Get To Know Richard de Silva Of Highland Capital

I’ve just finished a week away from the office for Spring Break, which was much needed. I’m now back & ready for action.

I took the opportunity this past week to publish summary notes of some of the VCs and entrepreneurs I had interviewed on This Week in VC. Back to regular writing this week so check back in.

One of my goals in doing the show was not only to educate entrepreneurs but also to put a human face on many of the VCs in our industry as VCs can be hard to get to know. We’re a busy bunch.

Today’s post is on the delightful Richard de Silva. Here is the video link or click on the image above.  Notes below provided again by Ramin Vaziri of ChannelStack. Thank you. (if you get some value out of the notes consider checking out his company or Twitter feed)

TWIVC Summary – Richard de Silva

What did you do before VC and how did that lead you to VC? (1:00 – 3:40)

Richard De Silva started off as a journalist with the Washington Post after growing up in D.C.  He then worked in consulting which gave him a broad base of business experience working with the newspaper, cable, and advertising industries.  In the late 90’s he saw the internet boom and helped start, a construction equipment marketplace that is nearing an IPO.

How did the experience of pitching Iron Planet to investors affect you as a VC? (5:00 – 5:55)

Yes it gives him an appreciation for anyone who puts themselves on the line risking rejection.  He does not bring his Blackberry to meetings and hopes to give entrepreneurs the same respect he wanted.

Startup after Iron Planet? (6:00 – 7:30)

Yes an online video startup in ’99 that helped large media companies encode and distribute their videos through portals.  The idea was right but the timing was early and required a pivot into being a software company.

How did you get into VC? (9:30 – 11:30)

In 2002 after exiting his second company he was attracted to the variety of being a VC.  He was introduced through mutual friends to Highland Capital.  At the time consumer internet venture capital was still suffering from the collapse of the Tech Bubble.  But it was an attractive time to enter because the successful internet companies were scaling and in need of capital.

Are you thematic in your investing or entrepreneur focused? (11:40-14:15)

Both.  The fund is organised into sectors and each VC forms forward looking themes within sub sectors.  But ultimately great people drive the ideas and Highland Capital is proactive in reaching out to entrepreneurs even at early stages.  So it is a combination of markets and people.  Richard coincidentally cites Mike Yavondite’s Qiigo as an example; Mike was a guest on TWIVC later that day.

In 2003 one of their first investments was Qiigo, Mike Yavondite’s company.  The contextual ad market was attractive.   Google Ad Sense was just getting going.  Highland Capital did a systematic search for who could build a stand-alone contextual ad search company and met with six or seven companies including Mike.  Mike built a white label product that let large publishers leverage text based ads by building their own marketplace rather than using Ad Words.  ESPN, Forbes, AOL were customers.  The company later sold for around $300 million.

Tell us more about Highland Capital (14:30 – 16:30)

Richard started as a principal and over a few years built a strong track record under Bob Davis and was promoted.  Highland has been around for 22 years currently investing the 8th fund which is $400 million.  They also have a separate $300 million fund focused on bricks-n-mortar consumer retail.  The in invest in IT (Software + Internet + Healthcare).  Since 2006 they have added offices outside of Boston including Menlo Park, Europe, and China.   Richard De Silva is based in Menlo Park with three other partners, there and 5 partners in Boston.

What gets you interested in a startup? (16:35-19:35)

The entrepreneur’s story and what brought them to their startup business.  Understanding the motivation and path they have taken up to this point.

How does someone get access to you? (22:00-33:00)

Usually through some sort of referral, it helps assign priority.  Richard’s email address is public but it is hard to manage all the inbound cold emails.  He appreciates aggressiveness have been occasional cold phone calls and he believes that is a lost art.  However Highland is very proactive in contacting entrepreneurs they are interested in.

What’s your point of view on next generation video entertainment? (34:30 – 37:00)

The first phase was just getting all the content online via YouTube.  The second phase will be who can get the right combination lean back, lean forward, interaction, enhanced data, and make it fun.  He is starting to see this occur in sites that are verticalizing content.  An example is Metacafe, a Highland Capital portfolio company.

Tell us more about MetaCafe? (37:00-40:30)

Highland invested in Metacafe a couple years ago.  Initially it was a UGC site that competed with sites like YouTube and Veoh.  It had a strong user base and 50 million monthly uniques.  It has become a short form premium destination that is verticalizing content in category channels.  They aggregate other people’s content and curate it into categories.  The curated approach gives advertisers and publishers more comfort in knowing the quality of content they will be amongst.

Why do you think Veoh didn’t succeed? (40:30 –41:30)

They had a very expensive burn rate at the wrong time.  They had a great team and interesting technologies.

What drives people to Metacafe? (41:30-42:00)

A lot of the traffic comes from search.  Social, Facebook, and Twitter referral is meaningful.

Do you think the impact of social media is effecting Google’s search business? (42:00 – 43:50)

Richard thinks it already is.  People are starting on Facebook rather than search and this is starting to happen. But Google is still showing great financial performance.  He does think there are opportunities in vertical search.  Fansnap is an example, search for ticket purchases.

StubHub seems like the leader.  What is Fansnap doing? (44:00 -49:30)

About half of StubHub inventory is ticket broker inventory and some of the largest brokers are investors in FanSnap.  Opportunities in vertical search exist where the sources of data are somewhat hidden and can be unlocked and displayed in an innovative manner.  Microsoft Bing Tickets is being powered by FanSnap.  Bing is very open to 3rd party elements in their index that create a differentiated user experience.

Do you agree that Google SEO optimised results for high volume search terms are broken? (49:35-51:30)

Yes.  The Page Rank system has been gamed and is leading to many spammy results.  Improvements have been made and further changes to the algorithm are being made.  However these unknown and unforeseen changes could lead to new problems for sites.

Do you think a multi-channel distribution strategy is important to guard against unforeseen changes? (51:30 – 1:02:40)

It is important to leverage the fastest growing platforms but anticipate changing terms of service.  Mark and Richard go on to talk about platforms, timing, and simple reiterative product design.  Mark thinks there are many opportunities to improve poor search results in Google products like Gmail and YouTube.

What do you think about accuracy of video search? ( 1:04:00-1:06)

It is important for brand advertisers that their ads appear next to accurate search terms.  One of Highland Capital’s portfolio companies, Affine Systems, helps solve this problem by extracting search terms from the video images.