Friday, July 17, 2009

Founders Collective: The Newest VC Firm in Town

I've been working this week to find out more about Founders Collective, the newest VC firm in Boston.

They don't yet have a Web site, though there is a bit about them on LinkedIn, and they've been covered lightly by Mass High Tech, PEHub, and Xconomy in June, when they filed SEC documents stating that they'd raised $24.4 million for a planned $50 million fund.

Here's what I've been able to find out so far...

- The three central founders of Founders Collective are Eric Paley, previously co-founder of Brontes Technologies; Chris Dixon, co-founder of SiteAdvisor; and David Frankel, a South African currently ensconced at the Mandarin Oriental. Frankel co-founded Internet Solutions, the biggest ISP on the African continent. There are four other founders spread across Boston, New York and California, but they haven't been named yet. They won't be working full time on the fund, but rather will help source deals.

- FC has been shacked up at the Boston offices of Flybridge Capital Partners, but will soon move out into their own digs, likely in Cambridge. Flybridge (formerly known as IDG Ventures Boston) made a ton of money when Brontes was sold to 3M, and in 2007, Paley joined IDG (now Flybridge) as a senior advisor. David Frankel, incidentally, was the very first investor in Brontes, which developed 3-D imaging technology for use in dentistry, and originally spun out of MIT research.

- What helped them raise $30 million thus far, on their way to $50 million, was a solid track record as angel investors. They've backed about 25 companies over the last five years, including TrialPay, Canopy Financial, Positive Energy, SiteAdvisor (acquired by McAfee for $70 million), Magazine Radar, Link Medicine, and Hunch.

- Chris Dixon is one of the co-founders of NYC-based Hunch, so he'll split his time between that start-up and Founders Collective. (Working alongside Dixon at Hunch is Caterina Fake, co-founder of Flickr.)

- FC has already made a few investments out of its new fund, and they're closing another next week. They'll typically invest under $1 million, and won't necessarily keep participating in later rounds. They'll aim to get enough equity with the seed investment that they won't be wiped out in later rounds.

- Michael Greeley of Flybridge has only good things to say about FC. "They'll get to $50 million quite comfortably, and that could translate into 60 or 80 companies. Our $300 million fund, in contrast, will be 20 to 24 companies. Their goal is velocity, and I think they'll be a real talent magnet." Already, he says, "they're bringing a lot of volume through the office." Greeley says that the fund will be pretty wide-ranging in its investments: "I think they'll have a highly-diversified seed fund." (Link Medicine, for instance, one of the team's investments that precedes the creation of FC, is a biotech company.) Given FC's strategy of investing early (and not necessarily paying to play in later rounds), Greeley said they will "gravitate to businesses that can get to proof points or break-even with $10 million or $15 million."

- The other VCs and entrepreneurs who provided me info with Founders Collective (and who asked not to be named) all had good things to say about the team. None of the usual VC competitiveness...

- Reached in a cab in Manhattan earlier this morning, Eric Paley didn't want to chat about what they're up to right now, at least until the Web site goes up in a month or so. All he would say was that "information technology has generally been our sweet spot" and "capital efficiency tends to be one of the core rules for us." He sees FC helping to fill the early-stage funding gap in the Boston and New York markets.

We'll keep an eye on them. And of course, do post a comment if you know more...

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