Dispatch From Venture Summit East: More Seed Funding in the Works from Kodiak?

Swung by the Four Seasons today to catch a bit of the AlwaysOn Venture Summit East, their first event in New England.

In the halls, I ran into David Andonian from DACE Ventures (who told me his two most recent investments were Howcast in NY and EveryScape here in Mass.) ... Flybridge Capital Partners blogger Jeff Bussgang ... M&A guy Paul Bowen ...former About.com CEO Scott Meyer ... Mr. Punchbowl Matt Douglas ... and Intel Capital's Lucy McQuilken.

My panel was titled "So You Want to be a VC." After a quick, poll, it turned out that only one person in the audience did....so we focused on what the panelists (all representing relatively new VC firms) are doing differently.

One interesting snippet that I wanted to share with you related to seed funding -- especially seed funding of unproven young entrepreneurs.

Bijan Sabet of Spark Capital said his firm had put money into Tumblr, an NYC start-up founded by 22 year-old David Karp. Sabet observed that "seed deals will inevitably have a high mortality rate...and we're not comfortable with that here." (Here presumably meaning Boston/New England.) He mentioned Y Combinator (based in Cambridge & Mountain View) and Tech Stars (Denver) as firms that are trying to build a model around very early, very small seed deals.

Chris Greendale of Kodiak Venture Partners said he thought it'd be smart for VC firms to take a million bucks, and put it into ten ideas. I asked him what would happen if he proposed that at his next Monday morning partners meeting. Greendale said "we're talking about it," and he told me afterward that some news could be forthcoming in the next 90 days. "Why is it such a bloody long process to give away $100,000 to a new company? We can give $100,000 to our existing portfolio companies at the drop of a hat," he mused.

The biggest (and only) applause line of the panel came from Drew Lipsher from Greycroft LLC. Someone in the audience asked about entrepreneurs moving west to find money. Lipsher said something to the effect of, if the entrepreneur doesn't believe in his company enough to believe it can succeed here -- they need to move it to Silicon Valley -- then we don't need to invest.

Today's Globe column: When VC Firms Go Back to the Well

Today's Globe column is about the fund-raising process that VCs have to go through every few years. It focuses on one new fund, DACE Ventures, and one older fund, Masthead Venture Partners, but also mentions a few others, including .406 Ventures, Kepha Partners, Longworth Venture Partners, and New Atlantic Ventures (formerly DFJ New England.)

Here's the opening:

Entrepreneurs visiting a venture capitalist to ask for money sometimes feel like kids asking Dad for an allowance. Ordinarily, they're not in the power position.

But every few years, Dad has to hit up Grandpa for a handout. When VCs spend through a given pool of money, they return to the investors who supply them with cash to manage the pension funds, university endowments, and wealthy individuals whom they refer to as "limiteds," or limited partners.

Just as fund-raising for entrepreneurs is a pivot point at which businesses will get a jolt of juice or struggle to hang on - fund-raising is a moment of truth for venture capitalists, too. Some will keep on truckin', and some will run out of gas.

"There's a tremendous amount of weeding out that takes place when younger firms go back and try to raise more money," says Josh Lerner, a professor at Harvard Business School.

Video is below -- and here are two paragraphs that got snipped from the end of the column in the edit process (happens all the time.)

Longworth partner Peter Roberts says the firm hasn’t officially drafted the private placement memorandum that it’ll use to raise the next fund, but says he’s optimistic about the reception they’ll get. “We’ve had a pretty good run over the past 18 months or so,” he says.

Lerner, from Harvard, and a collaborator at MIT, Antoinette Schoar, have been gathering data that shows that as VC firms get older, raising their sixth, seventh, or tenth funds, their financial performance improves markedly. But the challenge, he says, is surviving that long.

New England's New Crop of Early-Stage Venture Firms

In working on my Innovation Economy column for this Sunday's Globe, I was hoping to be able to squeeze in a run-down of the newest early-stage venture capital firms in our neck of the woods.

That didn't work out. (Totally my fault: trying to fit in too much good stuff.)

So here's my list -- with much more material than I would've been able to fit into the column. If I've missed anyone who has raised a new early-stage fund in 2007, please post a comment.

Fair Haven Capital
Boston, MA
Partners: Paul Ciriello, Managing Partner; Rick Grinnell, Managing DIrector; Jim Goldinger, Managing Director; Dan Keshian, Managing Director; Cheryl Goyette, Partner and CFO
Size: $200 million
Investments so far: Everyzing (formerly Podzinger), Cocona Fabrics, Xtranormal, and one Boston company that is currently at the term sheet stage
Sweet spot for A rounds: averaging $4 million

Ciriello says the firm spun out of TD Capital Ventures; Toronto Dominion Bank is an LP in the new fund. Fair Haven will focus on consumer tech, enterprise tech, security, and materials. (Cocona is developing a new fabric derived in part from coconuts.) "We do have a bias toward eastern North American," he says.

.406 Ventures
Boston, MA
Partners: Maria Cirino, Co-Founder and Managing Director (formerly of Guardent/Verisign); Larry Begley, Co-Founder and Managing Director; Liam Donohue, Co-Founder and Managing Director
Size: $125 million (could grow as large as $150 million)
Investments so far: Veracode, RatePoint, Memento
Sweet spot for A rounds: A few hundred thousand to $3 million

Cirino says, "We're very clued in to the fact that savvy entrepreneurs don't want $10 million bucks jammed down their throat when all they need is a couple. Take all the money you want? That idea is dead. Savvy entrepreneurs want to preserve their equity, and the way to do that is take as much money as you should, but as little as you can." Firm will focus on IT security and tech-driven services. "Part of what we look to do is avoid spaces that have been overheated by a lot of venture investment," she says.

Point Judith Capital
Providence, RI
Partners: Gina Raimondo, General Partner; David Martirano, General Partner; Sean Marsh, General Partner; David Mixer, Founding Partner; Michael Doyle, Venture Partner; Brad Waugh, Venture Partner; Jeff Weiss, Venture Partner
Size: $73 million (this is the firm's second fund; all others on this list are on their first)
Investments so far: Novare Surgical, Envista Corp., Music Nation
Sweet spot for A rounds: $500,000 to $3 million

Formerly an affiliate of Village Ventures. From the site, "We focus our investment activity in communications, information, Internet, and healthcare technologies." First three investments are in Silicon Valley, Beverly, MA, and New York.

DACE Ventures
Waltham, MA
Partners: David Andonian, Managing Partner; Jon Chait, Partner; Doug Chertok, Venture Partner (Chertok is based in New York)
Size: Slightly over $70 million
Investments so far: Panraven, Cityvoter, AuctionPal, LocaModa
Sweet spot for A rounds: $1 million to $3 million

"We're looking for capital-efficient, early-stage Web businesses," Andonian says. "There are not many firms filling the capital gap, as VC firms have gotten bigger and bigger." Andonian says the focus at DACE is businesses built either on the Web or on mobile platforms.

Kepha Partners
Waltham, MA
Partners: Jo Tango, Founder (formerly of Highland Capital Partners); Ed Hamilton (acting CFO)
Size: Roughly $50 million
Investments so far: PeerMeta, AutoVirt

Tango wouldn't talk to me, but this is from their site: "To deploy the vast amounts of capital the venture industry has raised, many firms are pursuing new strategies, models, countries and later-stage investments. Many are becoming venture bankers. KP has a back-to-basics approach focused on pre-seed, seed and Series A companies. We call this 'venture building,' and it is what created the venture industry in the first place." Is he hoping that people will associate his KP with that other KP on the West Coast?

LocaModa Scoops Up $6.1 Million from DACE

I'm at a conference in New York this week, and yesterday one of the moderators was using Wiffiti to allow audience members to post comments or questions by sending text messages from their cell phones; they appeared on a big screen behind the stage. Turns out that Wiffiti's creator, Somerville-based LocaModa, just raised $6.1 million from DACE Ventures, the new VC firm run by David Andonian and Jon Chait. (Two other investors participated in the round, LocaModa's Series A.) Not sure if this is DACE's first investment, but it's certainly among the first.

LocaModa also has some interesting ideas about "the Web outside" -- basically, screens in public places that people can interact with using their cell phones.

Here's the PEHub item on the funding, the very Spartan DACE Web site, and LocaModa's site.

Joining DACE are investors from India and Japan. LocaModa CEO Stephen Randall writes via e-mail, "LocaModa's business is now better placed to not only grow in [the] USA but also in Asian markets, where the usage of the mobile phone is often a user’s primary interactive device."

In July, Randall was carping about the cluelessness of Boston VCs in my Globe column. Maybe this has changed his mind?