Most venture capitalists don’t understand tagging, blogs, rss, ajax, or the two way web. They scoff at social bookmarking sites and think podcasting is a fad (maybe it is). They desparately “want in” to this renaissance of the web, but can’t be bothered to open up the simplest RSS reader and understand the power of decentralized content. In short, they don’t get it.
Most traditional VC funds have a single web-focused partner, who may or may not be interested in web 2.0 consumer companies. For the most part, these VCs are not part of the most interesting deals. If they do get what you are pitching, they want to pump way more money into the company than makes sense.
Here’s my attempt to point out the venture capitalists who do get it. Some of these have new funds and only recently became venture capitalists. Some of them have been around forever. There are just two personality traits all share. First, they understand that a fundamental shift has occured in web evolution. Second, they are hungry as hell to find deals, and spend more time proactively looking for the next opportunity than they do sitting back and looking at the business plan stream that naturally flows into any venture fund.
This list is purely subjective. It’s blatantly biased. Some VCs don’t belong and many who do are left off. But it’s a list, nonetheless, that I’ve come up with over the last few weeks of interviewing entrepreneurs, venture capitalists and journalists.
David Cowan
David Cowan is a partner at Bessemer Venture Partners and writes a blog called Who Has Time For This. He’s on this list partially because he incubated the hottest and most anticipated company on the web right now, Flock.
This guy picks winners. Of 43 early stage investments, 19 have gone public and 16 have been acquired. It could be because of his education – he has the killer combination of a math/CS degree and a MBA from Harvard.
Tim Draper
Tim Draper invested in Skype. Done.
He also sits on the board of SocialText, and his fund was in Baidu.
Tim will go anywhere in the world for the right deal. Most VC’s with 1/10th his net worth won’t leave silicon valley for a board meeting.
David Hornik
David Hornik is is a General Partner at August Capital and writes a blog that has over 10,000 RSS readers.
David best asset is that he knows everybody. He’s the kind of guy you want to drink beers with while watching a football game. If you are his friend, he’ll happily introduce you to anyone, and often puts two people together just because he thinks they should know each other.
He’s invested in companies that are defining the web today: SixApart and Technorati among them. And even if he doesn’t invest, he’ll do more than most VCs who have invested to help you. Here’s just one example – take a look at the things he says about Pandora, which isn’t a portfolio company.
David has told me on numerous occasions that “the web is an ecosystem” and that he wants to play his part in making it healthy. He certainly does.
Josh Kopelman
Josh Kopelman, through FirstRoundCapital, is quietly filtering through just about every young web 2.0 company, and investing in many of them.
Josh has a Wharton MBA and was the founder of Half.com, which was sold to ebay in 1998. His investments include Feedster, LinkedIn, Del.icio.us and, reportedly, Browster (and others).
Josh understand web 2.0 better than most entrepreneurs. His experience as an entrepreneur and growing huge businesses out of whole cloth is an incredible asset.
Fred Wilson
Fred Wilson is a founding partner of Union Square Ventures and writes the extremely popular A VC. If you are new to web 2.0, start with his Blogging 1.0 post. Then read the rest of his blog (even the stuff about music).
Fred was the original lead investor in del.icio.us, back when people were still scratching their heads about it. That enough gets him on the list. But Union Square’s other investments, including indeed, could also be major home runs.
It’s clear from his blog and what people say about him that he spends a lot of time working with his portfolio companies. He’s the kind of guy you want on your side when you go into battle.
Notables
Jeff Clavier – Jeff is a former VC and still makes the odd angel investment (Feedster, Truveo, and a few others). His new venture allows him to work with pre-funding companies and get them ready for prime time. In the last year, he’s worked with Userplane, Buzznet, UltraDNS, Glenbrook Networks, Loomia and two other undisclosed companies. If you have a hot idea and need advice, funding, introductions and anything else, Jeff may just take you on as a client and do what it takes to help you be successful – but like a VC, he’ll have to be convinced of your potential.
Brad Feld – Brad is a managing director at Mobius Venture Capital and writes a must-read web 2.0 blog called Feld Thoughts. Read his posts on Term Sheets if you are in the process of raising capital. I keep trying to meet him but haven’t yet. Brad’s investments include invested in NewsGator, Feedburner and Technorati.
O’Reilly AlphaTech Ventures – This is the only non-person on here. OATV just closed a $50 million fund to invest in young companies. Given the incredible access Tim O’Reilly has to these companies, OATV could quickly become an important fund in the web 2.0 space.
Pierre Omidyar – Pierre founded ebay and is the Co-founder of Omidyar Network, where he’s invested in a number of interesting companies including EVDB, SocialText and Feedster, plus a few undiscloseds. And it’s always good to have a multi-billionaire on your side.
Peter Rip – Peter is a founding partner of Leapfrog Ventures, a $100 million fund. Peter also writes Early Stage VC, another must-read blog. His investments include ojos, an incredible new photo-metadata service that is going to be extremely disruptive (and useful). Like others in this post, he’s a guy I’d want on my board. He’s gone through many battles as an entrepreneur in his time (he founded his first company in the early 80’s and worked at Infoseek in the late 90’s).
Peter Thiel – Peter, the former CEO of paypal, has invested in LinkedIn, Friendster, LinkedIn and other web 2.0 companies. He’s just created the Founders Fund. Can’t wait to see what investments come out of it.
The Young Guns
There are three additional VCs that are yet to make notable investments. But they are laser focused on the space and are hungry to make investments in web 2.0 companies. You will find them at every event and seem determined to make a name for themselves. I include them here now because Ithere’s a good chance that when I update this list in a year, they’ll be at the top.
Thomas Ball – Tom is a Venture Partner at Austin Ventures, a fund with $3 billion under management. He’s their consumer and web 2.0 guy and seems to be spending a lot of time in Silicon Valley and at web 2.0 events. Prior to joining AV, Tom was an entrepreneur who founded a couple of successful Internet companies. This adds a unique perspective to his investing philosophy in web 2.0. He works actively with a number of AV portfolio companies including Pluck and, I suspect, will be making important investments in web 2.0 in the near future.
Dan Grossman – Dan is a principal at Venrock Associates and has recently started a great blog called A Venture Forth (where he wrote a much bookmarked post on Ajax). Prior to Venrock, Dan was at Garage.com. You’ll also find Dan at most web 2.0 conferences, and he’s made a huge effort to reach out to the community and network.
Jason Pressman – Jason is a principal at Shasta Ventures, a young $200 million fund that has a deep commitment to and expertise in consumer-focused businesses. Jason was at Walmart.com and was part of a small group of executives that ran the place before coming to Shasta – he was VP of Strategy, Operations and Business Development. He has a keen insight into web 2.0 and has served as an advisor to a number of companies in the space. Jason knows how to grow startups to massive scale, and he is always thinking about which new companies he can help to achieve that scale.
Very silly question, but how does one get to be a VC?
Michael,
Great job on the list. I was happy to see that you had David Hornik in the top 5 and Brad Feld as an honorable mention. They are both going to be on the maiden VentureWeek podcast due to be released this Saturday. The topic, not suprisingly, is Web 2.0. Looking forward to having you on the show for the Year in Review episode in December. Take care.
These lists are rather pointless from a practical perspective. Why? Well, you still need a personal intro in order to get taken seriously by an VC. Without it,you’re dead in the water.
Mary Ann-
1. Have a lot of money.
2. Be willing to invest in risky unproven products with great potential.
Cool! Get them all to give me a call. I wanna sell out because x-mas for a $billion
I’m glad to see only one VC (Austin) that screwed me during Web 1.0.
Peter> Not true, very early stage opportunities come without trusted referrals. A lot of my deal flow comes from my blog or meeting people at conferences or geek/blogger events.
Great list Mike!
Mary Ann: You might want to check out the Kauffman Fellows program (www.kauffmanfellows.org).
How about a list of people that aren’t thinking about the space, but should be… like a “Where are they now” post?
Sorry Jeff, one exception doth not the rule make.
No Joi Ito?
Jonathan (#13) asks the obvious question. How can one leave out from this list Joi Ito, a VC who not only “gets it” but who helped “create it.”
the web 2.0 technologies you speak of are hyped and inchoate because too few people know what to do with them yet. what we’ve seen recently is an explosion of shallow, half-baked projects the internet public will never use.
ajax, rss, blogs and tagging might be cool, but I can’t blame the average venture capitalist- who is accountable to his investors- for waiting for a conspicuous return on these buzzwords.
does this seem iconoclastic? the smallest public library in the country has a set of deeper knowledge than one million chatty blogs put together.
fewer than 3% of internet users use RSS. I’m willing to bet they’re all geeks.
regarding tagging, have you ever noticed how imprecise it can be? When I tag ‘architecture’ by itself do I mean buildings or computer programming?
How is investing in Skype put on the same level (automatic inclusion) as investing in del.ici.ous? Isn’t making some ridiculous money the measure of a VC (return to investors)? Investing in cool tools doesn’t cut it; couting bank is the only true measure.
Peter> Good point, but I would bet that this is true for a lot of my esteemed colleagues.
Sam> Using that metric (the only one that matters – really), the only VCs who should be there are Tim Draper, Geoff Yang from Redpoint, whoever led the VantagePoint VP pipe in Intermix and Tony Conrad for Oddpost.
If I were to update this list after a day of receiving emails and comments, I’d make a few changes. I’d add about 15 guys, for instance, and would move Brad Feld at least up to the top list. I also note this post by Rex Hammock
Jeff,
My guess Jeff is that you have chosen to go further upstream as a means of securing deal flow before it gets to the big guys. That makes perfect business sense. But I still humbly stand by my claim that you are the rare exception who works with startups this early.
Hi Michael,
Thanks for putting this great list together! Love TechCrunch! This has become one of my best resources on the web for everything regarding web 2.0!
NO Marc Canter on this list ? egads !
this is damn self-referential. Tell me why I should care to read more of this? Narrow audience, doesn’t mean audience that has narrow interests. Don’t just show us you can find stuff. Show us you can make new connections.
Comment no. 22 – please clarify. Are you referring to me, or to a comment?
Hey you guys should list Stephen Hall, who is the lead early-stage investor for Vulcan Capital (Paul Allen). Steve just invested in our startup (we’re stealth mode, developing something that combines Web 2.0 AJAX with the Semantic Web..). Steve “gets it” better than any VC I’ve ever met. He also uses the tools himself all the time. I think he should at the very least be one of the “young guns” in your list.
Nova
Thx
more of an angel than a VC, but certainly Reid Hoffman should be on the list, and as noted previously Joi Ito.
along with Draper, other folks at DFJ like Steve Jurvetson are also quite savvy there (altho he’s more well-known for nanotech these days).
- dave mcclure
http://www.SimplyHired.com
Well both Josh and Peter funded my company ….hmmm
we’re already working on web 4.0. so there.
And, the startup mentioned most frequently on the list as Michael posted it …
Feedster.
HaCStart is an Sydney, Australia based incubator and seed capital investment firm specialising in internet and web services.
A number of our portfolio companies are the the web 2.0 & social networking space.
We currently have room to discuss opportunities with both entrepreneurs and investors.
Visit the HacStart.com website to find out more information.
http://www.hacstart.com
As someone who is in the process of raising VC from a place far away from Silicon Valley, I was glad to see a list to focus my efforts to raise capital.
They don’t explicitly say anything about Web 2.0, but I suspect Y Combinator would also fit the VC list.
MISSING ONE?
According to Matt Murphy of the San Jose Mercury, you’ve missed one… “Just a note for Web 2.0 fans, this is the firm where David Sze is a partner. He has invested in such companies as Cairo, Digg, LinkedIn, Oodle, SoftCoin and Wink, as well as “another stealth mode consumer technology start-up” — making him about as prolific as any VC in this area.” See:http://www.mercurynews.com/mld/mercurynews/news/columnists/13223037.htm
is it a good idea to talk about any kind of idea such as new social networking application etc to angels who have invested in the company within the same field e.g. social networking?
How do one invest in one of these VC’s?
I have to go with the boys at Northwest Venture Associates. They don’t screw you over.
Excellent list, some VCs are more fortune than others, but I venture to say that a lot of venture capitalist understand technological innovation like web 2.0, but only a selected few get to invest in innovative technologies. But like everything else out there it’s only a matter of time.
Cheers,
Saeed El-Darahali
Spoken to a few guys but you will also note that Bob Ackerman and Spencer Tall should be in that list from Allegis Capital.
Michael, I am surprised not to see Morten Lund here at all. Morten was the one guys who seed invested in Skype when nobody believed in them. Recently he invested in Maxthon and Zecco + much more coming. AND he is Danish – not a US based investor.
BTW, I think it is wise of many of the guys that “dont’t get it” as you say, not to invest in tagging and all the social media hype. There is very little business in it with a few excpetions. The fact that Yahoo bought Delicious (which is a great service) does not mean that there is business in it – just an excit (which is always nice of course).
Net,
Right on. Morten Lund has to be included but he is a European in a US centric list. Lot’s of interesting things come out of Europe these days as penetration of broadband and mobile has been much higher/faster than in the US.
Only a few guys like Morten Lund, Soren Kenner and myself focus on that space. No wonder we all work together
Alain, you are right! Good to be in the right company
Tom,
In the next list can you add some angel funds that have been involved in web 2 deals.
I found this today, can’t wait to see the list this year.
This is a good resource.
It would be great to add a broader list for AJAX related technologies.
Kopelman went to Wharton undergrad I think, not Wharton MBA
Mike,
great list. although someone like venrock is too conservative to be on it. Further, its usually a waste of time talking to associates or principles (ie non partners) if your in the early stage. At the later stage, most of these guys are irrelevent anyway.
Best,
bF
To me they all look alike
Smart 
Thanks! Will refer back to this list soon…
This is a very good, but I could add a broader list of VC’s and firms interested in Web 2.0 and related technologies.
Cool! Good to be in the right company