New York City seed investors are growing up, and raising bigger funds. IA Ventures just raised $105 million and ff Venture Capital closed its second $27 million fund last November (which I am reporting here for the first time). I asked ff VC’s John Frankel and David Teten to come into the TCTV studio to talk about the new fund and their approach to investing. Their first $6.3 million fund, which they raised in 2008, was the top-performing venture fund through the end of 2010, according to Preqin, with a net IRR in the high-40 percent range, says Frankel.
The new fund,which they raised over the course of a year, has already deployed capital to 23 startups, including Klout, ThinkNear, Livefyre, Voxy, and Kohort. The fund will stop investing in new companies at around 30, which it should hit by the end of this year. The rest of the capital will be reserved for follow-on rounds. The only way to get outperforming returns, believes Frankel, is to stay focussed. Frankel was an angel investor and before that worked at Goldman Sachs. Angel investing saved him from the Street, much like it did Roger Ehrenberg at IA Ventures. (In addition to Teten, Hashable CEO and Quigo founder Michael Yavonditte is a part-time venture partner at ff, which stands for “Founder Friendly”.)
If you look at their portfolio, there are a lot of data, analytics, and consumer Internet plays, but they always invest in the entrepreneur first. “We don’t think about the world by themes.” says Teten. “Our approach is the people who know the most about growth sectors are the entrepreneurs.” Adds Frankel: “Our teams drive our themes.”
In the video, we get into why ff invested early in Klout, among other topics. “A lot of people saw it as a Twitter analytics company,” says Frankel, who sits on Klout’s board. “We saw it as a way for people to manage their online footprint.”