“The time to invest in social media was two years ago.” That was a quote—or the gist of it, anyway—from Todd Dagres, co-founder and general partner of Spark Capital, during the venture panel at XSITE, Xconomy’s innovation summit last month.
Dagres ought to know, since Spark is an investor in both Twitter and Tumblr, the white hot mixed-media blogging platform—and Twitter co-founder Biz Stone recently became a Spark strategic advisor. So his quip seemed a perfect setup for me to ask the obvious follow up: What’s next?
I sat down with Dagres last Friday in Spark’s offices on Newbury Street in Boston to get the skinny on what he sees as the emerging new areas for investing that might take off the way social media has the last few years. “I can’t tell you that,” was his first reaction, but he wilted, as you’ll see. We also covered some other interesting ground—such as his views on what has made New York tech so hot and how it compares to Boston, why Groupon doesn’t get his investor juices flowing, why tech investing is better than making movies (Dagres had a stint as a Hollywood producer and still does it on the side), and more (Governor Patrick—read on, because there’s some stuff for you, too).
We started with New York, since late last month Spark closed its 19th deal in the Big Apple—joining in a new $50 million round for Foursquare—out of a total of 43 the firm, which was founded in 2005, has done. And Dagres says Spark has signed two more term sheets with NY companies. That’s a whopping percentage, almost half the total. The rest, he says, break down as a dozen in Silicon Valley, seven or eight in the Boston area, and a few others scattered around.
Here are the take-homes from our conversation:
Boston vs. New York—Dagres says New York surpasses Boston on some key parameters for entrepreneurship. “It really is a vibrant community of entrepreneurs. It’s a very creative environment. It’s an environment where there’s a sense for the customer. And it’s also a community where there’s a lot of sharing going on.” What Dagres calls “a powerful mixture of factors” has led to the ascendance of New York entrepreneurship. “I think it grew out of the Wall Street bust and also the transition from traditional media to digital media. Kids grew up in a media hub and an environment of a lot of risk-taking. That all mixed together. The other thing I will throw in there is the artistic element.” All these things previously existed in pockets around the city. “Now, it’s kind of come together into one big vibrant, collaborative community.”
Boston, says Dagres, now falls short of New York on at least two of the factors listed above: collaboration and sense for the consumer. When it comes to venture firms, he says Boston VCs have traditionally invested in enterprise-focused software companies-and see consumer-oriented startups as too risky. “It’s all risky,” he counters, and meanwhile the unprecedented ability of small companies today to reach billions of consumers is “incredibly powerful.” Besides Spark, Dagres could only name one other Boston-based firm he felt was comfortable investing in consumer plays and taking big risks (another, oft-cited critique of Boston venture firms, which Dagres agrees with)—and that was General Catalyst.
But Boston’s shortcomings vis à vis New York don’t stop with venture firms. Dagres says as a whole, Boston’s entrepreneurs lag New York startups when it comes to collaboration and sharing—and that, in turn, has prevented Boston from matching the spirit of the entrepreneurial community in New York. “We don’t quite have the critical mass in the community,” he says. “And we don’t have
