New York-based Union Square Ventures is one of the most respected venture capital firms in the tech world.
Does it deserve that reputation?
We’ve sifted through USV’s portfolio, which is approaching 30 companies. And we’ve assigned each company a grade, ranging from A+ to F, based on our view of the companies’ potential to build a big business and produce a great return for USV.
Among the USV companies: Some big winners, like Twitter and Zynga; some promising bets, like Foursquare and Meetup; and some head-scratchers.
Overall, USV appears to have hit the ball out of the park: Big bets on Twitter and Zynga could generate all the returns the fund will ever need. Earlier exits on companies like TACODA and Feedburner were also huge wins.
And USV never made the mistake many older VC firms did–raising a positively massive fund with limited investment opportunities. Instead, USV helped pioneer highly focused seed and first-round investing–and overall the firm’s strategy has been a huge success.
But still, it’s fun to look at the specific investments. So let’s do it!
(As always on a wide-ranging survey like this, we’d love your help: Are we missing something? Are our favourites overrated? Have we dissed a winner? Is there an opportunity or challenge ahead for any companies that could dramatically change their position? Let us know.)
Grade: A +
Zynga's revenue run rate is around $600 million, according to sources we've talked to. Zynga could have been preparing for its IPO, but it just got $180 million from Russian holding company DST, at a valuation that could be as high as $3 billion.
USV led a $10 million round in Zynga back in January 2007.
Twitter is growing like a weed, and it's finally making serious moves to firm up both the business and the product. Union Square was an early investor in Twitter. While Twitter's business model is unproven, we believe Twitter will figure it out.
USV participated in Twitter's A, B, and C rounds. It sat out the most recent round that valued Twitter at $1 billion.
The investment's already up at least 20X, so this one should work out just fine. And it has a chance to be positively massive.
It's still early. Foursquare could fizzle out. But, after just a year, Foursquare is in the middle of one of the hottest funding wars going and it has Yahoo offering $125 million to buy it today.
Union Square led a $1.35 million investment round last September, at what was said to be a $6 million valuation. Another home run...
Etsy is the arts and crafts answer to eBay. Last year it had $130 million in gross merchandise sales. In other words, this is a serious business with a realistic shot at sticking around. (Or getting acquired for a nice amount of money.)
Etsy has raised $31.6 million in three rounds with Union Square participating in each.
Meetup is doing low double-digit millions in revenue, according to an industry source we spoke with, which is backed up by leaked documents from last year. It had its first profitable month last July. However, those same documents revealed Meetup is not hitting aggressive growth targets, which could be seen as problematic.
Union Square invested in Meetup during its later stages. Crunchbase says it was a $7.5 million round. If Meetup's revenue is, say, $25 million, the company might be worth $100-$200 million. A solid hit, but not a home run.
When we were casting around for hot, lesser known, Silicon Valley startups, multiple people mentioned Twilio Twilio is a smart group of young folks with a good handle on the mobile market. With Google's big push into mobile and Twilio's smart team, this looks like the kind of company Google would pluck.
Union Square led Twilio's $3.7 million series A round.
AMEE, which aggregates data on carbon and energy, is Union Square's only green tech investment. We spoke with a someone that has great expertise in the carbon emissions industry. Our source's take on AMEE: 'They're definitely smart guys, but they're taking a risk.'
From talking to our source, it sounds like AMEE gathers a bunch of data on carbon emissions, which can vary from place to place. Then it can serve it to people that need that data. Right now, bigger companies already do what AMEE is doing, so AMEE isn't needed. However, our source says if AMEE can focus on building its platform of emissions data to be invaluable, and having great analysis of the data, then it can be a nice business.
Also, the cap and trade bill getting passed would help, but it's not a make or break situation. So, it's a middle of the road company. It has a chance to break out, but it'll be years before we see what happens.
AMEE announced a $5.5 million series B in February which USV participated in.
Tumblr is a super-simple blogging platform. It's a product that's showing nice growth adding users, and growing pageviews. It's even built a nice widget that makes transactions through the service easy. You put in your credit card info once to buy something, like a custom design for your blog, then after that you can buy more things with ease. Think iTunes -- put in your info once, from there it's easy to buy music forever.
There's potential with that payment widget: Tumblr can sell features to make blogging better.
But here's the problem: Despite Tumblr's rapid growth, it has lost a lot of buzz (and, probably, market share) to Twitter and other micro-blogging platforms. If Tumblr wants to stay free, it will need a huge audience to build a big business. Tumblr also catering largely to a young, artistic crowd, so it's going to be hard to seriously monetise. It's possible Tumblr will get acquired at a nice price, but there are no immediate, obvious buyers.
USV, along with Spark Capital, invested in all three rounds of Tumblr. Total money raised for Tumblr is $10.3 million.
Adaptive Blue's GetGlue helps with recommendations of products. You tell it what products you like, then it tells you what you might be interested in. After watching a video about it, it strikes us as Hunch-like. Except it was around before Hunch. And nobody talks about Adaptive Blue or GetGlue anymore. Unless there's something going on beneath the radar, this one may not work out too well.
USV has invested $6.02 million in the company.
Boxee's software for watching web video has won it a base of ardent supporters, but revenue is a challenge. It started working on a payments system that emulates iTunes -- people can buy shows through Boxee. The show's creator gets 70% of revenue, Boxee gets 30%. Nice idea, but Boxee doesn't have many users yet.
Boxee also has a piece of hardware -- the Boxee Box -- that's coming sometime this year. It's reportedly going to cost around $200. We're not sure if that's much of a business, either. Boxee is also viewed as a threat by cable companies and (some) web companies. It could turn this into an asset (cooperation), but it might have to give up a big piece of its business to do it.
In short, Boxee has a buzzy product, but hasn't shown break-out potential yet. The best odds at this point are that someone like Comcast or DirecTV buys Boxee to reinvent their set-top box software.
USV has invested $3 million in Boxee.
This is a wacky company. Bug Labs does modular hardware--open-source for gadgets. It seems more like a science experiment for enthusiasts than a company. It sells kits to make mobile gadgets. (One hope is that industrial uses for Bug devices will take off.)
Bug has raised three rounds of funding, but we haven't seen the amount disclosed. USV participated in each rounds. Bug Labs' buzz has faded, and it seems the company's potential is headed south in a hurry. Maybe they'll get lucky and get bought out.
Update: We upgraded Bug from D+ to C+ after seeing some of the projects Bug has in pipeline. It shifted its focus from consumers to enterprise and has a decent chance at becoming a big business.
Clickable is a search engine marketing company that created software to manage campaigns. From what we understand, it's a good product. Clickable's revenues are apparently growing at decent clip, and it just added five new execs.
Clickable has raised $20.5 million across three rounds and USV has participated in all rounds.
Disqus is a popular blog commenting system, but we're not sure we see a business here.
The biggest problem with Disqus is that the company that it would fit best with is WordPress, which already bought a Disqus clone.
Disqus has gained user traction (the first important step), but we think it will struggle to find a big business. It's also hard to see it selling for more than single-digit or low double-digit millions.
Covestor is a social network for investing: You can check out the portfolios of people you think are smart (and then, presumably, follow their lead).
This is an interesting social idea, but it's hard to see it getting really huge. The most likely exit would seem to be an acquisition by a company like TheStreet.com in the low double-digit millions.
Heyzap is a social gaming distribution platform. It helps game developers get a bigger audience by partnering with publishers. It seems like a potentially good business, but a source in the industry told us that Heyzap doesn't move the needle for its partners and rival Mochi Media is a better platform.
Union Square only put a few hundred thousand in the company. It led a round that was between $500,000 and $1 million, TechCrunch reported.
Indeed is a Google for job listings, right down to the look of the site. It has a clean look, and gets revenue from sponsored listings. Marc Cenedella, CEO of TheLadders, which partners with Indeed, says it's a 'useful, comprehensive' site built by people that have 'an insightful view of how the web works.'
We spoke with a tech investor about the company, and he said everyone says it's doing well. We think revenue is in the $20 million to $30 million range. comScore says Indeed had 10.7 million unique US visitors in March.
Union Square participated in Indeed's $5 million series A round, the only round it has raised so far. If Indeed has $20-$30 million of revenue already, this is shaping up to be an excellent investment.
Grade: NOT GRADED
We're recusing ourselves from this one. The founders of 10 Gen also co-founded this company. We can already hear the screaming...
We've never heard of InfoNgen. It's supposed to be a discovery engine for business users. On its site InfoNgen touts its ability to help users quickly analyse and research financial information and data. Anyone out there ever use it? Any thoughts on how the company is doing?
We can't find out how much USV invested. Fred once wrote that InfoNgen was company that was trying to make the web smarter.
Oddcast has evolved over the years, and no one seems to know what it really does. It started as an avatar company. It now appears to be a marketing firm or digital ad agency.
Oddcast produced the very popular Monk-e-email online ad campaign for Career Builder. As far as viral online marketing is concerned, you can't do much better than that. It also worked on making a customisable E-Trade baby ad campaign.
Union Square led a $4 million investment in 2006 in Oddcast. The company has been around for more than a decade, and it seems to still be trying to find itself.
We've had two different people -- one an investor and another an executive in the local digital space -- both say to us, 'I don't get that company.' The investor suggested it might be 5 years ahead of its time.
Outside.in does aggregation of hyperlocal news. Local for all the hoopla still hasn't built many super successful businesses online. And media isn't a particularly great business either.
When we go to Outside.in, we're underwhelmed by the results for our Brooklyn neighbourhood. We're even less impressed when we check the results for the smallish town we grew up in.
Last December Outside.in raised another $7 million led by Union Square, bringing its total of funding to $14.4 million. The last round had a strategic investor in CNN. With this big a cash pile, Outside.in will probably be able to figure out a business eventually. But they're not there yet.
Pinch media merged with Flurry at the end of 2009. The combined company provides analytics for smartphone operating systems including Android, BlackBerry, and the iPhone. The world is bullish on the mobile web and applications. Flurry is there with a nice set of analytics, which would likely be a good business, provided Google and Apple don't limit Flurry's access or produce their own suite of analytics.
Union Square participated in a tiny seed round worth $560,000, according to Crunchbase. And now it's a small shareholder in Flurry.
We asked our email department what they think of Return Path. They were positive on the company. As boring as email seems in this Web 3.0 world, it's still a big business.
Union Square invested $10 million in 2008 and led another round worth $6 million last year.
Simulmedia is led by successful serial entrepreneur David Morgan. Dave sold Tacoda to AOL for $275 million, and he helped found Real Media. (He's also an investor in SAI.)
Simulmedia wants to help TV companies better deliver their ads. This is a crowded space in which many companies have failed. It's also a potentially huge market for a company that gets it right.
Last we checked, Simulmedia was loading up on big brains. The company has a bunch of smart people, and is building an interesting business.
Union Square participated in a $4 million round last year. Simulmedia just raised another $8 million, led by Time Warner Investments. That's a lot of money. We imagine that Simulmedia will figure out something promising to do with it.
Targetspot dominates the Internet radio advertising market. comScore data from December says Targetspot reaches more than 29 million unique listeners each month. It also reaches 64% of people in the entertainment-media category, and 14% of the total internet audience, according to comScore, via MediaWeek.
A report last year from eMarketer puts the internet radio ad market at $292 million, growing over $300 million this year. Owning 60% of this market sounds like a nice business to us.
USV participated in an $8.6 million round with Targetspot in 2008.
Tracked is trying to one-up Yahoo Finance, Google Finance, Bloomberg, et al. This is very ambitious. It's also very risky. (All or nothing).
One person we talked to said that USV is backing Tracked because its founder Michael Yavonditte successfully ran and sold USV-backed Quigo. That's certainly a positive.
We've played with the product, and it does not seem particularly differentiated yet. Tracked has raised a lot of money, though, so it may yet get there.
Tracked has raised $11.5 million so far.
When we were asking around for this feature, one person said to us, 'I don't think they're still in business.' They are still in business, but it doesn't look good for Wesabe in the long run. It was a rival to Mint.com which has done very well. It also reportedly tried to sell itself to Yahoo--and failed. Wesabe has been left behind.
USV participated in a $4 million round in 2007.
Zemanta is a nice little product that helps auto insert links and photos. We're not sure we see a business in it, though. USV only put a few hundred thousand dollars into the company.
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