Early Stage Adventures

I recently caught up with Andy Payne to chat about what we are seeing in the internet startup world around Boston.  Andy has been around the Boston scene for a long time – being one of the co-founders of Open Market, Revenio, and FanSnap.  He is an adviser to Care.com and Kayak, and on the board of HubSpot.  A great guy with deep experience on consumer Internet companies.

Some highlights:

• As we are all aware web properties can be built quicker and cheaper than ever before.
• The good news, following this trend, is that there does seem to be a new crop of entrepreneurs in Boston starting to work on really interesting web opportunities. And historically, Boston has built several very solid consumer and SMB web based businesses for example, Kayak, Constant Contact, Vista Print, TripAdviser, Carbonite, HubSpot, Logmein, Shoebuy.com, Rue La La, Zipcar, and CSN Stores.
• The flip side to this is that a lot of spaces feel like they have gotten crowded and many ideas seem “smaller”. Over funding, capital efficiency, and lower barriers to entry present concerns to investors, and some spaces are “hot”, although maybe less so in Boston than nationally.  Social games and local deal sites come to mind.
• Not to beat the west coast east coast thing, but one difference for consumer web companies can be felt at times is in recruiting.  In the Bay area there is a steady stream of alums coming out of eBay, Facebook, Google, Yahoo, etc where FanSnap relocated after being incubated in General Catalyst’s offices.  As yet, we don’t have that depth here and it would be great to see alums investing money/time from the above listed Boston companies (more of this seems to be happening)
• In thinking about interesting web investment opportunities – we both love the concept of big data.  In some respects this is similar to where NYC based Roger Ehrenberg (IA Ventures) focuses – the core premise being that it’s possible to extract valuable insight from the massive structured and unstructured datasets that are continually being developed online.
• For example, take online marketing data – today nearly every detail of an online customer interaction is observed, tracked, and optimized.  Think of what Amazon does
• Startups can build and sell apps to help extract and use this data.  Our good friend, David Cancel, has a new company Performable doing some very interesting things around A/B and multivariate testing to help marketers become more effective in middle of the funnel.
• Another approach is to build a web company around the “big data” and use it as an unfair advantage.  Kayak is a travel search company, however, it’s also a big data company using proprietary tools in-house.  Decisions are data and analytics driven.
• We talked about online advertising and $ that still get spent around purchase intent vs brand/image advertising.  Some of your web sessions end up with you spending money.  You buy something – it’s a commerce event. If you’re close to or near that transaction path you will enjoy good monetization.  We disagreed a bit on brand $ moving into online display – I’m seeing through some of our investments that there are brand $ available, but advertisers are sensitive as to where and when these ads get placed.
• There is also a big shift to buying audience rather than sites — divorcing data from media and bringing them together on demand at execution time — a trend that is well documented elsewhere
• And while there is a lot going on in online display, I feel that many investors have under-estimated what it takes to compete successfully at winning meaningful ad dollars in terms of sales and operational infrastructure.  There seems to be some more interesting opportunities on the publisher side rather than the buy side
• We also both love “boring offline industries” that are ready to be web enabled.  Vista print is the classic example in the SMB market. Software companies get more interesting when they are not a pure-play, and are attached to something hard, non-replicable – like some sector in custom manufacturing where perhaps one could web enable the workflow and produce massive scale.

In all, a great session even if Andy trashed my white board