Value the Silicon Alley Way
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As one of the top venture capital firms in the Internet universe, Flatiron Partners is also recognized as the premier VC firm in Silicon Alley. Flatiron was created in 1996 by managing partners, Jerry Colonna and Fred Wilson, and is located in New York's historic Flatiron district.
Although the firm has a heavy presence in the Alley and invests exclusively in Internet related companies; Flatiron's investment reach and strategy are not glued to specific regions or sectors. Flatiron is perhaps best known for its lucrative investment initiatives into content/media, International, and "pervasive computing."
Looking to get more insight on Internet investing and venture capital success, I recently took a cab ride to Flatiron Partner's offices at 257 Park Avenue South in New York City. As I entered the heart of Silicon Alley, I couldn't help but notice the billboards and painted buildings advertising, what else, Internet companies. Once inside I had the opportunity to sit down and speak with Jerry Colonna.
Colonna: We're on our third fund now and it's a $500 million commitment from Chase Capital. As a $500 million fund, the size of investment that we're looking at has shifted somewhat. Up until 1999, our sweet spot was really $3.5 to $5.5 million as a first time investment. Over the last year, when we completed 26 new investments -- which is a record for us -- we did as small as $l.5 million and as much as $l5-20 million. Right now, I would say that the average investment--immediate investment--is more like $8-l0 million. And that's a result of how much capital we have to put out. Everybody's feeling the need to put more capital out.
Reporter@Large: I want to get into Flatiron's focus areas within the Internet space in terms of content, commerce, and communications. These areas seem so broadly defined.
Colonna: Yeah, that's really marketing language. The areas that we see ourselves in are online media, International, and pervasive computing. These are three areas of expertise that we have.
Reporter@Large: You have certainly attracted a lot of attention with your online media focus.
Colonna: Within the online media sector, we are very much interested in manifestations of my theory. My theory goes like this: The value of a media property grows in relation to the level of affinity that the audience feels for that property. Moreover, the value of the property actually increases over time, unlike, say, the value of a product, which starts to die out unless you constantly create new versions of the product. Media properties have a much different life cycle.
Reporter@Large: So Yahoo! for example. I use Yahoo Finance.
Colonna: Yahoo Finance as a product probably generates $50-$60 million in revenue at minimum. Well, that's a nice, healthy little profit there. You can take Yahoo Finance public. Yahoo is a good example because they've done a very good job of developing tools to strengthen the affinity between the audience and the company. And so, Yahoo Messenger, Yahoo Companion, the paging tools, the instant messaging tools, tickers and that sort of thing--these are all applications that we like to call stickiness