The Deal
Friday, July 4, 
10:59 pm

[Posted on November 2, 2007 - 3:40 PM]

fredwilson.jpg
Venture capitalists who invest in seed-stage companies often like to back "serial entrepreneurs" who come with a proven track record of successful startups behind them. By contrast, Union Square Ventures has invested in a handful of Web 2.0 firms with relative newbies at the helm.

We asked managing partner Fred Wilson what accounts for his uncommon comfort level in betting on first-time less experienced entrepreneurs. "We have a number of different ways we make investments," he says. "One of them is to put very small amounts of money behind very small, young and inexperienced teams." He acknowledges that "not all of our bets will pay off" but points out that the investments are modest, which limits the damage if things don't pan out.

But Wilson also speaks about the importance of investing in young people who are on the front lines developing new applications and services. Union Square has invested in four young (NYC-based) entrepreneurs who fit this profile: Joshua Schachter, 33, founder of social bookmarking site del.ici.ous; Rob Kalin, 27, of online craft market Etsy Inc.; Alex Iskold, 34, of AdaptiveBlue.com, a so-called semantic Web company working on improving Web browsing (Iskold also had a software startup called Information Laboratory); and David Karp, 21, of blog tool developer Tumblr Inc. Together, the startups account for a third of Union Square's investments, which also include open-source consumer electronics platform Bug Labs, online advertising tool Clickable, job search engine Indeed and avatar software specialist Oddcast.

"So far, the strategy has worked out really well, and the companies that have come out of it all look to be really interesting," Wilson says.

Etsy isn't profitable yet, but Wilson says that the "amount of revenues they have and the rate of growth in revenue is such that in my experience Etsy is going to be a very successful investment."
 
On AdaptiveBlue, Wilson says, "We're not yet at a point of data that would give us huge confidence, but it feels good." 
 
Tumblr is the youngest company Wilson mentioned, and Karp is the youngest founder. Previously called Davidville Inc., Tumblr recently received $750,000 in seed funding. This week, the firm delivered the third version of its tumblelog tool, initially launched in March. Wilson describes Tumblr as a "significant leap forward" and predicts it will "fundamentally change the way we communicate." It's certainly changing the way Wilson communicates. Check out his tumblelog. - Mary Kathleen Flynn 
 

Comments
From: Andrew Parker,

This is an interesting summary, but if you want to get at the nitty-gritty details our investment thesis with respect to founders and entrepreneurs, we've written in-depth on this subject here: http://www.unionsquareventures.com/2007/01/founders_and_ma.html


From: fred wilson,

Adpative Blue is not Alex' first startup. he's done several before this one. he is already a serial entrepreneur.

i also suggest anyone who wants to dig into our thoughts on this subject to visit the link that andrew posted in the previous comment

fred


From: Alain,

Thanks, gents. I'll update the post to correct Alex's startup record.


From: Mary Kathleen Flynn,

Fred,

Good point re Alex Iskold...but...then in your stats, who is the fourth first-time entrepreneur you've invested in?

Franchise Entrepreneurs – Two
Serial Entrepreneurs – Five
First Time Entrepreneurs – Four

Thanks,
Mary Kathleen Flynn, Senior Editor, The Deal & Tech Confidential


From: Alex Iskold,

Not only this my second startup, I am also now 35 :)


Alex


From: Alain,

Alex--No worries, the extra year is on us.

I've been looking into Adaptive Blue (and admittedly struggling to get my head around the underlying concepts). How might SmartLinks benefit, hmmm, let's see, a financial news publisher that's looking for ways to provide more relevant, dynamically updated content for readers? Appreciate any thoughts you have on that.

Alain


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