Xconomist of the Week: ATV’s Bob Hower on “A” Startups, IPOs, & the God of VC

The venture capital industry is in flux. A lot of firms and funds are contracting. Big guys are doing more later-stage investments (see GitHub). Little guys are trying to innovate with early stage companies. Fund investors are trying to figure out how to get more bang for their venture buck.

In the midst of all this is Advanced Technology Ventures, the venerable Boston and Silicon Valley firm that invests in a very wide range of companies, from software and IT to healthcare to cleantech. ATV started in 1979 and has more than $1.6 billion under management.

Heading up the firm’s East Coast IT investments is Bob Hower, a general partner and 10-year veteran at ATV (and an Xconomist). Hower is known for his bets on tech companies like Acme Packet, AppIQ, Application Networks, and more recently, Actifio (in business data management) and Apptegic (in marketing tech). Before becoming a VC, he worked at Lotus Development, General Mills, and Priority Call Management, which was bought by LHS Group in 1999.

I’ve recently talked with Hower about the climate in venture and startups. This week, I asked him to go on the record about macro trends in exits, fundraising, and a couple of his local portfolio companies. Here’s a lightly edited transcript of our exchange via e-mail:

Xconomy: You have quite a track record with companies that start with “A”… so tell me about how Actifio and Apptegic will change the world (and be great investments for your firm).

Bob Hower: Actifio’s promise is simplicity (Apple-like interface) and the ability to recover anything instantly for up to 90 percent less. The beauty of a big, broad value proposition is that people can use it in their own way. Dropping costs and reducing complexity will mean new services are possible (free backup for your data for all of your cloud apps). It will also mean better user interfaces in the future for IT folks who are frustrated with the tools they use every day. It’s the extension of Apple’s influence from the consumer side all the way into the data center.

Apptegic is completing the marketer’s dream: full lifecycle management of 1:1 marketing (1 message to 1 user). Today several companies (including one of ours called {X+1}) help deliver tailored messages out on the Web or on a website to users to increase engagement. However, the ability to specifically measure engagement and act on it within an application, in real time, is missing. Apptegic is working with many customers to close this last gap in the marketing cycle to help make customers happier.

X: The big news this week is GitHub’s $100M financing round. Do any of the big VCs truly do early stage “venture” anymore? Is it still necessary?

BH: We still do early stage. I think the best venture returns from an IRR [internal rate of return] basis will get generated from early stage. As you’ve reported, there has been a concentration of fundraising in the venture class, and that enables some firms to invest large sums of money into later stage, but still dynamic companies. There have been some big wins in the last few years, so I expect this type of investing to continue, but it’s not where we play.

X: As a VC firm, is it getting harder to make investments across a broad range of sectors? What are the big macro trends there? We hear a lot about VCs getting out of cleantech, for example.

BH: Investing across IT, cleantech, and healthcare? I don’t know that it’s getting harder from an investment standpoint—in fact there are several interesting areas of convergence today, but I believe it’s harder from a VC firm fundraising standpoint.

X: How do you see the exit markets evolving in tech—in particular, the IPO market in the wake of Facebook? Who’s the next big IPO from New England?

BH: The IPO market is recovering steadily. I think Kayak is out next, but I don’t follow the pipeline that closely. We have several companies that are tracking for the next few quarters, so I’m rooting for anyone going out!

X: If you could ask the God of VC any one question, what would it be?

BH: I’m currently reading a sci-fi book called Ready Player One in which everyone “lives” through their avatar in a virtual world. I would ask VC God which parts of the book come true and who the prescient entrepreneurs are who make it happen. I imagine they are walking among us now!

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