Bob Johnston Talks Less Adtech, More Diversity for NY Investments
It is time for a bit of a shakeup in the New York startup landscape, if you ask Robert (Bob) Johnston.
He is founder of The Executive Council, which operates the New York Venture Capital Association. Johnston is also co-founder and CEO of SponsorHub in New York. Plenty of startups here chase ideas in adtech, he says, one of the city’s bread-and-butter industries—but that can get stale fast.
Johnston spoke with me in advance of this year’s Ingenuity conference, which kicks off on October 27 and brings together investors and entrepreneurs. Aside from the expected conversations on how startups can attract potential backers, he expects diversity to be a key theme at the two-day event—and it’s a topic he believes needs to be addressed from many angles.
Xconomy: What will be new at this year’s conference?
Robert Johnston: We’re going to have Jesse Jackson speak about the issue of diversity in tech, which is coming to a head this year. We’ve seen a bunch of articles in the press around [venture capital] funds trying to figure out their mixes on the diversity front. Whether it be their own staff, the investments they are making. Through the New York Venture Capital Association, we want to bring important issues like diversity to the forefront.
We should be embarrassed; you look at any other industry and there is a much healthier ratio of minorities and women involved. We want to bring these issues to light. We’ll do a roundtable with Jesse Jackson, moderated by Jessica Lawrence from New York Tech Meetup.
The rest of the conference has a lineup of people like Shari Redstone [vice chair] from Viacom.
X: How can changing the landscape help move innovation forward in New York?
RJ: [In terms of industries] part of it is moving beyond adtech. The adtech scene is saturated and picked over. We need entrepreneurs to focus on healthcare and fintech. There are some great industries in this town that have been deep for decades. So let’s go cherry-pick some of the best talent out of those industries and launch some startups. The ability to look at other industries and build some businesses is important. That will make New York vibrant over time by not being a one-horse town with adtech.
If you map the most active VC funds and the quantity and types of deals they are doing, there aren’t that many of them. If you look at the types of deals, it’s been relatively predictable over the last two or three years.
That’s probably okay because over the prior 10 years, these guys were in a drought. They’ve been feeding the trough for the past 24 months and have had their fill of adtech. We want to get some focus on other industries. There’s great stuff happening in healthcare and fintech.
X: Are there any impediments to the funding flow in the city?
RJ: I’m seeing, between Series A and B rounds, a bottleneck, whereas a year ago the bottleneck was at the seed stage. If there is a bottleneck between Series A and B, you’re going to see some very unhappy investors. It’s one thing if you lose your money in a seed round; you lose a couple hundred thousand dollars. If there’s nowhere to go and you’ve invested in a Series A round, the economics of a venture firm are going to have to change a bit.
There’s been a lot of good activity over the last few years, a lot of good buzz for New York. To make this thing stable and real for the next five to 10 years, or more, we need to invest in other sectors.
As a VC, I was in a drought for a number of years. A lot of firms here were waiting for some action; I suspect they were going for the easiest, lowest hanging fruit. That tended to be the AppNexuses of the world when they were young companies. From 2008 to 2010, adtech was the easier place to put your money right away. But how much more innovation can happen around an advertising unit?
We are seeing First Round, FirstMark, RRE, and a few others starting to invest in other sectors. Each of them has done a healthcare deal or two in the past year; Venrock as well. There are also a few funds quietly raising much larger funds for the expansion-stage capital.
X: What has held back the diversification of who gets funding? What else needs to happen to open up diversity?
RJ: A way to get it kick-started is to create forums where minority entrepreneurs have a chance to pitch. That’s one easy way. On the investor side, we need to have more minority investors. You’ve got a few partners at most of these funds; these guys are in their 30s or 40s. They’re going to sit there for years. There need to be new funds created that have a particular focus on this.
Having a dialogue is important. Providing forums for minority entrepreneurs to present what they’ve got is important.
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