espite being coastally challenged (currently living in Philadelphia), Josh has been an active entrepreneur and investor in the Internet industry since its commercialization. In 1992, while he was a student at the Wharton School of the University of Pennsylvania, Josh co-founded Infonautics Corporation – an Internet information company. In 1996, Infonautics went public on the NASDAQ stock exchange.
An Obvious Success
Investing in pre-revenue startups is risky. Seed-stage investors know that things typically don't go according to plan. And sophisticated investors know that they will lose money in a good percentage of their investments -- with the expectation that they will make that back plus a nice profit in some of their other deals.
Today Evan Williams announced the creation of a new company, Obvious Corporation, that purchased the assets of Odeo (a company First Round Capital invested in). As Evan wrote today in his blog, Odeo "was a humbling and highly educational experience." And he concluded that although there was real value in what the team created, the structural constraints/requirements of venture investors were not a good match for the company.
So he did something that amazed and surprised me. He dug into his own pocket to return capital to his investors. 100% of our investment. Evan did not have to do this. His shareholders are sophisticated investors and we went into this with our eyes open. We know startups are risky.
The reason I invested in Odeo in the first place was because I wanted to make a bet on Evan – and his recent actions have shown me how right I was. I continue to be a huge “Evan fan” – and should he decide to raise outside capital again, I hope to be his first phone call.
In the meantime, I will be cheering for an Obvious success from the sidelines
It's refreshing to see a VC who's still a fan of an entrepreneure who didn't hit him a home run. I'm guessing it's from growing up on the other side of the VC/E fence.
Posted by: jeff barson | October 26, 2006 at 11:46 PM
I read about this in TechCrunch and I have to say that I was utterly impressed. Obviously the financial commitment is unique, but I think it takes as much courage to be honest with yourself and your board that the company strategy and investment goals have become misaligned.
Posted by: Lee Hower | October 27, 2006 at 03:37 PM
Some people are lucky to invest in the right corporation.
Posted by: ler | October 28, 2006 at 09:05 AM
Definitely -- betting on the right people is far more important then betting on a stellar idea.
Posted by: Justin | October 30, 2006 at 03:43 PM