Blog

Fellow VCs: Here’s Where to Invest $1B+

A couple weeks ago my colleague Dimitri Dadiomov published a post on NextView’s “View From Seed” blog which answered the question “Should we take Harvard MBAs Seriously as Startup Founders?”  The (obvious) answer of “yes” he supported with comprehensive research about the entrepreneurial activity coming out of Harvard’s business school.

We knew that it was formidable, but the sheer number of founders, companies founded, dollars raised, and (early) exits from HBS founders over the past six years impressed us.  From the group, over 260 founders have launched around 90 startups, raising more than $2.5B in capital.  Notable names like BirchBox, Blue Apron, Cloudflare, and Rent the Runway were launched by these MBA grads.  Successful exits include Wildfire (to Google for $350M), Behance (to Adobe, $150M), and RentJuice (a NextView-backed company co-founded by David Viveroto Zillow for $40M).  It wasn’t a complete surprise to my partners and me at NextView, though, as in addition to our RentJuice investment, we have backed a number of other Harvard MBAs who started companies straight out of school including InsightSquared (co-founded by Fred Shilmover, raising $27M to date) and ThredUp (co-founded by James Reinhart and Chris Homer, raising $50M to date).

But what was surprising, at least initially, was the apparent downturn in the graph after a peak of activity in 2011.  Has something gone wrong in the past couple years?

 HBS1

Quite the contrary.  Rather, as Dimitri noted, we’re at the beginning of the cycle for these recent classes.  On the number of founders and companies:

  • Some people are likely in stealth mode, and haven’t self-identified themselves currently as founders, which is merely a known bias in the study.
  • Some alums will work a couple years prior to starting their companies, rather than doing so right out of school. These individuals and companies are just being started now or will be shortly, and will likely bring up the count for these years if looked retrospectively a couple years from now.
  • The class of 2014 shows no sign of slowing down, at least when you see that 41 founders have already self-identified. It’s just one data point, but it certainly makes the classes of 2012, 2013, and 2014 feel anything but dormant.

On the metric of capital raised, the rationale for the smaller figures is the same as the two points above, coupled with a more important fact that earlier in a company’s life-cycle it’s almost by definition likely to have raised smaller amounts.  Pursuing the underlying data, it’s as you’d expect that most of the rounds raised so far are Seeds and Series As, and many haven’t even raised any meaningful capital at all.  And, of course, the larger growth rounds just haven’t happened yet since the startups aren’t mature enough to warrant 8-figure capital raises.

And therein lies the $1B investment opportunity: funding Harvard Business School startup founders from 2012-2014 and beyond.

HBS2

Even if we remove 2011 as a potential outlier, that billion-dollar estimate is still a very resonable prediction.  The dotted red line above shows the average amount of capital raised by HBS founders between 2008 and 2010: $416M per year.  Take that as a proxy, and it’s fairly safe to project that the HBS classes from 2012 onwards will likely raise a $1B in venture capital over the next few years.  It’s up to seed funds like ours at NextView Ventures to identify and work together with these entrepreneurs for the early capital raises and catalyzing their best possible start.  And larger venture capital funds seeking to deploy meaningful capital should look no further… my fellow VCs, these 88 (recently graduated) HBS founders and their ventures are ripe opportunities for investment.  The early exits from their predecessors are a strong leading indicator that’s they’re going to be very fruitful.

 

David Beisel

David Beisel is a co-founder and Partner at NextView Ventures. He has been focused on early stage Internet startups his entire career, both as an entrepreneur and venture capitalist. As an investor in the digital media space, David was most recently a Vice President at Venrock and previously a Principal at Masthead Venture Partners. Prior to becoming a venture capitalist, David co-founded Sombasa Media, an e-mail marketing company best known for its flagship product BargainDog. Sombasa was successfully acquired by About.com where David served as Vice President of Marketing. David holds an MBA from the Stanford Graduate School of Business and an AB in Economics, magna cum laude and Phi Beta Kappa, from Duke University. He also founded and leads the Boston Innovators Group, an organization which holds quarterly entrepreneur events drawing a thousand attendees.


  • brentgrinna

    great post.