Venture capitalists need to be really good at taking the long view. They bet on startup companies that may take years to build a product, find customers, and go public. So they need to think beyond the COVID-19 pandemic, the presidential election, and the down economy.
“You don’t want to have an overreaction to COVID and put money into companies that are creating an entire business model around it,” says Bob Mason, managing partner of Argon Ventures. “It’s a painful and hard experience. But any meaningful company is going to take a decade to form. You’re trying to think of the longer arc of trends and technologies.”
Argon, which is in the midst of raising $30 million to invest in startups, is part of a wave of new venture capital firms based in Massachusetts, most of them on the smaller side of the spectrum. (For comparison, General Catalyst, a 20-year old VC firm in Cambridge, announced in late March that it had pulled in $2.3 billion in capital to invest.) Incredibly, even during the pandemic, more money has already flowed into venture capital in 2020, roughly $57 billion, than in the entirety of 2019, according to the National Venture Capital Association — and it’s possible that this year could set a record. That’s good news for entrepreneurs trying to raise money.
Among the new firms are Prime Impact Fund and and MCJ Collective, both focused on technologies that may mitigate climate change.
MCJ Collective sprang from entrepreneur Jason Jacob’s exploration of the ways technology might be able to slow global warming, which he chronicled in an e-mail newsletter and podcast. (Jacobs was previously the CEO of Runkeeper, a workout-tracking app that was acquired by the Japanese sneaker company ASICS in 2016.) MCJ stands for My Climate Journey, and as Jacobs was learning about the sector, he was also making his own investments in startups like Carbon Engineering, a Canadian company working on an approach to capture carbon from the atmosphere.
Prime Impact Fund, in Cambridge, announced in June that it had raised $52 million to invest in startups focused on the environment — whether that’s helping farmers preserve crops they’ve harvested, and decreasing spoilage, or making the process of extracting lithium for batteries more efficient. Prime Impact has already put money into 10 startups. Prime’s website says it’s hunting for “diamonds in the rough, start-ups which can grow into historically significant, planetarily impactful companies.”
Companyon Ventures, of Boston, is raising a $40 million fund to back software startups focused on selling to businesses. Among its investments are Ziflow, which makes proofreading software for marketing agencies, and Smartvid.io, which uses cameras and analytical software to keep construction sites safe — observing, for example, that some workers may not be wearing hardhats, gloves, or face masks.
For the type of software companies Companyon backs, cofounder Tom Lazay says that “it’s almost as if nothing happened” in 2020 that was out of the ordinary. “Maybe our companies saw a pause in purchasing for those 60 days in April and May when all corporate buyers went on lockdown to figure out what was happening,” he says. “But since then, it’s almost like business-as-usual through this uncertain time.”
The two founders of Will Ventures were both linebackers on Harvard’s football team; one of them, Isaiah Kacyvenski, went on to an NFL career and a Super Bowl appearance with the Seattle Seahawks. But Kacyvenski says that Will Ventures, with about $55 million to invest, doesn’t plan to put its money only in sports-related startups. “Sports has always been perceived as this niche market,” he says. “We’re trying to redefine the markets sports touches ― massive adjacent markets like connected fitness, health and wellness, telehealth, e-sports, and skill-based gaming.”
But there are several sports-linked startups in the firm’s portfolio, including Jock MKT, a fantasy stock market where you can buy and sell shares of athletes with real money; Liteboxer, which makes a tech-enabled home boxing trainer; and FitBiomics, a Harvard spinout that is developing the “Gatorade of the future” by sequencing the microbiome — or gut bacteria ― of elite athletes to create new probiotic products.
The small team that Kacyvenski and his cofounder, Brian Reilly, have put together at Will Ventures includes two women overseeing marketing and operations. But when you look at who’s forming this new crop of VC firms, and ultimately making the investment decisions, you find primarily white men in their 40s. Venture capital in Boston today looks very much like it did a decade, two, or three ago.
There’s more awareness today that that may disadvantage female and minority founders who are not already in some way “known” to these VCs. Mason at Argon wrote an opinion piece over the summer about the prerequisite for people who want to start a VC firm: You generally need to be wealthy enough to have made a few successful “angel” investments in startups first, and to put a few hundred grand of your own capital into your new firm’s coffers to show you’ve got skin in the game. “These capital requirements are out of reach of many who would otherwise be highly qualified as a general partner” of a new venture capital firm, Mason wrote.
Lazay at Companyon Ventures agrees: Getting a venture capital firm off the ground without a track record of past success in entrepreneurship or investing, a vast personal network, and a few million bucks in the bank “is just a real tough game,” he says. “The deck is stacked against you in a way that is truly unfair.”
Kacyvenski notes that in the realm of sports, you have “the ultimate level playing field, a true meritocracy” in which men and women of all races can excel. In venture capital, “we need a better farm system that is very mindful and thoughtful around creating opportunity, regardless of who you are, and breaking the mold.”
In a business that thinks about the long-term, that has been a long time coming.