They wore respirator masks and clutched flashlights and duffel bags as they raced up 27 flights of stairs in the dark, cramped stairwell of Two World Financial Center. When they reached their destination, they stuffed their three, large bags, ran back down and walked 15 blocks to waiting cars. It was eight days after the terrorist attacks and they had been given one hour to do the job.
The crew were members of Metropolitan Venture Partners, and they pulled off what Managing Director Paul Lisiak likes to call a “bank robbery” of their own office. “There was an incredible amount of dust everywhere, and on all the walls [rescue workers] had written badge numbers in the dust with their fingers with names and messages,” he says. “It was very eerie to see with the flashlights.”
Lisiak and the other “robbers” lifted the firm’s incorporation documents, info about portfolio companies, stock certificates, laptops, personal effects and anything else they could carry.
The downtown VC firm recovered some of its loot, but it was still homeless. In the weeks that followed, the partners managed their $10.5 million fund out of their homes and from their London-based chairman’s Manhattan pied a terre.
Travel has been an adventure, too. On Nov. 12, when virtually no one in the United States was getting on a plane, Lisiak and Michael Levin, another MetVP managing director, boarded a jet at JFK on their way to meet with colleagues in the firm’s London office. As they sat on the runway, American Airlines flight 587 crashed nearby in Queens, news that temporarily sent the whole city into another frenzy. Lisiak and Levin got off the plane and cancelled their trip.
For VCs in New York, scratching out some version of normal life since Sept. 11 has meant getting beyond the initial shock and surviving a brutal economic environment.
It wasn’t until after Thanksgiving that MetVP finally moved into a new office across from the historic Flatiron Building, between midtown and the financial district. Lisiak says it was the best deal the firm could find, but it didn’t necessarily make life any easier than working from home: It was a month before phone or data lines were connected because the phone companies were focused on untangling the telecommunications mess downtown. A resourceful tenant strung a single copper wire from her fax machine up the fire stairwell to the MetVP office. Until just before the new year, all the firm’s business was done over cell phones and a shared 14.4K Internet connection. “All you needed was one excited entrepreneur to send us a PowerPoint presentation and the whole office was shut down for 20 minutes,” Lisiak says.
MetVP persevered through the technical difficulties and other setbacks and in May it funded its first deal since Sept. 11. It put $2 million into LightStream Technologies, a water disinfection technology company.
MetVP is slowly but surely putting Sept. 11 behind it, as are New Yorkers in general. While some of them are still reluctant to talk about the events of Sept. 11, the city’s residents don’t jump anymore at every unexpected loud noise-like the engine blast from the fighter jets that once circled the city-and they no longer open their mail with rubber gloves.
Business, on the other hand, has been slow to come back. Cab drivers, a good benchmark of commerce in a town where nobody drives, say their daily take is still way down. New tenants have taken over some of the stores and restaurants that closed in downtown neighborhoods like Chinatown and the financial district, but other retail and wholesale businesses in those areas are still being shuttered.
Those hundreds of retail closings haven’t affected the New York venture community nearly as much as the failures over the last couple of years of startups like Flooz.com, GovWorks, Kozmo.com and Metion, which alone took more than $500 million down the drain with them.
“The whole venture market is still so battered down, but it seems to be particularly bad in New York City,” says John Iorillo, co-chief executive officer of Ambrose Employer Group LLC. “What used to be Silicon Alley is just battered.”
Ambrose, a private employer organization, offers benefits packages, mostly to small companies. In the heyday, Iorillo and the folks on his team were staples at New York venture conferences and coffee swills. He would go to about two a month, but this year he’s only been to one on the fallow circuit. “I got an email from a conference yesterday, and it got sent around the office very quickly,” he says. “Everyone was saying, Is this real?'” That’s how dead the scene is. It’s a joke.
At one point, 75% of Ambrose’s business came from Silicon Alley companies. Now, Iorillo says, it’s down to 10%. The new clients are in other sectors and they’re not in Manhattan. “I don’t think it had much to do with Sept. 11 at all honestly,” he says. “I think it’s more economy-based and market-based.”
New York venture capitalist Thomas Pennell refuses to let the gloom get him down. He shows his commitment to his home by marking a different anniversary every September-the founding of $12 million Pennell Venture Partners.
His fourth “Annual Still Open for Business Party” was slated for Sept. 12, 2001 at his very hip Lower Manhattan location in the Village. He rescheduled it for the following month and enough people filled his small office to make any no-shows unnoticeable. The party is on again for this September.
Pennell has suffered at least one other close call: On July 1, he was scheduled to deposit $2 million in proceeds from his latest capital call in the Connecticut Bank of Commerce, but the bank folded on June 26. Luckily it failed before he made the deposit, or it may have turned $2 million in cash into $100,000 in FDIC insurance.
And while the venture business has been “lean,” Pennell has managed to do two new deals and one follow-on financing in the past year.
Business and life may be tough, but New York won’t grind to a halt, says Steve Brotman, managing director of Silicon Alley Venture Partners. Says Brotman: “You can say all you want about New York, but it’s got to have the most entrepreneurial culture on the planet.”