Andreessen browsing for Internet gold mines
Netscape co-founder raises $300M to make early bets on startups
It's fitting that Netscape cofounder and University of Illinois alum Marc Andreessen is pressing the refresh button on the beleaguered venture capital industry. A pioneer of the commercial Internet and a dot-com mega-millionaire, Andreessen recently raised a $300 million fund that takes an older school approach to investing in emerging technology companies. The fund is designed to make smaller bets on more startups.
While fund-raising for venture capital firms nationwide plunged by nearly two-thirds to $5.1 billion in the first half of 2009, Andreessen and partner Ben Horowitz apparently had little trouble courting limited partners. The fund will invest as little as $50,000 (and all the way up to $50 million) in mostly Silicon Valley-based Internet startups. The partners have the Rolodex to source the next Twitter (of which Andreessen was an angel investor) and the capital to maintain their investment interest through an IPO or acquisition.
(AP file)
So how might this new venture model impact Chicago area deals?
"My belief is that a $50,000 investment is a down payment or gateway to a larger involvement," said Steve Miller, principal with Northbrook-based Origin Ventures. "It's like living together before you get married."
Origin typically invests about $1 million in its portfolio companies, which include online restaurant delivery service GrubHub.com and Internet telephony provider IfByPhone. Miller said his firm is contemplating making smaller investments in two earlier-stage companies, with more dough to come if certain benchmarks are met.
"When greater capital is needed down the road, it's a quick and easy process," he said.
Matt McCall of Evanston-based New World Ventures notes that Andreessen and Horowitz started off as successful entrepreneurs who are now reinvesting their riches in younger companies. He added that while Chicago does not have Silicon Valley's volume of entrepreneurs-turned-investors, the region is developing "second- and third-generation entrepreneurs" in the interactive media and Internet services industries. When the markets turn around, McCall believes, they "will start to come back out of the woodwork."
Dick Costolo, co-founder and former CEO of FeedBurner, is coming back to Chicago after a two-year stint with Google. FeedBurner, which raised money from McCall (then investing of out Northfield-based DFJ Portage), was acquired by Google two years ago for a reported $100 million.
Costolo, an angel investor in Twitter, said he plans to spend the summer in Chicago and then see "what comes next" in the fall. When asked about the Andreessen Horowitz fund, Costolo understandably supported more "operator/entrepreneurs on the investment side of the fence." The former improvisational comedy performer added that he "specifically wanted active investors" while growing FeedBurner, and "always will."
The Printed Blog, an ambitious albeit revenue-challenged media startup that launched with great zeal earlier this year, is no more. Founder Josh Karp cited "a lack of outside capital" as to why he ceased operations for the company, which printed and distributed compilations of online blogs in Chicago and other markets. Stay tuned for Karp's next venture.
More than 1,500 aspiring business owners are expected to converge this Friday at the 2009 Small Business Expo, which will be held at the UIC Forum. Don't miss the sweet elevator pitch of Chicago Chocolate Tours and other speakers (including yours truly) and exhibitors. More information can be found at www.chicagocitytreasurer .com.
Brad Spirrison is a Chicago free-lance writer.