Over the years, we’ve had the pleasure of interviewing many industry influencers with whom we have relationships – media, entrepreneurs, analysts and more – and we’re excited to expand further with our new “Venture Capital Insiders” series. Jeff Bussgang of Flybridge Capital Partners did us the honor of kicking things off.
Jeff is a General Partner at Flybridge Capital Partners, whose investment interests and entrepreneurial experiences cross consumer, Internet commerce, marketing services, software and mobile start-ups. Jeff currently represents the Firm on the boards of Cartera Commerce, ClickSquared, DataXu, i4cp, Plastiq, SavingStar, SimpleTuition, tracx, and is a Board Observer at ZestFinance. He was previously a Director at Brontes Technologies (acquired by 3M), BzzAgent (acquired by Tesco), Convoke Systems, go2Media, oneforty (acquired by HubSpot), PanGo Networks (merged with InnerWireless), Ready Financial (merged with AccountNow), and Transpera (acquired by Tremor Video).
Jeff’s book on venture capital and entrepreneurship, Mastering the VC Game, is an insider’s guide for entrepreneurs on financing and company-building. The book has been hailed by the Wall Street Journal, BusinessWeek, TechCrunch and The Financial Times as an essential guide for entrepreneurs.
Jeff serves as a Senior Lecturer at Harvard Business School and teaches a class on entrepreneurship and lean start-ups called Launching Technology Ventures. He has co-authored three HBS cases that are taught in “Founder’s Dilemma” (Curt Schilling’s Next Pitch) and “Launching Technology Ventures” (Foursquare and Predictive BioSciences). Jeff is also the co-author of “Ruling The Net,” a 1996 Harvard Business Review article on the Internet’s potential for commerce. He is also on the Board of MITX, the Massachusetts Innovation and Technology Exchange, and is a Founding Executive Committee Member of FirstGrowth Venture Network, a network of venture and angel investors supporting first and second time entrepreneurs building exciting companies in the New York area.
Jeff’s popular blog on helping to demystify the venture business for entrepreneurs, “Seeing Both Sides,” can be found at www.SeeingBothSides.com, which is syndicated by BusinessInsider.com, Reuters, PE Hub and others. You can follow Jeff on Twitter @bussgang.
How is the VC climate different now than it was 10, 15 years ago?
There are two new phenomena that impact the VC climate as compared to 10-15 years ago. First, entrepreneurs require less capital than they used to – thanks to the declining cost of technology, the cloud and the application of the Lean Start-Up methodology. Second, new companies are able to accelerate their growth much faster than ever before, thanks to global broadband penetration, the cloud and the social fabric that connects consumers and businesses. As a result, seed investing has also proliferated as a method to get connected to young start-ups early in their development, and growth equity investing has become popular for companies that achieve product-market fit and have the privilege of scaling fast.
What makes Boston’s VC climate unique?
Boston is the second strongest entrepreneurial climate in the world after Silicon Valley and arguably the most diverse and dense. With its deep information technology roots, burgeoning health care industry and emerging energy sector, Boston has emerged as one of the hot spots for entrepreneurs and investors alike. As a result, every major technology company is either headquartered here (e.g., “anchor companies” such as Akamai, EMC, Thermo Fisher, Vertex) or has a large presence in the region (e.g., eBay, Google, IBM, Microsoft, Oracle).
Any advice for the first time entrepreneur seeking institutional investment?
The odds are against you – most VC see hundreds of opportunities for every one that they invest in – so recognize that you have to have something special to attract institutional investment. Make sure you do your homework before approaching an investor. Entrepreneurs seek money once every few years, but investors are pitched by entrepreneurs every hour of every day. Thus, there is an information asymmetry that entrepreneurs need to work hard to overcome.
What makes your book, Mastering the VC Game, an insider’s guide? What’s different about the advice you give vs other insider guides?
I think entrepreneurs have found the book valuable for three reasons. First, it’s written by a practitioner. I’m an active investor, not an author or consultant, and so my perspective comes from being engaged in the business for a decade. Second, I used to be an entrepreneur, so I have empathy for their struggles to build and fund a company because I’ve been there myself. And I know what information I would have wanted back when I was an entrepreneur. Finally, I interview over a dozen VCs and entrepreneurs – folks like Twitter’s Jack Dorsey and LinkedIn’s Reid Hoffman – to explore their case studies and wisdom. This mix of an informed, personal perspective and compelling case studies seems to be what is resonating with entrepreneurs.
You teach at Harvard as a Senior Lecturer at Harvard Business School. What do you learn most from your students that helps you navigate the VC world? What are their biggest challenges as aspiring, upcoming business leaders?
I learn a tremendous amount from my students – it is very much a two-way street. They give me great insight into what’s hot in the market, what the latest trends are and what some of their biggest challenges are. At the macro level, their challenges are similar to all entrepreneurs – finding a unique, differentiated market opportunity and marshalling the capital and human resources to pursue it.
Talk a little about your co-authored HBS case study that is taught in “Founder’s Dilemma” (Curt Schilling’s Next Pitch) - where did 38 Studios go wrong? Did they? Was it the RI business climate? How will it – or did it already – change the VC landscape moving forward?
The Curt Schilling case is one of the most interesting I have worked on. Curt was trying to do two very ambitious things at the same time. First, he was trying to build a hugely valuable business from scratch in a super-competitive field. Second, he aspired to personally transform himself from being an All Star baseball player to becoming an All Star entrepreneur. Many professionals attempt personal transformations and so Schilling’s efforts, which were so dramatic, provides great lessons for entrepreneurs in this area. As for what happened to 38 Studios and the situation with Rhode Island, I’ll leave that for a future case.
How does the VC environment differ from the East Coast to the West Coast? What are the challenges in navigating the differences?
The differences are more modest than many observers try to make it and there are many East Coast VCs who are investors in West Coast companies and vice versa. Both markets are very competitive, but the West Coast is probably even more competitive, as there are more investment professionals managing more capital. As a result, the deals can be pricier than East Coast deals.
Did you want to be a Venture Capitalist when you were a kid? What led you to this career?
No, I wanted to be an entrepreneur when I was a kid. I had never heard of venture capital until I came to business school and met a few firms. When my partners started Flybridge and asked me to join them in founding the firm, it was too good an opportunity to pass up.
What is next for you for the remainder of 2012?
Whatever my investors, partners and portfolio company CEOs tell me to do! They are the customers I serve.