On the last day of September, San Diego-based Avalon Ventures announced a closing of $161 million for its new fund—Avalon IX—on its way toward an upper target of $200 million. Avalon is an 18-year-old firm—storied in San Diego but not fantastically well known nationally—still led by founder Kevin Kinsella. Avalon made its name in biotech. But increasingly it has diversified into digital media investments, largely thanks to the work of managing member Rich Levandov, who joined the firm in mid-2007 to lead its East Coast activities after some five years with Masthead Venture Partners.
Levandov, who still works out of his old Masthead office just blocks from Xconomy’s headquarters in Cambridge, MA, has led Avalon’s investments in a suite of Internet startups, among them Cloudant, Cloudkick, Pictela, and Simulmedia. But it was his November 2007 Series A investment in social game developer Zynga—which he co-led through Avalon VIII—that really put Avalon on the digital map.
Kinsella told Xconomy this spring that Zynga, which has recently been valued at a reported $5.5 billion, might be Avalon’s most successful play of all time. And even though Avalon is still known primarily in biotech circles, having Zynga in its portfolio gave the firm real momentum during the raise of its new fund. In fact, Avalon’s new focus on digital investments may be the leitmotif of Avalon IX.
As Levandov says, “To me, the thesis on which we raised the fund was on increasingly technology-enabled Web services—social media applied broadly, not just to games but to every facet of Internet life.” That means e-commerce, enterprise computing, publishing, and retail, he says.
Levandov is quite a character in a profession with some great characters: you can read about him in Extreme VC: Tale of the Tacoda Tattoo (he hasn’t gotten the tattoo yet, by the way, but that’s another story). A bit scruffy, completely casual (usually wearing jeans), and iconoclastic, he just isn’t what comes to mind when you think venture partner. For instance, we were set to meet one recent morning at Henrietta’s Table, the favorite Harvard Square breakfast hangout of VCs. But he buttonholed me in the waiting area and took me down a nearby alley to the funky, hippie-yuppie Hi-Rise Bread Company, where we had the upstairs pretty much to ourselves—absolutely no suits. While we ordered, Levandov gave me a quick gourmet coffee tutorial: It turns out he is a coffee connoisseur the way most VCs are wine-ophiles.
But that’s another story, too. The point of this story is Zynga. Levandov co-led the Series A with Brad Feld of the Foundry Group and Fred Wilson of Union Square Ventures. But while you hear a lot about the other two, who have become VC superstars, you don’t hear that much about Levandov. I wanted to ask him how that investment came about, with an eye toward gleaning some insights about the direction in which the Internet and social media might be heading—and for entrepreneurs trying to come up with the Next Big Thing. Below is a summary of what we talked about—organized around what seemed to be the key areas or themes Levandov identified.
The Hunt for the Next New Platform—In Levandov’s view, there have been a couple of really significant platforms in the modern history of IT—namely, the PC and the Internet. “All sorts of companies,” he says, were built around each platform. With the PC they ranged from Lotus to Electronic Arts—not to mention Microsoft, which provided the operating system. With the Internet, Levandov says, “The real jewels that were built on that platform were companies like eBay and Amazon and Salesforce.com.”
Enter Mark Pincus and Zynga. “It was an interesting coincidence,” Levandov says of
