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Looking Back: Getting Started

As I wrote yesterday, we've pulled the plug on our investment firm.  As part of the wind down process, I thought it would be worth going back and describing the journey we went through in putting the firm together, trying to raise money, and the ultimate decision to suspend our fund raising.

Today I'll go back to the beginning.  It was early 2007.  I had left Venrock without much of a sense of what I was going to do next.  Although I considered some operating roles at that time, most of my effort was spent considering investment opportunities.

I made a real aggressive effort at networking.  I attended networking events, particularly Open Coffee Cambridge and the Web Innovators Group.  I met with anyone and everyone, from potential entrepreneurs to VCs.  I wanted to get a sense of what was going on in the market.  And, each person I met was a potential referral to someone or something else.  As I learned in the VC business, you just don't know where the big idea is going to come from.  Everyone should carve out some time for networking in their industry.  It's an investment in your future, and it keeps you current and connected.  With an open mind, you can always learn something from meeting a new person.

As part of that networking, I became an advisor to a bunch of start-ups.  This wasn't a job -- there's no cash compensation.  Some of them offered up some stock options.  Others I did as a labor of love.  I decided not to be an angel investor as I didn't know what I would end up doing.  I wanted to both minimize my formal entanglements and keep my personal capital available for potentailly starting up something on my own.  Also, not investing allowed me to be more direct with the entrepreneurs -- I was only giving them feedback because it's what I thought was right.  It didn't have to do with protecting my investment.

I thought about joining an existing investment firm (if they would have me).  But, I had joined two VC firms previously, Atlas Venture and Venrock.  It's very hard to get a good read on a VC firm from the outside.  You have to spend a lot of time working with them directly to understand the internal dynamics.  The target list of firms I could join pretty much went to zero when you considered the number of firms that would consider having me join that also had sufficient capital to justify adding another partner that I was also interested in joining and that was willing to go through a long 'dating' process to make sure that it was a good fit.

But, during this time, I started working with what became my Sempre partners, Bob Fleming and Tim O'Loughlin.  I had known Bob for some time.  He was the common link between Tim and me.  We started spending time together, initially strategizing about potential investment strategies, but really just getting to know each other better.

We found that we made a great fit.  We complemented each other's skills.  Our personalities meshed perfectly.  We came to a shared vision in how to run a potential partnership.  We each felt that as a team we were better than the sum of our individual parts.  We decided to enter the due diligence stage on forming a team -- gather the same diligence on each other that a potential LP would gather, develop an investment strategy that was compelling in the early 2008 market when we would likely kick-off official fund raising, and figure out if this strategy was compelling to us personally and was a great fit for our skills.  This would take time, but we needed to do this to confidently tell prospective LPs that we were a strong, committed team.

The final diligence and strategy development will be the subject of my next post.

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