Polaris Ventures Made No Return on Dogpatch Labs New York’s First Exit

Matt Meeker, entrepreneur-in-residence and start-up liaison at Dogpatch Labs.

The sunny Polaris Ventures-sponsored Dogpatch Labs space is a mystery! Start-ups hand-picked by Polaris Ventures and entrepreneur-in-residence Matt Meeker get to jam on their product for six months and often longer rent-free, giving up no equity stake, agreeing to no “first-look” caveats, no strings attached, in a super space just south of Union Square. And despite some rumorous rumblings to the contrary, start-ups seem to have no trouble moving up after they leave. Today the five-person analytics start-up Spinback was acquired by Buddy Media for an undisclosed sum which was “very compelling”–compelling enough that the company scrapped the term sheets it had signed with east and west coast VCs for an (also undisclosed–but “very normal”) Series A. And after giving the company free rent along with the free coffee, free lunches and visits from tech luminaries that come with the space, Polaris Ventures made zero monetary return on their success.

Polaris wasn’t one of the companies Spinback was planning to include in their series A, either–although it’s unclear if that was because they weren’t interested or because Spinback got more attractive offers from other VCs. Either could be true, although a company with Spinback’s prospects–social media analytics in a world where Facebook serves up a third of online display ads in the U.S. now–seems like the kind of company that Polaris should have been comfortable banking on after “getting to know them” for half a year. But the firm is extremely choosy about investing, and Mr. Meeker says they gave Spinback an extension on their stay in part because they knew Spinback was talking to Buddy Media about an acquisition.

“We’re looking for a couple great companies each year to invest in and work with for a long time.  Dogpatch is a great platform for getting to know people. Polaris doesn’t make many investments in a year–probably two or three early stage (seed or A round) investments in New York this year, so we want to really know people well before we invest.  Dogpatch gives us a way to do that,” Mr. Meeker told Betabeat.

That means Polaris Ventures will invest in less than 10 percent of the companies that go through the residency. There are 41 people in 16 companies in the space now.

I wasn’t trying to be cynical, but I couldn’t quite get my head around how two or three investments could support a Union Square space and all its associated costs. Polaris must be expecting this to pay off somehow, right? we asked Mr. Meeker.
Polaris is “serious about giving back to the ecosystem,” and “supporting young startups” and is also somewhat altruistic, he said. “That said, the strategy is also to get to know 15 to 18 companies over an extended period of time, so we make smarter investment decisions.”

Polaris is happy about Spinback’s acquisition even though it didn’t make money on the deal, he said.

“There’s a lot that goes into the “return on investment” calculation of Dogpatch, but we’re super happy with outcomes like this. We believe if we help great entrepreneurs be successful, that’s nothing but good for Polaris, the ecosystem, and the entrepreneurs,” he said.

“I wouldn’t have joined them (Polaris) if I wasn’t convinced it was real.” Polaris Ventures Made No Return on Dogpatch Labs New York’s First Exit