Wednesday, November 21, 2007

Tight-Lipped Tango Looks to McKinsey as a Model

I had a conversation earlier this week with Jo Tango, founder of the early-stage venture firm Kepha Partners and an alumnus of Highland Capital Partners. The entire conversation was off-the-record, though. Tango says he wants to let the companies in which he invests do the talking. The comparison he used was McKinsey & Company, which never even divulges the names of clients it serves.

I acknowledge that VCs can often hog the spotlight, subtly trying to make themselves look like the geniuses, rather than the entrepreneurs they choose to back.

But Boston needs a new generation of high-profile VCs, and I had been hoping that Tango would be part of that group.

VCs ought to be a presence at public events (Tango usually turns down speaking invites, and doesn’t go to gatherings like Web Innovators Group or OpenCoffee), and they ought to blog/write/podcast/vlog about what’s on their minds and what they’re seeing.

That sends a message that:

    A. They’re approachable, even if you’re not a done-it-before entrepreneur, and
    B. It communicates that there is a vibrant, plugged-in VC community here that’s interested in new stuff, and brainstorming about it in public.

Unlike McKinsey, Tango does at least have a Web site listing the investments he has made so far. (He also lists a number of investments he made while at Highland.) Kepha’s two investments so far, AutoVirt and Peermeta, have both been made alongside Sigma Partners, another ultra-quiet local firm. Peermeta was a $6 million first round; AutoVirt’s wasn’t disclosed. Peermeta was founded by Cheng Wu, the successful serial entrepreneur who has been with Cisco, ArrowPoint, and Cascade.

The same day I spoke with Tango, CEO Evan Schumacher asked who I thought were the next-gen VC firms in Boston… the firms that are worth watching because of their new approach to investing. Off the cuff, I listed Spark Capital, IDG Ventures, .406 Ventures, Longworth, and General Catalyst. (Old school firms trying to reinvent themselves include Prism VentureWorks and Polaris.) While some of them don’t have dazzling track records yet, they are communicating with -- and presumably working with -- entrepreneurs in new ways.

Tango, I worry, is doing things the old “Waltham way."

(Am I being too cranky on the day before Thanksgiving? Maybe. So I'll note that Tango gets very high marks on, mostly for his work while at Highland. Also, I compare Kepha with other new early-stage venture firms here.)

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Blogger Mike Feinstein said...

I think you are being overly harsh because you don't agree with Jo's marketing approach. I might agree with your observations, but that doesn't necessarily make him a bad guy or bad investor (I know you didn't exactly say either one of those things, but that's the message). Maybe some quotes from entrepreneurs who worked with Kepha or at least pitched them would have been helpful, too. At least a lot of people who post on TheFunded like him (unlike most firms).


November 24, 2007 3:46 PM  
Anonymous Anonymous said...

Hey Scott. I agree you are being too cranky. A venture investor's job is to be a successful investor, not to market themselves -- too much of which, arguably, inhibits one's ability to be a good investor

Typically, venture investing was/is about being prescient and living thru the "j curve". Tasks, I would argue, that are enhanced by staying mum.

Particularly today, when there are way too many venture investors and way too many startups purusing the same basic concepts, how exactly does one get and maintain an edge if one broadcasts one's presumably carefully thought out strategies to anyone who will listen?

VC's relentless self-promotion and marketing and blogging is indeed very revealing and informative -- exactly why they shouldn't do it, at least if making returns for their LPs matters. Judging by the tsunami of self-promotion coming out of the venure world, it seems today that returns don't matter. And take a look at the firms and funds returns -- you will see little if any returns.

November 24, 2007 5:44 PM  
Anonymous steve kane said...

oops, clicked the wrong button. i aposed the "anonymous" comment above

steve kane

November 24, 2007 5:46 PM  
Anonymous VCMike said...

Scott: I am going to assume your reference to Polaris was meant as a
hat tip that unlike some of our "old school" peers sitting high above
the reservoir on Winter St, we are doing lots of things, like blogging and
getting out and about in the entrepreneurial community, that break down
the perceived walls between entprepreneurs and the guys with the gold.
And I certainly won't argue with that observation.

However, I WILL argue with your choice of the phrase "remaking

Having been a partner at Polaris over an 8 year period
which has seen tremendous upheaval in the venture business, both in
terms of investing strategy, culture and personnel, I actually take a whole lot of pride in the fact that Polaris has stayed true to the very same strategic, cultural and organizational principles that have guided our approach to venture capital since the day the firm was founded. In fact, I will go so far as to say our strategic and organizational stability is one of Polaris's great distinctions and strengths in the venture business.

For example, unlike a number of our peers who have only recently come around to a strategy of "stage and sector diversification," we have ALWAYS partnered both with entrepreneurs at the very earliest stages of company formation as well as with owners of more mature profitable businesses looking for growth capital; and we have ALWAYS backed entrepreneurs in broadly diverse sectors ranging from biopharma to digital media to computing infrastructure.

And, while we have enjoyed substantial growth in the partnership since our founding in 1995, we have also enjoyed one of the most stable partnerships in the business. Seven active Polaris partners have been with the firm for seven years or more, and EVERY General Partner has been with Polaris for at least 5 years. Compare this to the number of "top tier" VCs who have only been able to remain current by hiring brand new "consumer Internet" "life science" or "energy" partners.

Finally, and more to the point of your post, if you ask people who know us well (and, to be honest, I had assumed you yourself did!), Polaris has always put a huge emphasis on human capital, and we have always put a ton of time and energy into getting to know the most promising up and coming entrepreneurs, often years before they are looking to raise capital, whether it be in the biotech labs at MIT, dinners and drinks at Nantucket, salons at the Metcalfe home, our annual Digital Media Summit, or any other of the dozens of opportunities each and every partner seeks to get to know the founders of the next Akamai or Momenta.

The way I was taught venture capital -- and this literally was something the Polaris founders expressly emphasized from my first week on the job --getting out to find and get to know the best emerging entrepreneurs is the bread and butter of our business, and in my view if you don't enjoy this you shouldn't be a VC. In fact, I would go so far as to say this not only is something each and every Polaris partner considers part of our job, but it is our favorite part of the job.

So there you have my one issue with your post! Apologies for what ended up being a bit of a rant, but, as you might sense, my firm's ability to succeed over the course of five funds without ever having to "remake" the partnership actually is a huge asset for us, and something I feel strongly about.

But, that small, tiny, eensy quibble aside, appreciated your post!

December 2, 2007 8:59 AM  

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