Here's a quick update as the third quarter ends: We have been developing our dealflow and mechanisms to help candidate companies. We have been seeing where we best fit in the world of "super seed" funds. And we've following our competition, a number of which just got caught colluding against the entrepreneurs, as reported yesterday on Techcrunch. Some observations:
1. In the three months we have been active, the number of funds and dollars going into early stage investing in the Bay Area have skyrocketed. Not only are the "usual suspects" -- Andreesen, Conway, McClure, YCombinator, First Round and the angel networks -- much more active, but more and more people are announcing their interest in this stage of investing, including traditional VCs who are trying to get footholds with companies by participating this early. Clearly it is a popular segment to invest in.
2. Acknowledging that the best returns come from unpopular but fundamentally sound investments (and observing that sound but popular investments do less well owing to the increased competition of the resulting companies), we worried that this flood of capital would drive down returns. Of course, we'd never participate in the sort of anti-trust violation that Techcrunch outlines -- we believe in pure capitalism, not the illegal kind -- and we think we can differentiate ourselves adequately with our active participation in bus.dev deals and our willingness/focus on singles and doubles (not home runs).
3. Further, we think our scale is a differentiator -- we don't need to invest in "big disruptions" or the "next big thing" to make our returns. Our thesis is that every industry is being disrupted somehow and that vertical attention to a key aspect of the disruption, if strategically executed, will position the company for attractive acquisition. We don't need to be the acquirer, if exiting early yields great returns, reduced risk and faster times.
