Earlier today, Lerer Ventures revealed that the early stage investment firm–a powerful, active force in growing New York’s startup ecosystem–has raised its biggest fund yet. While raw SEC filings first indicated that Lerer Ventures was raising $30 million, the deal closed at $36 million. That’s more than $64 million combined in less than two years.
Partners Ken Lerer, Ben Lerer, Eric Hippeau, and Jordan Cooper have backed some of the most high-profile companies from New York’s new class of tech startups, like Warby Parker, MakerBot, OnSwipe, and Birchbox. Lerer Ventures has also had a number of notable exits, like GroupMe (acquired by Skype), Mr. Cooper’s startup HyperPublic (acquired by Groupon), and Venmo (acquired by Braintree). In fact, the Huffington Post mafiosos–Ken Lerer and Mr. Hippeau are both veterans–have been so busy building “the largest infrastructure in New York for entrepreneurs” that they apparently haven’t had time to move Venmo into the “Exits” list on the firm’s website.
Betabeat spoke to Mr. Hippeau this afternoon after his firm’s new fund and why we’re in “the golden age for entrepreneurs in New York.”
About a year ago, when I spoke to Ben Lerer, he attributed LV’s success partly to being at the right place at the right time. How much do you think that has been a factor in your growth and your place in the ecosystem?
Our growth is a reflection of the growth of entrepreneurship and startups in New York. So in that sense, we are definitely at the right time because this is the golden age for entrepreneurs in New York. There’s a whole infrastructure to support entrepreneurs. We’re a big part of it, but by no means the only part of it.
We also have four partners who, combined, have a lot of experience on the operations side–operating media, tech, and communications companies–as well as a lot of experience in doing venture capital investments.
In May, 2011 when LV first announced an East Coast-West Coast partnership to syndicate deals with Ron Conway’s SV Angel Partners, it was a big sign of support for your firm. Now, you’re much more entrenched in the startup scene. Would the partnership be as vital to your success if it happened now?
I have personally known Ron for about 20 years. He’s a good friend of mine as well as someone with whom I’ve co-invested over the years. We’re based in New York. He and his fund are based in San Francisco, so we’re very complementary to each other. And when we make a co-investment in a company, we bring our joint network of support, so that’s very meaningful for the companies.
Now, we actually co-invest with pretty much everybody in the marketplace. We are very collaborative and an investment is always a syndicate of people who come together to help a company.
Which other New York firms are in your syndicate?
All the very active investors in New York, such as First Round, RRE, Softbank, Thrive, High Line, Betaworks–just to name a few–are all funds and people that we have repeatedly done investments with.
Recently, LV named Stephen Colvin, the former CEO of Newsweek/Daily Beast as an executive-in-residence. Between that and Ken Lerer’s NowThisNews, is this a sign of LV’s focus on content startups?
We are interested in content, but by no means do we do content mainly. When we invest in New York, we invest in sectors that New York is good at. So there’s consumer, commerce, mobile, social, ad technology, publishing technology. There’s actually a lot of B2B, software-as-a-service type businesses, marketplaces. Having Stephen join the team is more of a reflection that we want to continually add resources to support our portfolio companies.
Andreessen Horowitz, for example, says they use the old-school CAA model in terms of how they structure resource to help portfolio companies. Do you have a model for the way you try to build an infrastructure for your portfolio or do you build as the need arises?
We do have a model. Obviously we don’t have the resources that Andreessen Horowitz has. [Laughs]
Yeah! But we do have an extensive network of support. We have not only our own colleagues, we have a group of analysts and a principal who are helping out full-time with the companies, but we have this extended network of people who are in our ecosystem that are advisors, or people we’ve worked with in the past, or people like Stephen Colvin that we can rely on for very specific tasks. We have a very big focus on making sure that we are constantly doing things that move our companies forward.
Considering LV’s rise, is there any downside to having really good deal flow?
[Laughs] I guess the only downside is that it can be sometimes a little bit overwhelming, but we do have a good system in place to make sure that we identify companies that are really promising. I actually think it’s a real asset!
Have you noticed one area of weakness among New York companies or something LV’s portfolio companies need help with–monetization strategies or partnerships with larger companies?
The common denominator with New York companies is that they’re constantly looking for qualified new employees. I can’t tell you how many open jobs we have within our portfolio, but it’s definitely in the hundreds, if not thousands. So identifying and recruiting and bringing good employees, particularly on the technology side, is one of the biggest challenges. But the companies always find ways. Some of the employees that they hire don’t necesaarily have to be in New York, given that a lot of the companies tend to be virtual.
There’s a perception that New York’s startup scene is very open and accessible. But as things matures, the tendency is to get more stratified. How easy is it for a company to get a meeting with you?
We haven’t found any real difference in the past few years. New York tends to be very collaborative. Everybody is literally working together. Of course it’s competitive like any ecosystem, but it’s not, perhaps, as intensively competitive as it is on the West Coast. The players are well-identified. The players tend to be very constant and consistent. There’s really no other way of saying that this is as collaborative an ecosystem as you could possibly imagine.
In terms of where you’re allocating the fund, besides sectors like content or commerce, is there another factor you look for in potential investments?
Sure. We’re looking for teams that have big ideas whose time has come. The factors that matter to us are: Is it a big idea? Is the timing for this idea right? And is this the right team–are these the right people–to be doing this? Clearly the trends are mobile, social–on the B2B side, the use of consumer Internet technology for the workplace. We’re starting to see more and more marketplaces that are developing. All the things that you would expect New York to be good at because New York is the fashion, media, finance, commerce capital of the United States. So all of these industries–and plus whatever else you can imagine–are being transformed and disrupted by technology and this is where we want to be.
Can you give an example of a company that you’ve invested in that represents “a big idea whose time has come”?
I don’t think I would do it justice because we have 135 companies. So, I would rather not!