First Round Capital Bridges 'Chasm' Between Startups and Brands
A Seed-Round Fund That Takes the Ad Business Seriously
Venture-capital firms are measured in funds raised and exits. But if they were measured in how well they bridge the divide between the startup world and the world's biggest marketers, First Round Capital would win, hands down.
Silicon Valley tends to view advertising as a spigot that can be turned on, and that leads to too much money funding solutions to problems that no marketers have. But First Round Capital has a different approach: It thinks about the business from the start. And that means making connections to marketers and agencies.
It started in 2008, when FRC chartered a bus and took about a dozen entrepreneurs on a tour of big agencies, including McCann, Digitas and OMD. Among the passengers were a just-out-of-college Nat Turner and Zach Weinberg, who demo'd an early version of Invite Media, which would be acquired two years later by Google.
Since then, FRC has launched its well-attended Advertising Summits, as well as trips to marketers themselves. In the last six months, FRC entrepreneurs have visited Procter & Gamble, Red Bull, GE, the Washington Redskins and Hearst.
"There is a big disconnect between big brands and little startups," said partner Chris Fralic. "It is profound. It is a chasm. The percent of the time it really works well for both sides is too small. Part of what drives me and a lot of the efforts that we do is to help bridge that gap -- to bring marketers and startups together and find ways to work with each other better."
FRC is seed-stage and invests small amounts -- $500,000 to $750,000 -- then builds a network of entrepreneurs that can help each other within industries. With 21 portfolio companies in ad tech alone, it's one of the biggest investors in the space. In its 2012 annual report, FRC calculated that every dollar it invested was followed by $36 from other investors.
Exits are important, but so is the value added to fledgling companies and the industries they serve. "It's the value that we work super-hard to deliver beyond the dollars," he said. "The primary value we are most focused on is the community and the network."