This is a guest post from Eric Wiesen, a general partner at RRE. It originally appeared on his blog.
The recent acquisition of Gowalla by Facebook is just the latest incidence of the potential tension between investors and founders when a company is acquired primarily for the team rather than for the technology, product or business that they’ve built. People around the web will take the opportunity to observe that in situations where a company is acquired in this way, the founders typically get a package of equity to motivate them to join (and remain at) the acquiring company, while investors usually get anywherefrom zero to a small return on invested capital. Look around and you’ll find people willing to condemn the founders for unethically “selling out” their investors and you’ll find people who say the exact opposite, that such a company didn’t have saleable assets anyway, and so investors are owed nothing because the business failed.
A few weeks back Betabeat met Oren Bennett at a Brooklyn Beta party, where he informed us that he was a recent college dropout who was planning to start his own venture fund. We had our doubts, given his lack of experience as an entrepreneur and his admittedly minimal knowledge of finance. Today we got an update from his friends at UNYStartups:
Mr. Bennett is doing great. He met Mark Suster, who thought he was wasted. And he is forging ahead with his venture adventure, aiming to raise a $100 million fund his first time up to bat as High Growth Capital Partners.
This being a hip, youthful fund, it currently operates off of a Tumblr and Twitter account. As Mr. Bennett explained, “We were also at the peak of the biggest macro cycle in the history of the U.S. This meant it was the best time to raise and the worst time to invest.” In order to compete with established shops like DFJ Gotham and USV, Mr. Bennet had to go big. “I decided to raise $100 Million myself and start my own VC Firm. I needed to raise as much as I could because after the cycle ended I would have to wait a long time before I could raise again. I knew the minimum amount for the first round was usually $25 Million. I was about to do something very unusual.”
American Express just hosted their first ever Open Forum hackathon at General Assembly and the company has been invested and partnered with a number of New York startups this year. Now American Express has announced an initiative to invest $100 million in early startups to “facilitate the company’s transition to digital,” which seems like a fancy way of saying they want to be in on the smart money.
Taylor Davidson was working on a mobile wallet ten years ago, building a system to put PayPal onto people’s PalmPilots. “I was trying to do intelligent apps for smart phones before the technology totally existed,” he told Betabeat by phone. “Now you can see the explosion of this stuff because the technology has caught up with the ideas.”