Spark Capital Launches Startup Seed Fund
[Updated with interview material from Spark Capital general partner Bijan Sabet, see below.]
It’s almost the equivalent of the “microloans” phenomenon for the venture world: the profusion of startup schools, bootcamps, incubators, and seed funds that give teams small amounts of money—from a few thousand dollars to a few hundred thousand—to get their ideas up to speed and test them in the market before they need more serious capital. Boston’s Spark Capital, whose portfolio focuses on social media, entertainment, and network infrastructure companies, is the latest to join this trend.
Spark announced this morning that it’s launching [email protected], a program that will offer seed-stage investments of up to $250,000 to promising early-stage startups in the New York and Boston areas. And by mid-afternoon it had already received a “slew of e-mails” with proposals, according to Spark’s Bijan Sabet.
“In this economic environment, continued innovation and entrepreneurship are as important as ever,” Spark founder and general partner Todd Dagres said in this morning’s announcement. “Looking back at previous recessions, some of the greatest technology companies were created and achieved market success during turbulent times. We view [email protected] as an opportunity to not only buck the trend of investors retreating from new early stage funding but also to capitalize on what may be a perfect storm for the next great technology company to take root.” (We’re working on contacting Dagres directly.)
Spark said the seed investments will be available to companies working on technologies at all stages of the “media and technology value chain”—content, applications, platforms, and infrastructure. In that respect, Spark seems to be looking to help create more hot startups along the lines of its current portfolio companies Eqal (the multimedia studio behind the “lonelygirl15” Web series), Twitter (the famous microblogging service), Tumblr (a simplified blogging platform), Kickapps (a builder of white-label social networks), and Verivue (a broadband video delivery company).
Spark is already a supporter of the incubator model: it provides support for TechStars, a Boulder, CO-based startup bootcamp that will operate a parallel Boston session starting this summer. But while [email protected] doesn’t sound like a full-scale incubator on the TechStars or Y Combinator model, the firm says companies that win seed funding will have access to Spark partners and legal counsel. Spark hasn’t said what the terms of the seed investments will be—for example, whether the funded startups will somehow be obliged to offer Spark equity.
Startup builders can apply for the Spark program online at www.sparkcapital.com/start. The firm says applicants will be judged on “creativity, thought-leadership, wide-reaching but focused ideas and the qualifications of the founding team.”
Update, 3:30 p.m. March 25, 2009: I just spoke with Spark general partner Bijan Sabet about [email protected] Here are the key quotes.
On why Spark is doing this:
“By and large, we mostly do early-stage investing. We’ve done later-stage investing as well, but typically we are part of the first institutional round for our companies. The investments range from the $350,000 we put into Tumblr to get it going, to something close to that for Oneriot and Admeld, to other Series As that are larger—we did $1 million with OMGPOP a year ago. So we’ve done a bunch of early-stage investing. And in this market we continue to see a few trends that are clear to us. Many funds are getting bigger and bigger, and in the Northeast in particular, there is nothing like this that we’ve seen. On the West Coast they have some of these programs, but we don’t see them done here. A very active angel and seed investing community is an important part of the ecosystem. So we felt it was the right time to do this…This is very much focused on New York and Boston, at least for now.”
On Spark’s larger efforts to reach out to early-stage startups:
“One thing that we’re trying to promote is that this is one component of a larger initiative that we’ve termed [email protected] The seed part is the newest part of that offering, but we include in this thing the Alliance for Open Competition, which is our effort to get rid of non-compete agreements, and our investment in TechStars, and some community things that we’re trying to do that really focus on entrepreneurs.”
On the response to the seed investing program so far:
“It’s amazing. Just today, I’ve gotten two public comments on my blog with proposals, and a slew of e-mails that have come in just since this morning. We are going to have a lot of evening reading. I haven’t gone through them, so I can’t tell you whether any of the day-one applicatnts are going to get capital from Spark. But I just feel that angel and seed-stage investments play a very important role. Even before the economic collapse, the Northeast didn’t have the strength of the angel network that the West Coast has. We have some very good angel investors, but they aren’t nearly as active and comprehensive as the angel network on the West Coast.”
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