“Micro VC” and “super angel” funds are all the rage these days. These terms refer to the emerging segment of venture capital and angel capital in which a growing number of investors are putting small amounts of seed money into very early-stage startups—mainly in Internet software.
How are traditional venture firms reacting to this movement? Many already make seed-stage investments, and others are starting to do more. I recently sat down with Izhar Armony, a partner at Charles River Ventures, which has offices in Waltham, MA, and Silicon Valley, to talk about many things—among them, how he views the micro-VC landscape. Charles River Ventures has had its own formal seed-stage funding program, called QuickStart, since 2006. In this program, the firm invests $250,000 in the form of a loan to each startup, and it has backed more than 30 of them to date. “For a certain kind of investment, it’s good,” Armony says.
Armony’s expertise runs the gamut from mobile software, open source, and software-as-a-service, to intellectual property and alternative energy. He was a veteran of Onyx Interactive, a computer-based training company in Israel, before joining Charles River Ventures in 1997. His startup exits have included Virtusa, iPhrase, ThinQ, Yantra, Guardent, and Oberon. He is currently involved with a number of companies we report on regularly at Xconomy, including Intellectual Ventures, RPX, TerraPower, 24M Technologies (the new spinout from A123Systems), and Vlingo. [Disclosure: The author’s brother-in-law, Mike Phillips, is a co-founder of Vlingo—Eds.]
Here are some excerpts from our chat, about micro-VC strategy and some misconceptions that first-time entrepreneurs may have about building companies. I thought it was particularly interesting to hear these things coming from a well-established tech VC in town:
Xconomy: What do you think about the evolution of micro VC?
Izhar Armony: In general, I think it’s a positive phenomenon for the entrepreneur to have a more approachable source of capital that can write very small checks to begin with. Specifically, for certain kinds of startups—consumer Internet startups, less so [software-as-a-service] companies, but maybe, where within weeks you’re up and running, and the cost to launch is in the tens of thousands, or hundreds of thousands of dollars, but not millions—it’s very good. As Chairman Mao said, “Let a thousand flowers bloom.” From the entrepreneur perspective, it’s a good thing.
But there are two problems. One is that innovation is much broader than Web 2.0.
