Introducing Javelin Venture Partners, the Newest VC Player in San Francisco

There’s a new venture firm in San Francisco, one that’s actively shopping for early-stage deals now. Called Javelin Venture Partners, the firm is managing $70 million on behalf of one family office, and it’s being spearheaded by entrepreneur and angel investor Noah Doyle, and Jed Katz, a serial entrepreneur who has spent the last four years as a managing director at DFJ Gotham in New York.

Neither Doyle nor Katz — friends who graduated together from UC Berkeley’s Haas School of Business in 1996 — wasted much time in putting their MBAs to use. Almost immediately after nabbing his degree, Doyle cofounded the loyalty network startup MyPoints, acquired by United Online for $112 million in 2001. He later joined the geospatial startup Keyhole, acquired by Google for an undisclosed price in 2004, and stayed at Google three more years before leaving the company to consult with and invest in startups. (Doyle was also an early investor in Keyhole.)

Katz, meanwhile, quickly cofounded the online rental and relocation service Rent Net, which was acquired for an undisclosed amount that Katz calls “a success for me. I was dirt broke, and then wasn’t.” Katz later formed Move.com, another rental and relocation site that sold to Homestore.com in a stock deal valued at $960 million in 2001. After taking some time off, Katz became COO of the company behind the of popular consumer astronomy device SkyScout, then joined DFJ Gotham.

I met with Doyle and Katz at their small but impressive offices in San Francisco’s Rincon Center yesterday afternoon.  There, we talked about what they’re backing, why they think they’ll do better than their traditional venture firm peers, and what they make of Twitter.  Here’s part of that conversation:

First, Jed, you were a managing director at DFJ Gotham, which seems to be raising its second fund with some success. Why join a new firm that no one has heard of yet?

JK: I liked the DFJ team a lot and I’ll continue to work with them as a co-investor; their position in New York is really great. But my wife and I wanted to start a family out here instead of New York. I spent 15 years here before moving to the East Coast, and when the opportunity popped up to continue being a VC and to do so in an entrepreneurial way, with someone I’ve known for 15 years, it was too good to pass up.

A $70 million fund is a sizable first effort. Can you disclose anything about the family office for which you’re investing?

ND: We aren’t talking about the connection, but the family has done investing in the past and is happy to put money into [early-stage VC]. If there’s a trend, I think it’s that family offices have, to some extent, agreed to look longer term than traditional LPs, who are constrained by their need to distribute cash annually. I think we may see family offices taking a bigger role in venture capital.

Who will make investment decisions? Do you have to run everything past this LP?

JK: Yes, the LP is represented — it’s the three of us — but it’s a fairly streamlined process, which is important to us. Noah and I have an entrepreneur’s mentality; we want to be able to move quickly.

Do you care if you lead investments, and will you favor syndicates or working alone with startups?

JK: We’ll probably lead deals, though it’s in no way a requirement. And so that there are other minds and networks and deep pockets involved, we would prefer to syndicate — as long as the startup doesn’t raise too much money altogether. You want startups to have enough capital to get started along, but not so much that you’re jamming too much into them too early, and making it difficult for yourself to get big returns.

Which firms would you say that you’re most like?

ND: Definitely some of the smaller, more nimble funds. We’re part of that group of funds [that’s beginning to crop up, like Josh Felser’s Freestyle Capital]; there’s a bit of a concentration of them here in SF.

Some of those funds have said explicitly that they’re interested in companies that can enjoy even modest exits in five years or less. They aren’t necessarily trying to shoot the lights out. Is that true of Javelin, too?

JK: The way the market is, most venture-backed companies that are successful will get acquired along the way. When you fund and dive into a company, you’re creating it to be able to exist on its own, but hopefully there are acquirers along the way.

ND: That said, we did structure the fund with a typical 10-year horizon.

Jed, you were involved with a hardware company, Yamcom. Will hardware be a focus area or are you two investing strictly in Internet technologies?

JK: We might do a hardware deal, if it was the right one. To me, the SkyScout was just so much fun. But mostly we’re focusing on the Internet as an enabler, be it on the consumer or enterprise side, IT or healthcare.

ND: We ask, is it a great team solving a problem, and is the market large, and if those fundamental tenets are met, it answers a lot of questions for us around the business.

We also believe there are great opportunities in [software as a service], where you can leverage the benefits of consumer products to deliver a low-cost user experience but also make money on fee-based versions. It’s like with Keyhole and Google Earth, where a large user base [of roughly 300 million] drove other aspects of the business [including enterprise versions] and established a comfort factor. The government, for example, didn’t have to wonder whether people would use the technology.

You’ve so far funded six companies, four of which began as angel investments for Noah, and two — the ad optimization startup AdRocket and the real estate intelligence startup SmartZip —  that you’ve already backed as a team.

JK: Right, and there are two others that are about to happen, one in cloud computing and the other, I hesitate to talk about, but it’s an open-source product.

I’m actually more interested in knowing what you would have invested in if you’d launched this fund earlier.

ND: I like Opinmind, backed by Morgenthaler and Onset [Ventures]. It’s an ad targeting optimization technology that organizes users across multiple social networks. It’s very much needed by social networks and advertisers who don’t have a good way to do it otherwise.

What about Twitter? Is that a company Javelin might have gone after?

JK: That’s a tough one. I have mixed feelings about Twitter. I think it’s a great platform that has uses, including as a real-time search engine. But I also think there’s a tremendous amount of nonsense [involved].

I also wonder how you monetize real time search.

JK: Right, that’s Twitter’s problem.

ND: They have this product that’s so easy to use and that’s led to this greater adoption curve. Now they have to find more integral ways of getting Twitter to become adopted as a service. Otherwise, will those usage rates continue? They have to work to avoid MySpace burnout rates. You have to come out with a new version that gets you above the peak of the last one.

What we find very interesting is that it becomes a pointer to useful information, especially overlaid atop a social graph. People tweet about things that mean something to them, like bootlegged performances or political comments, and that secondary information is relevant. So I think you’ll see services that build on that and find ways to tease out significant information. It’s not going to be a simple query. I think that’s where standard, real-time searches aren’t delivering on their promise right now.

What types of people are you looking to back? Do you prefer serial entrepreneurs?

JK: It depends on the person. Drop.io [a startup that Katz backed at DJF Gotham] was founded by a super high energy young guy who’d started just one little company that didn’t work out previously. Then again, some serial entrepreneurs just know to start companies. A huge part of our job is measuring that [question], using our instincts, relying on references and spending a lot of time with the teams. Once you know what qualities you’re looking for, it’s much easier.

Jed, do you think your experience at DFJ Gotham was critical to establishing that pattern recognition?

JK: I learned a lot of critical lessons there, absolutely. Every experience is valuable, but I learned a ton there about evaluating companies and people. I also have a place to go, too, if I ever have questions or need advice. [Indeed, Katz is still considered a venture partner at the firm, though his role going forward is strictly in an advisory capacity.]

ND: The benefit of running a fund is that you start to see the patterns. You see many more business teams than you ever could if it weren’t your day job, and that pattern recognition does come with time. We started slowly out of the gate. Javelin began to come together last May. And it’s allowed us time to build up that reference database, if you will, and start to get a feeling for the market. And considering how much has changed in the last year, that’s been important!