Xconomist of the Week: Roger Ehrenberg Plans for Deeper Investments

Innovative use of data will change our world when you peer through the lens of Roger Ehrenberg, founder and managing partner of two-year-old IA Ventures in New York. From financial services to education and beyond, he sees opportunities to mine, harvest, cleanse, and analyze data in competitive ways. Armed with a $105 million fund that closed in February—IA Ventures’ second fund since its inception in 2010—Ehrenberg says he plans to back seed-stage companies, as well as follow up with later-stage rounds.

Ehrenberg already has the ball rolling. He says IA Ventures looks for companies that leverage data in ways that are relevant to the rest of the world. In March, IA participated in the $925,000 initial funding round for Seattle’s Drawn to Scale, which offers a platform-as-a-service for big data. Other companies IA has backed include Visual Revenue in New York, which created a platform that recommends where media editors should place content on their front pages, and online music analytics provider Next Big Sound in Boulder, Colo. “We’re very excited about the ability to leverage data and new business models to disrupt institutions,” Ehrenberg says.

Though IA’s second fund is more than twice the size of its $50 million first fund, Ehrenberg says he wants to focus on layers of investments rather than scatter the money around. IA’s first fund had 20 portfolio companies, and he expects this second fund to include about 25 companies. “We want to run a concentrated portfolio,” he says.

One of the major technology trends IA follows, Ehrenberg says, is the remaking of the financial services sector. The new business models and technology put into play by startups, he says, can help position data from legacy systems to be more useful. “That is the big part of the edge these new companies have relative to the incumbents,” he says. Ehrenberg points to BillGuard in New York, one of IA’s investments, as an example. BillGuard scours consumers’ credit and bank card transactions for potential fraud by using crowdsourced information from other users.

IA also backs companies that are developing new systems for credit scoring transfering money. Ehrenberg says other sectors have caught his eye, as well, including education. In that space, IA has invested in New York’s Coursekit, a graduate of the NYC TechStars summer 2011 program.

Though many of IA Ventures’ investments are in the New York area, Ehrenberg says he has backed companies in Boston, San Francisco, Los Angeles, and abroad. Many of the startups he funds from overseas wind up establishing a physical presence in the United States. Such companies, Ehrenberg says, look to the U.S. as their primary growth market.

Two-year-old DataSift, an IA-backed company founded in Reading, Britain, currently houses its CEO and business operations in San Francisco. BillGuard, founded near Tel Aviv, Israel, relocated its headquarters along with its CEO to New York. “Geographic expansion is common among many of our companies, especially given the nature of their disruption,” Ehrenberg says. “It lends itself to moving to other markets.”

Before founding IA Ventures, Ehrenberg proved his own savvy for backing companies. He previously made angel investments through IA Capital Partners, funding such companies as TweetDeck, Solve Media, and bitly. Prior to IA Capital, he was CEO of DB Advisors, a hedge fund trading platform within Deutsche Bank. Now Ehrenberg is excited to see startups finding innovate ways to leverage data, especially in his home territory of New York.

Ehrenberg says while New York’s ecosystem is young compared with more mature venture communities, the city’s unique strengths make it stand out. Financial services, advertising technology, fashion, and merchandising are all sectors where New York offers opportunities for startups to create killer new ideas, he believes. “You’re innovating right in the middle of commerce [here],” he says. However, he says, the local innovation community does need to see more entrepreneurs who pull off huge exits and then become angel investors to support the ecosystem—what Ehrenberg calls a virtuous cycle. Close connections with academic institutions such as Columbia University and New York University are also necessary, he says, to help the startup scene evolve beyond this nascent phase. “That takes a generation,” he says. “We are now laying a positive and healthy foundation for that.”

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