A few months ago, Peter Lee--a venture local capitalist who has served at firms such as Prism Ventures and Clearstone Ventures Partners--joined a relatively unknown venture firm here in Southern California, Baroda Ventures (www.barodaventures.com). We caught up with Peter earlier this week to get the background on Baroda, and to talk a little about the firm's investment goals.
We're familiar with Baroda, but for our readers who haven't heard of Baroda Ventures, talk about the story behind the firm?
Peter Lee: Baroda Ventures is David Bohnett's--the founder of Geocities'--personal investment fund. David founded Geocities back in 1994, took it public in 1998, and in 1999 Yahoo bought the firm as a public company. He made a lot of money from those deals, so in 1999 he set up Baroda Ventures. He then invested in about twenty companies, almost all of them in Los Angeles or Southern California. They did really, relaly well. Some of the companies that you would know--LowerMyBills, Stamps.com, MediaVast, Xdrive, and Netzero--so as an investor, he was very successful. He was basically active investing until 2004 and 2005, and then started getting much more involved in the non-profit space. His foundation has put lots of money into charities, and he's given over $30M to date to charities. He's now sitting on three different boards of nonprofits. As a new phase in his life, he began to spend more time on that.
I met him a year ago, and we got chatting about the market, what's going on, and his own interest in getting back involved in investing. His view was that he was so busy with other stuff, he didn't have time to lead investments like he did before. In the first incarnation of Baroda Ventures, he only worked alone. It was him investing his own money. After a long discussion, we decided to relaunch Baroda Ventures, and he brought me on as a partner to run investing, in the early stage, venture side. He's still involved--obviously it's his money--but it's at the investment committee level. He's still be an advisor, and will get involved because he likes to, but he'll be leveraging my efforts.
Are there any specific areas you'll be investing in?
Peter Lee: Essentially, we are Southern California focused, through we will be looking at out of SoCal investments--we're not closing our doors to those, but our interest is really in focusing down here. Our size of investment rounds will range anywhere from $100,000 to $1.0M or $1.5M, for our first investment. Typically, our investments would be in the $500,000 range or maybe $750,000. In terms of sectors, it's going to be Internet, Consumer Internet, Software-as-a-Service--though in that area, not traditional enterprise sales, but along the lines of business productivity tools and customer acquisition tools like salesforce.com--and also digital media. That's our primary areas, and obviously--given the amount of money we are putting in--it will be seed or a small Series A investment. We would like to syndicate all of our deals, if possible, although we're willing to go it alone. With me coming in, there's a more concerted effort to work with other partners down here and elsewhere.
How many investments are you targeting a year?
Peter Lee: I would say we'd typically make four investments a year. There might be a little balancing, where we might do two larger investments and two, smaller, seed investments. It's still somewhat getting worked out.
Are you now out looking for opportunities, and are you seeing any good ones?
Peter Lee: There are some pretty good opportunities out there. The first couple of weeks, we were almost like a startup--getting things set up, infrastructure, email, and also doing lots of networking to get back in touch with the guys I've worked with in Southern California. I was also on a few panels and speaking engagements at small conferences and events, just to get our name out there. In the last couple of weeks, we've started to ramp up, and are actively looking at new investments. I wouldn't say we're extremely close to anything right now, but we've seen I'd say at least three different companies were we went further than an initial meeting--not a term sheet, but deeper diligence. There are definitely interesting things in Southern California. In a market where there's a general downturn, as well as a lot of LA-based venture capitalists who don't seem to be as active right now, it's been a benefit to us. We have money, and are aggressively looking to invest in companies that need money. In general, Southern California is less capiatlized from the venture perspective versus the opportunities here--there's lots of good stuff going on.
Peter Lee: Even though everyone took a hit from the market, the entrepreneurial industry here is more robust than it was before, just because of the build out of technology companies here. From MySpace, to Google, to Yahoo, to other large successful companies like LowerMyBills--all of these firms have built a good presence here, with lots of product and engineering talent. Because of the downturn, they've been busy spinning off a couple of guys here and there who have worked at these companies, and want to start new companies. There's that atmosphere here, and there's the engineering and product talent, especially in consumer Internet. I don't think that is going to go away just because the market is down. Given that, the Southern California venture capital ecosystem is definitely going through turmoil. You're seeing a lot more outside investors from Silicon Valley or elsewhere, the guys from First Round Capital, or other investors, doing a lot more investing in SoCal. LA VC's haven't been quite as active. That benefits me, as lots of outside VCs are happy to do the bigger Series A or Series B rounds. Talking about the small, seed series A investments, I get the sense that it's not worth their time to travel to SoCal, and they like to be close to their companies for such a small amount. For the outside venture capital firms, having a local group willing to do those investments helps tee them up for bigger investors. It will be interesting to see what happens with the Los Angeles venture capital market.
Finally, what's the perfect company for you, in terms of team, technology, etc?
Peter Lee: On the team side, you definitely need a very, very strong technical or product person--preferably on the founding team--along with a person who is a traditional business guy, who understand business models, and has some strength in business development or customer acquisition. Those two personalities are critical. We'd also love to have someone who has been part of a successful startup--but most likely, not one of the initial founders, who didn't make a lot of money or enough to retire on. They know the game plan, know what success looks like, know what it takes, and are hungry to be part of that founding team. We've love to have it if they had some experience as a founder, or tried to do something entrepreneurial on their own--successful or not--and have gone through realizing how much work it is. I also like to see someone who has shown a commitment to wanting to build a business by bootstrapping efforts, on their own, rather than coming to me with a business plan and not having built anything. I'd prefer to see that they have taken their nights and weekends, scrapped things together, and pulled together a good prototype, demo, or even launched a web site--and which shows off their talent around their product--where you can see what they have built. I'd like to see someone that is coming to you to raise capital, not just on a Powerpoint, but based on what they have actually done.