Bambi Francisco sits down with Noah Doyle, Managing Director, Javelin Venture Partners, an early-stage venture capital firm, focusing mainly on digital media, Internet commerce, mobile and healthcare IT.
BF: In the past several years, there's been a number of seed stage and early stage venture firms emerge, such as Start At Spark, Techstars in Denver and Y Combinator. They've been filling a void and that is for really early, early stage. What about Javelin? What is the void you are filling at Javelin?
ND: We really started the firm specifically to fill the void at the seed to early Series A range. Today it costs less to start a business and Vator.tv is a great example of that. Doing interviews and broadcasting to the world from the dining room while getting thousands of followers for a remarkably conservative sum of money is fantastic. And, it's being done every day. Businesses are being started at $10,000. We've met with teams that have a working product with just $10,000.
BF: We just did a Vator Box, profiling AirBNB, which just raised $20,000.
ND: That is a great example. Y Combinator is an emblematic of a trend. And, it's not just incubators, but it's happening across the country. For the traditional venture capital structure it's really geared around putting several million dollars into a business and it is not necessarily the right thing for them to do to sign up for that when they can really make a lot of progress as a business and really explore their model and get traction. That is where a smaller fund can work. That's the opening that we saw. We decided to create a flexible fund that could be nimble, that could do investments and do the reserves as the company grows.
BF: Who would be a compriable VC Firm?
ND: There's a real class of early-stage VCs. There's First Round, True Ventures, Founders Fund, and Blumberg Capital in this category. It's really funds that to some extent could be bigger but have decided not to be and they preserve that flexibiltity to do the smaller investments but have the capital behind them to support the businesses as they get large. We are looking for businesses that are exceedingly capital efficient that can make great progress with about a million dollars so they they can have sound businesses that demonstrate customer attraction in many cases such as revenues that get traction before raising millions of dollars and we as a fund can participate when those larger funds come together.
BF: Before we talk about that end and the exits of the cmpanies you are trying to position for, you talked about how you are investing between $250,000 to $2 million into these companies, can you elaborate more about what exactly you are looking for?
ND: We really look for businesses that have a differentiated set of intellectual property in innovation - usually a technical innovation - at the core. But it could just be a differentiated approach to social networking or to a market space that nobody has taken before. And, a business can be built around that IP where there is a large market potential, such that productization can be done quickly and early proof points can be generated but if that makes progress, the market depth is really there. One example is a company in our portfolio called Nuvon which is a hardware/software solution for connecting in IP world to the non IP world. It's an opem IP environment and this company with a few team engineers built an entire micro-architecture from the operating system based on open software and pulling pieces together, made it work, and now they are actually deploying in hospitals with less than a few million dollars of funding going into the company. So it is an example of how you can move mountains in many ways and that market is a multi-billion dollar market. They have plenty of room to grow in many different segments.
BF: So as a fund focusing on early stage companies, imagining that the positioning is different, do you do this with your companies, is your company different for an M&A and if so, how does it change your strategy?
ND: The strategy is, in many ways, not really that different.You have to attract talented people who are doing it for the challenge of it as much as for the potential role and you have to focus on the usual core of any business of solving the problem for customers.Our belief is that one of the advantages of structuring our business is that we can take that long view and recognizing that companies take a long time. We are traditional funding and we are set up as a ten year fund and we are many funds extending that so we are prepared to go the long hall.There isn't an IPO market today that says it will not come back. So in the future, we try not to be focused on the exit then having a good sense on the variety of exits that are out there. We focus in building a great company and the exit will find them.
BF: Yes, if you build a great company, the exit will find you.