IA Ventures, the New York City-based firm with a big data fetish, just announced that it raised $105 million towards a second fund. That’s more than double the $50 million seed fund IA Ventures founder Roger Ehrenberg raises in 2010.
With this new fund, Mr. Ehrenberg told TechCrunch, IA Ventures will be able lead seed rounds as well as series A and B rounds and follow a company through its growth. Previously, IA gravitated towards pre-revenue companies “between a Powerpoint and a prototype.” Those companies, says TechCrunch, require more “hands-on work,” and with Fund II, IA Ventures will be able to diversify its portfolio into both seed-stage and later-stage companies.
TechCrunch’s post on the new fund set off a chain of negative responses on Twitter, unrelated to IA Ventures, but rather to do with a theory Erick Schonfeld slipped into the piece about the difference between East Coast and West Coast investors below.
In fact, there seems to be a divide between East Coast and West Coast superangels. “There is a huge ideological argument right now at play,” says Ehrenberg. Investors like Ron Conway, Dave McClure, and even Clavier make a lot of small bets—60, 100, or more per fund—hoping a few of them will pay off massively. They know that somewhere in their portfolios could be the next Google or Facebook. The East Coast seed investors are a little bit more cautious (they would say “disciplined”). Ehrenberg models IA Ventures more like a small Union Square Ventures or Foundry Capital—a more concentrated portfolio where the investors use their contacts or domain expertise to help take some of the risk out of the companies.
“The optimal point on the risk-return frontier,” says Ehrenberg, “is putting small amounts early, being close, and being in a position to put in more money when there is an opportunity to de-risk as opposed to holding a portfolio of lottery tickets and hoping that one of those lottery tickets looks like Google or Facebook.”
The contradiction Mr. Dixon seems to be getting at is the idea that small, pre-revenue investments supported by a hands-on approach are at odds with the idea of getting in on the ground floor with the next Google when it still looks like a long shot.
Reached by email, Mr. Dixon said, “Just look at the investments by Betaworks, Founder Collective, Highline, Thrive, Lerer, etc. Some examples companies: Tumblr, Tweetdeck, Pinterest, Uber, Fab, Artsy, Birchbox, Warby Parker, Makerbot, Buzzfeed, etc. It is a long list of great tech companies. In almost all cases these firms invested in the first financing round.”
Sorry, Schonfeld, Conway vs. Ehrenberg is no Biggie vs. Tupac.