What I learned on the First Round Startup Trek

Tuesday, I joined Howard Morgan, Josh Kopelman, Chris Fralic, Phin Barnes, and our GC Doug Bernstein on First Round Capital’s tour of NYC startup spaces—temp offices and incubators where there were critical masses of companies doing innovative things.  We went to two Sunshine Suites locations, all three TechSpaces, the Incubator at RoseTech, the NYU/Poly Incubator, and New Work City.  Our goals were twofold—one, of course, to meet new and interesting companies at an early stage and two, to let people know that we’re an active NYC investor willing to look at companies at such an early stage that the whole company is two people, two desks, and a whiteboard.  At the same time, we pride ourselves on being a hustling, customer focused business—like the companies that we invest in—so showing people that we’re willing to come to them versus being an “ivory tower” VC that waits for you to go to them.

Miko Mercer at LaunchSquad helped us with some of the PR event, which included a great piece in the WSJ and awesome coverage in CenterNetworks.  She collaborated with Ben Kessler on a great video record of the days events as well:

I learned quite a lot about the startup ecology during the walk:

1) First off, every space like this needs an advocate—not just someone to call when the toilet overflows but someone who not only knows the companies in their space, the residents by their first name, the potential synergies, but who is also tapped into the outside world that these companies live in.  I was struck by the shepard-like position that Bruce Niswander holds at NYU/Poly and how much Paula Hughes at Techspace Chelsea was tapped into the local startup community and paying attention to that world through social media. 

2) Some spaces are more tech-y than others—and one thing we learned is that there’s a big difference between a startup incubator and a temp office space.  I thought we were going to run into more bootstrapped companies like Yipit than we did—two guys putting out the money to work in a small office because they found themselves to be more productive outside of their house.  What’s clear is that most entpreneurs are not spending their own money on desk space—but perhaps to their own detriment.  Some of the facilities here were really impressive—and clearly there was a sense of collaboration among the teams we met that you don’t necessarily find when everyone is working remotely.

3)  Much more needs to be done to bridge the gap between the communites inside these spaces and the community outside.  Most of us at First Round hadn’t seen all of these spaces, and many of the residents I spoke to didn’t necessarily know about things like nextNY or any of the more focused meetups that have been going on.  I talked to a few of the spaces about hosting more events for outsiders to bridge that gap and help advertise what they have.

4) VCs are much more resiliant than I thought they’d be.  While not all of them made it the whole length of the trip, I was pretty impressed with the walking speed and general resistance to the 20-degree temps shown by the First Round Capital team.

5) A place where the innovation community could use a little more glue is among service providers, consultants, and investors.  I ran into two PR firms that had done work for First Round portfolio companies that I didn’t know too much about—and a graphic design and user experience shop that had built some of the largest ecommerce sites in the world.  These are important resources for an invester to be able to share with companies—and they also see a fair number of companies themselves.

6) Startups generally suck at “wide open networking”—where the purpose of a meeting isn’t specifically stated.  There were a bunch of companies that I met that didn’t initially come out to see us who hesitated because they weren’t sure if they were supposed to be pitching, if there was a signup, or they had already raised money.  As an entrepreneur, you need to be out there building a huge network.  Even if you raised money, as a feeder fund for larger VC firms, we probably have better relationships with most of the top tier funds than anyone else—and if you’re not right for us, we’re happy to pass you on.  At the same time, with more than 60 companies in our portfolio, it would be really surprising to me if there wasn’t someone you couldn’t strike a biz dev deal with, get bought by, etc.  Startups need to do a better job of realizing the opportunity that arises when someone with a big network just wants to shoot the shit and talk shop.