Monday, June 15, 2009

VC Larry Cheng on the Facebook Investment That Didn't Happen

Larry Cheng, a partner at Fidelity Ventures, serves up a blog post well worth reading today, about the early days of Facebook -- and his initial 2004 meeting with Facebook's two founders at Henrietta's Table in Cambridge.

Cheng writes:

    Mark [Zuckerberg] and Eduardo [Saverin] had a complementary aspect to their partnership. Mark struck me as the alpha male. He had a profound confidence about him that exceeded his youth. He exuded killer instinct. He was not shy about sharing his aspirations of dominating the college market. He was also the technical visionary behind the scenes. Eduardo was polite and unassuming. He could have been your college roommate. He was jovial, relational, and likeable. He seemed to be the fast follower. He was also apparently the business mind. While both exuded a certain naivete, they were both convinced that they were going to change the world. They were right.

As far as I can tell, Cheng was the first VC in Boston to talk to the founders of Facebook while they were still at Harvard, and the firm he was at at the time, Battery Ventures, may have been the only Boston area firm to have had a chance to invest in Facebook. I wrote about what happened in September, 2007.

But the biggest unanswered questions remain unanswered by Cheng's blog post: why exactly didn't Battery invest in Facebook? And if they had invested, would Facebook have stayed in Massachusetts -- or was Zuckerberg determined to build his company in the Valley?

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Tuesday, May 19, 2009

New HQ for Greylock Partners: Sand Hill Road...Menlo Park... Calif.

Just got off the phone with Bill Helman of Greylock Partners, who shed some light on the story everyone is talking (and Tweeting) about this morning: Greylock is moving its home office from Waltham to Menlo Park.

Sticking around in Waltham will be two partners: Helman and Bill Kaiser. (They also get occasional visits from Greylock chairman Henry McCance.)

Helman said the decision was made by the partners over the past month. "We looked at the data, looked at our returns, and looked at competitive data, to the extent that you can get it," he said. "Then, of course, we get paid to make judgments, so there's a judgment that gets made on top of that. We asked, is this cyclical or secular -- and we came down on the side that this is more of a secular shift than a cyclical one."

"This doesn't mean that Boston is a zero," he continued. "Boston is a terrific location, and there will continue to be success here. But the big change was moving the back office [to California, and deciding to add new partners there.] I have an emotional attachment to Boston. I live in Cambridge. I love Harvard, and I love MIT. But we have a responsibility to our limited partners."

Greylock only has a handful of current portfolio companies in the Boston area right now. They include Zipcar, Reveal Imaging, Concert Pharmaceuticals, AVEO, and Ounce Labs. I called Roger Tung, chief executive of Concert, this morning, and he hadn't yet heard about the news, though he'd had lunch with Helman (who serves on his board) a few weeks ago.

"They told me they're getting new space on Sand Hill Road, but I just assumed they were moving offices there," Tung said.

Helman said the plan was not to discuss the change until July, when Greylock holds its LP meeting. But apparently rumors were circulating around the grapevine that Greylock was closing its Waltham office and laying everyone off, so Helman needed to set the record straight. (The new space in Menlo Park will be big enough to add a few more partners -- and Greylock is unusual right now in that very few VC firms are growing.)

He said that Greylock raised its most recent fund in 2005 ($500 million), but hasn't been out trying to raise a new one -- though they're talking about when might be the right time.

Helman portrayed this geographical shift as something that has been taking place over the last eight or ten years for the firm, as the Greylock partnership and portfolio has expanded in the Bay Area. "Fifteen years ago, we were 75 percent Boston and 25 percent Silicon Valley," he said, "but more recently we've become much more focused on Silicon Valley." Portfolio companies out there include Facebook, LinkedIn, Cuil, and Revision3.

"Everybody has been asking me, do you think Boston is terrible and there's no opportunity here," Helman said. "That's not what we think. The issue is one of relativity. We get paid to deliver relative value add. For us, this is about the relative best geography."

My take: this is not such a big change for Greylock, where they've been focused predominantly on West Coast opportunities for a while... but the fact that the firm will be adding partners in the Valley and not in Massachusetts is a net negative for the entrepreneurial scene here.

Your thoughts?

(Update: Here's the official Greylock release on the move... and some data and reaction from Bijan Sabet at Spark Capital.)

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Thursday, July 24, 2008

Facebook Drops $250K on Boston's LuckyCal

Earlier this week, someone turned me on to LuckyCal, a Boston-based service in beta that helps you connect with friends or business contacts while you're traveling... and suggests events you might be interested in. Sanjay Vakil, previously co-founder of PatientKeeper, is LuckyCal's founder.

One example is that your favorite band happens to be playing a gig in a city you happen to be visiting on vacation, and LuckyCal lets you know. Or your college roommate is visiting your city on business. LuckyCal uses your calendar to figure out where you are, what you're doing, and offer some visibility into what your contacts are up to, with your permission. Today, they just announced a $250,000 grant from Facebook's fbFund.

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Tuesday, May 20, 2008

WSJ on Harvard's Budding Start-Up Culture

The Journal has an interesting piece today about the interest in start-ups engendered by Facebook's success. From the story:

    [Trip] Adler is just one of the Harvard students who have caught start-up fever since Facebook, founded when Mr. Zuckerberg was at Harvard in 2004, exploded in popularity. Other recent Harvard-born start-ups include Internet companies Kirkland North Inc., Inc. and Labmeeting Inc. And Facebook has become a model for these start-ups on many fronts, from the look of company Web sites to their corporate strategies.

    "I would not hesitate for a second to say Facebook's a motivator," says Paul Bottino, director of Harvard's Technology & Entrepreneurship Center. "Facebook creates would-be Facebooks." He says a start-up contest this year attracted 55 entries, up from 10 to 18 for past contests.

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Thursday, February 7, 2008

Does Facebook's Revenue Matter?

The Power, Drugs & Money conference at the Seaport Hotel has brought together an interesting mix of people ... Jim Gordon of Cape Wind is speaking now, and I just bumped into someone from the Boston Redevelopment Authority and Noubar Afeyan from Flagship Ventures in the hall.

The first morning panel focused on innovation in New England, and was moderated by Chris Gabrieli of Bessemer Venture Partners and the Massachusetts 20/20 Foundation. Panelists included Bob Buderi from Xconomy, Doug Banks from Mass High Tech, Bob Krim from the Boston History and Innovation Collaborative, and me.

Krim said that Boston has a good track record of gravitating to new ideas once old ones lose steam. (For a long time we fished for cod... then we focused on the telegraph and telephone... later, we invented minicomputers and e-mail.) Krim also has a nice term for the interactions that happen here between investors, entrepreneurs, tech users, and academic researchers. He calls it the "bump and connect."

Doug Banks had a nice turn of phrase when he said that developing technologies that produce cleaner power is "the noble pursuit of the day." I agree, even if some worry about it becoming a bubble.

We bashed Harvard a bit, which Gabrieli suggested looks down upon the process of commercializing new ideas. I mentioned Facebook at one point ... if Harvard had more VCs prowling the hall, or had more of an entrepreneurship infrastructure forging connections with the local innovation economy, would more than one local investor have seen the Facebook deal before the founder moved to California?

Banks said that Facebook doesn't have impressive revenues, and is probably overvalued. He mentioned that the #2 e-commerce vendor, after Amazon, is, headquartered right here in Massachusetts. I said to Doug afterwards, that's great, but how many smart young people are moving from Kansas to Massachusetts because they want a job with And how many smart young people are moving from Kansas to California because they want a job with Facebook, or one of the zillions of Facebook app developers out there?

Someone in the audience complained that as venture firms raise larger funds, they tend to be less interested in backing early-stage companies started by wet-behind-the-ears founders. I mentioned some of the new early-stage, smaller venture funds that have started up in the last year or two.

The opening keynote speaker was John Kao, author of 'Innovation Nation.' He offered a picture of what other countries, like Singapore and Finland, are doing to try to build hubs of innovation.

I see countries like those, and states like North Carolina and Michigan, playing offense: trying to attract smart people and fast-growing companies. Our job here (in the US, and in Massachusetts) is to play both offense and defense.

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Monday, September 24, 2007

Peabody on Facebook

The buzz in the blogosphere today is about whether Microsoft or Google is about to make a big investment in Facebook, valuing the site somewhere in the neighborhood of $10 billion. The Wall Street Journal's Deal Journal blog looked to Bo Peabody (founder of Tripod, an early homepage-building site acquired by Lycos, and Village Ventures) for some perspective. A snippet:

    There are two ways to look at it. There is the purely financial decision, and the other is something different than that. If those guys were doing the risk-adjusted thing, financially they would sell. I just think that the market, if you look at the history of media, it is by nature a consolidating force. Typically things get consolidated. I don’t think that’s a great thing for consumers, but there is serious economy to ad sales. And they haven’t built a real ad sales organization. In order to do that it’s very expensive. Very expensive. Digital ad sales at the entry level are getting multiple six figure salaries. They have to think carefully about that.

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Sunday, September 9, 2007

Today's Globe column: Why Facebook Went West

Ever since I moved back to Boston from San Francisco, I've been wondering about the story behind why Facebook was started at Harvard but has been based in Palo Alto, CA ever since the summer of 2004. So that's the topic of today's Globe column. Here's the opener:

    In April of 2004, two Harvard undergrads walked into the Charles Hotel for a meeting with a venture capitalist. What happened next either highlights Boston's deficiencies as a greenhouse for a new generation of Web start-ups, or illustrates the incredible magnetism of Silicon Valley - or a bit of both.

I didn't get to talk with Facebook CEO Mark Zuckerberg for the piece, unfortunately, but pretty much everyone I spoke to said that he had his heart set on going to Silicon Valley for the summer after his sophomore year. (I do believe that for aspiring techies, Silicon Valley exerts a powerful pull the way Hollywood does for aspiring actors.) Scott Tobin of Battery Ventures, the one VC firm I could find that was aware of Facebook in early 2004, wrote in an e-mail:

    Zuckerberg was into going out to Palo Alto for the summer if I remember correctly, however it’s impossible to tell if whether he had influential advisors in NY or Boston working with him & suggesting to him that Boston was his place – that he would have considered doing so.

Peter Thiel, co-founder of PayPal and the first investor in Facebook, said:

    I think there was a sense that it made sense to start an Internet company from California. It was seen as a friendlier environment. It is really amazing that people in Boston missed out on it, even though it was a very risky deal, with lots of open questions.

David Sze, a partner at Greylock, said, "There is definitely an ecosystem advantage [in Silicon Valley]. There isn't a history for consumer Internet on the east coast, and I think Mark sensed that and wanted to have every advantage."

I mention the large number of local companies now building Facebook apps in the story....while I don't want to try to be comprehensive here, there are apps from (just launched today - a nifty one that lets you spin an animated Globe and then answer travel trivia), Tourfilter, Fafarazzi, TripAdvisor, StyleFeeder, OurStage, Finetune, GoLoco, Geezeo, and

The video that accompanies this week's column is an interview with Stephen Kaufer, co-founder and CEO of TripAdvisor, a Web 2.0 company founded here in Boston that stayed. In it, he talks about raising money, building a team, and staying flexible enough to find a business model that would work. (TripAdvisor was acquired a few years back by InterActiveCorp for $200 million.)

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Wednesday, July 25, 2007

Facebook faces the music

Today's the day, in US District Court in Boston, for a hearing in the legal dispute between ConnectU, a social networking site with 70,000 users, and Facebook, a Palo Alto company with about 31 million users. Both sites were founded at Harvard, by undergrads. The issue in dispute is whether Facebook founder Mark Zuckerberg stole ideas from ConnectU's founders, for whom he was writing software code, and then created Facebook.

Valleywag has a chronology of the charges and the legal wrangling, and the Cape Cod Times has an AP story.

The social networking site is experiencing hyper-growth ever since it opened up registration to anyone -- not just high school or college students. Zuckerberg moved Facebook from Boston to Silicon Valley in June 2004. This lawsuit was initially filed in September of that year.

Update: Judge seemed unimpressed by ConnectU's argument, according to, and case won't see much more action until the fall.

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