A Plan For New York

A Plan For New York

As I mentioned in my blog post yesterday about Boston, I just moved to New York City to launch (or perhaps more accurately, relaunch) CRV's presence in the city.

New York City has been written about extensively by investors who have lived here for decades. I just got here — so unlike my piece on Boston — I hardly have the depth of understanding of the local startup scene to write any meaningful analysis.

Instead, I want to talk a little about what I hope to contribute to this growing ecosystem, as well as the reasons why CRV is making a foray into the city (besides access to jianbing).

Head of the Charles

First, I want to talk very briefly about CRV, which acronymized our name officially from Charles River Ventures last year. The firm was founded in 1970 in Boston, with a focus on spinning out startups from MIT's prodigious technical labs. The idea of university spinouts was not yet widely used by universities, nor was venture capital as an asset class widely known (it would take some more years for pensions even to be allowed to invest!)

From the very beginning of the firm's history, we have invested in companies that are pushing the frontiers of technology. It's hard to believe today, but the key technologies for sequencing genes were only discovered in the mid-to-late 1970s, following the discovery of DNA. Thus, some of our early wins from that era included Amgen, originally Applied Molecular Genetics, which today is a $115 billion market cap pharmaceutical giant.

That focus on technology continued throughout the 1990s, in which Charles River moved to the new frontiers around networking, security, and storage companies that underpinned the growth of the internet. Beginning in the early 2000s, we opened an office in Silicon Valley, and were early or first investors in companies like Yammer and Twitter.

Today, two-thirds of CRV's capital, startups, and team is based around the West Coast (predominantly the San Francisco Bay Area, but also including L.A. and Seattle) and one-third is based around the East Coast corridor of New York to Boston. This balance within the firm has been true for several years now, which is why we officially changed our name to CRV: never again should a founder in SoMa or the Mission ask for "Mr. Charles River" (which happened not infrequently).

The Changing Landscape of Venture and Entrepreneurship

Great startups start with great technologies and bold visions. Over the past decade since the launch of AWS in 2006 and the iPhone in 2007, we have seen an explosion of startups started by founders taking advantage of the cheap resources offered by mobile technologies, cloud infrastructure, and social networks.

In addition, we have seen a wave of successful companies built around the software-as-a-service model that provided a rare moment to defeat incumbent players in the enterprise who clung to their on-premise and perpetual license models.

That cheap era of free growth is coming to a close.

The major reason is simply that the internet has matured as an ecosystem, and the virgin soil of technology has already been tilled by newly incumbent companies. Zendesk — a fund-returner for CRV — could build a customer success product using a SaaS delivery model and become a billion-dollar business. But what will defeat Zendesk in the enterprise today?

The changes are showing up in the data. As Tomasz Tunguz showed last week, new company formation in SaaS has markedly decreased the past few years. Incumbents can still be defeated, but they are no longer thirty year behemoths clinging to the software models of the 1980s. Now the competitors are also startups with the same ethos.

Entrepreneurship is hardly dying though, critics be damned. Instead, founders are moving to fertile areas like VR/AR, autonomous cars, biotech and health tech, tough social problems like urban infrastructure and education, and the next generation of deep cloud infrastructure and security.

The challenge is that the cost to begin these sorts of startups are notably higher. It's hard to write a VR app on a weekend, throw it on the App Store, and build a billion dollar business (of course who the heck knows!). Instead, it takes serious talent and venture capital to guide these rockets off the ground. When Intel started in 1968, it raised more than $17 million as a seed round (in 2016 dollars). We are seeing the same intensive technology development pattern from that era reappear today.

What's exciting about this for CRV is that we are really just going back to our roots. None of this is new for us, which means we can focus on the technologies at the heart of these next revolutions and fund them.

A New York State of Mind

New York over the past decade has certainly seen an explosion of startup activity, particularly in spaces like ecommerce and fashion which have traditionally been strength industries for the city.

Over the past couple of months, we have seen a host of news that clearly demonstrated that NYC is becoming a key driver of "hard" tech companies as well. CockroachDB is building a strongly consistent SQL database, and was founded here in the city. Slack is placing its machine learning lab here in NYC, and all major tech companies like Google and Facebook are expanding their footprint in the city. Even supposedly old media giants like NBCUniversal are getting into the game with research labs being formed locally around VR/AR. Plus, the expansion of Cornell Tech is an early but exciting future for tech education in the city.

CRV wants to be a part of that story, and so do I. We want to bring our technical know-how and love for cutting-edge engineering and fund some of the next groundbreaking companies that are going to blow our minds and bend the trajectory of our society.

I mentioned earlier that I am "re-launching" CRV's presence in the city before. Adam Enbar, who is now the co-founder of Flatiron School in downtown Manhattan, was an investor with us from 2012-2014 before the entrepreneurial bug hit him. What we started to see with Adam was the beginnings of the enterprise software and deep tech industries in New York, companies like Greenhouse, Percolate, and Namely among many others. Now the cycle is complete.

That's CRV, but who am I? I'm an engineer/statistician by training who loves great product design. I started programming in elementary school, making games with my TI-86 graphing calculator (including a finite-state machine AI!). I went to Stanford and majored in Mathematical and Computational Sciences (our merger of stats + CS), worked on Google+ (sorry!), and have been in the tech industry the last five years in venture capital and at TechCrunch.

Today, I'm working on a side project using graph databases for language learning, following some bad experiences with the Anki flash card software. If you have ideas or are passionate about the topic, please let me know.

Otherwise, I hope to see you around. If you have a cool tech project you are working on or just want to talk about products, feel free to get in touch – my email is danny@crv.com. Otherwise, say hi at a meetup group. I've already been welcomed by so many people, and it has been great to get started. Now let's go build something awesome.

Image by Sam Valadi from Flickr used under Creative Commons.