early-stage companies.
“Every deal I’ve done (at Atlas), I’ve been the original lead investor,” he said. “And that’s what I like about it. Finding flagship technologies that are sustainable and capable of being built into large companies that generate jobs locally and give back to society.”
Fagnan, too, is aware of the younger generation of VCs in the area and is optimistic about its contribution to the industry’s future.
“Within even the more prominent firms, a lot of deal flow is being driven by a younger generation. That generation has taken the baton and is running with it,” he said.
