Interview: VC Life Outside Silicon Valley
I had the opportunity to interview Matt Rightmire of Borealis Ventures, an early stage VC firm based in New Hampshire. Matt left the entrepreneurial community in Silicon Valley to join a venture firm in NH's Upper Valley -- a move some might not expect from a veteran of Yahoo (he joined them in 1995) and other startups. He's a smart guy with a lot of interesting things to say. Highlights are below, along with a link the MP3 of his interview. The complete transcript appears at the end of this post.
Why did he do it? "At a certain point in life, there's more to what you're doing than work." He explains that he and his wife wanted their kids to go to school somewhere other than Northern California.
What does he think of Silicon Valley? First, Matt notes that the culture of Silicon Valley attracts lots of smart people and capital. But, he says, "I think people have to recognize ... that there are elements of that culture that ... balance out those positives." He adds, "I think people's priorities are a little skewed, and I think somtimes that impacts some of the business decisions that are made" in Northern California.
What's the difference between East Coast and West Coast VC's? "I think it's much harder to find capital available, back here in the east, just because of the numbers." Matt also says there's a difference in the types of people who become VC's on each coast. In California, "A lot of them have played the role of early stage start-up founder" while in the Northeast, "More so, they come from financial industry backgrounds. They haven't worn the entrepreneurial hat."
Where should budding entrepreneurs start their companies? Not surprisingly, Matt says "If I liked the idea, I'd say, 'you can start it right here in my office.'" Otherwise, each entrepreneur has to judge the individual circumstances for their company and idea.
What is different about the Borealis approach? Matt and his partners like to say they are different from other VC firms, and from what I've seen (at least from a distance) they are. Their philosophy is to get actively involved with early stage companies and try to take them to the next level, not just with capital, but with brainpower and elbow grease. Matt explains: "Both of those things, though I think that they were the foundations on which venture capital was created in the late '60s and early '70s, as traditional funds have gotten bigger and bigger in terms of capital and their management and in terms of number of people involved, people involved in those firms have become less willing and less able, either to get involved early, or to roll up their sleeves and be very active with the companies in which they invest."
Finally, is there (or will there be) a Bubble 2.0? "I like to think that everybody -- everybody -- is a little bit smarter this time around."
or read the transcript below
Transcript of Interview with Matt Rightmire
Chip Griffin: Hi, this is Chip Griffin. My guest today is Matt Rightmire. He's a venture capitalist with Borealis Ventures, a firm based in New Hampshire. He's formerly with Yahoo!; he actually went to work for them back in 1995, the early days of the world wide web. Welcome, Matt.
Matt Rightmire: Thank you for having me.
Chip: I thought this would be an interesting interview for my listeners and readers, because Matt made a transition that is rather unusual. He went from Silicon Valley to New Hampshire, rather than the other way around. I was hoping that Matt could shed some light on it, and talk about how the entrepreneurial community outside of Silicon Valley looks and what the advantages to it are. So why don't we start with the first question. I guess that's the basics; why did you leave Silicon Valley and come to New Hampshire, Matt?
Matt: Well, let's start by saying I left New Hampshire to go to Silicon Valley, so I sort of made a round trip. The reasons for my return are pretty straightforward. At a certain point in life, there's more to what you're doing than work, and the culture of Silicon Valley is that there's nothing more important than work. I have three young kids and we reached... my wife and I, when the first was born, rapidly determined that our goal was not to send them to elementary school in California. I think we believe that we can find people that share our values and the things we hold important much more easily in small towns in New Hampshire than we can in the ex-urban zoo of Northern California.
The original impression that both of us had was that we'd probably have to sacrifice things on the career front in order to make the move, and I think, here we are, a year and a half later, and I think the sacrifice has been much smaller than either myself or Margaret imagined. Certainly, both in southern New Hampshire and more so in the upper valley and up around Mount Washington, there's a lot more going on than I think, certainly than what I expected to find. I think there are talented entrepreneurs, there are talented technologists, and more and more there's capital available here to help those entrepreneurs and technologists really explore some of the ideas that they have.
So, a lot more activity here than I certainly expected to see. I think at the same time, people have this perspective on Silicon Valley that it is the epicenter, the nexus, the center of the universe, and while I think that it does have a lot of things going for it, in terms of just the talent it attracts, the capital available, the innovation that takes place at research universities like Cal Berkeley and at Stanford. I think people have to recognize, as well, that there are elements of that culture that certainly make it... well I guess I should say balance out those positives.
The reality is, it's about as cutthroat as any economic center can be. I think that people's priorities, and I'm speaking in generalities here, but I think people's priorities are a little skewed, and I think sometimes that impacts some of the business decisions that are made. And I think that the venture community and the capital providing community in Northern California, though they're certainly more willing to take risks than probably any place else in the world, I think sometimes as a consequence of that risk taking culture, they're probably more likely to invest a whole lot of capital behind businesses that just may or may not have legs.
So, I certainly recognize the positives of Northern California. I think people just need to recognize as well that there are, I won't call them negatives, I think that's too strong a word, but there's certainly other factors to consider when you think about what's going on in Northern California and the opportunities that are available there.
Chip: What do you see as the biggest differences between venture capitalists in the valley and venture capitalists here in New Hampshire?
Matt: Or in the northeast, for that matter. So I sort of alluded to one, and that is the Northern California venture capitalists base their thinking on generating 100 extra turns, and if one in 10 companies does that for them and their funds, then they're pleased and satisfied with that. They are far from risk averse. One can easily say that it's a risk chasing sub-culture in the venture capitalist community out there. Second, I think, and again, speaking in huge generalities, the world is not black and white, though I sometimes like to view it that way; venture capitalists in Northern California are generally much more entrepreneurial sensitive. A lot of them have been there before; a lot of them have played the role of early stage start-up founder or manager. I think because of that, there's a much better understanding of some of the challenges and forces at work on the entrepreneurs that they're working with.
Generally speaking, folks on the east coast, less aggressive in pursuing risk. More so, they come from financial industry backgrounds. They haven't worn the entrepreneurial hat. They haven't been in operating roles in businesses before, and I think that generally colors the way they think about those same forces that I described earlier. So I think it's a different perspective; it's not better or worse but it's certainly different. My bias, given my background, is the belief that operators, those that have been in businesses and had management roles in businesses, especially growing ones, earlier, add a lot more value to the first time entrepreneur who is trying to grow a business rapidly, because they've been there before.
And so, I certainly have that bias, and my partners call it a west coast bias. I think if that's a west coast bias, then I'll embrace it fully, because I do think it ends up generating and adding a lot more value than financial engineers typically can. And I think the third difference is just the amount of capital that's available. In Northern California, there is probably, I don't know the numbers off hand, but I bet there's at least five times as much venture capital available. Maybe 10 times, maybe more, and that creates a more competitive funding environment, when entrepreneurs are out seeking capital and the obverse, I think it's much harder to find capital available, back here in the east, just because of the numbers.
Chip: If an entrepreneur came to you today and said, "I need your advice. Should I start my company in one of the hubs, either Silicon Valley on the west coast, Route 128 here on the east, or perhaps even New York's Silicon Alley, or in one of the outlying areas like New Hampshire." What kind of advice would you give them?
Matt: If I liked the idea, I'd say, "you can start it right here in my office." I think it very much depends on individuals, industry, stage of company, all of those factors. And I guess as well, the sort of critical success factors of the business. All of those factors should weigh in pretty dramatically on location choices, if you're so lucky as to be able to make one. Too often, I believe, people have blinders on with respect to where they can locate their companies. They are comfortable living where they live, and as a consequence, they conclude that that's where they're going to be, and if they're unsuccessful raising funding in that particular geography, then they fold up their tent and go home.
I think more realistically, you have to recognize that capital availability can pull you to a bunch of different places. So, more capital available in Northern California and in the hubs; I think that's a draw for many folks. I think traditionally, capital availability, access to talent, the location of basic research institutions, all have contributed to early stage venture funded enterprises being located in those same places. I think over the last five, seven, 10 years, that location and co-location with all of those resources has become less and less important. There's more capital in places like New Hampshire. Borealis is a perfect example of that. There's more human capital available in places like southern New Hampshire and the upper valley, Raleigh, Durham, Charlottesville, Virginia, Indianapolis, places where there's a vibrant intellectual community, and that vibrant intellectual community is attracting more and more and more experienced and talented business folks.
And then finally, I fundamentally believe that the world is just a much more open, communicative, less geographically tied place than it was 10 years ago. Not surprisingly, high bandwidth connectivity, except in my house in rural Hanover [laughter], has enabled a bunch of good business ideas that traditionally would have had to be located in the hubs, to be located elsewhere. That availability and that capacity is only going to contribute to more and more meaningful businesses being created outside of the traditional metropolitan areas.
Chip: You touched a little bit on Borealis, but I think this might be a good time to talk about how Borealis fits into the mix in New Hampshire. Obviously, New Hampshire doesn't have a lot of VC firms and a lot of funding options, but Borealis sort of fills that need to some extent and I think you've talked a little bit about the approach that you all take, which I think is a slightly different take on it than most east coast venture firms.
Matt: We like to think it's dramatically different from most east coast venture firms. So Borealis is comprised of three partners; myself, Jesse Devitte who was the founding executive of a software company called Softdesk, based in Henniker, New Hampshire, that was eventually acquired by Autodesk. So he's an operating executive as well, and then our third partner is a fellow named Phil Ferneau. Phil has a tremendous amount of experience in commercializing basic research. Those backgrounds sort of lend themselves to a couple things; first, we like to be involved in early stage ideas. Myself and Jesse, and Phil as well to a lesser extent, have rolled up our sleeves around ideas on an operating basis and pushed those ideas into meaningful businesses. So we've done that in the past, and as capital providers, that's what we want to do in the future.
I think second, we like to think of ourselves as very, very, very active members of the team, whereas most sources of capital either don't have the time or the inclination to roll up their sleeves and do the hard work of getting a business off the ground or to the next level, other than providing capital. We like to think that in addition to providing capital, we're going to work in tandem with the entrepreneurs and the management team to really push the operations of the businesses in which we invest. Both of those things, though I think that they were the foundations on which venture capital was created in the late '60s and early '70s, as traditional funds have gotten bigger and bigger in terms of capital and their management and in terms of number of people involved, people involved in those firms have become less willing and less able, either to get involved early, or to roll up their sleeves and be very active with the companies in which they invest.
So we're doing what we like to do; we're doing it where we like to do it, and the funds that we have to invest allow us to do both of those things. So the approach is definitely different. We are, in addition, I think big supporters of making things happen outside of the traditional hubs. I sort of alluded to why I think there are opportunities for businesses to be created and to grow in places like northern New England and New Hampshire. We're sort of putting our money and other people's money where our mouth is, by choosing to invest the lion's share of the capital we have under management in early stage enterprises here in New Hampshire. So our philosophy is definitely different, but we feel like it's a right market opportunity and on top of that, it's how we really want to spend our time. So it's a good combination of things.
Chip: You talked a bit about how there's obviously a lot more money in Northern California, venture money, that is. How do you see the marketplace for venture funding in New Hampshire today? Is it a market for VC's where there are just so many ideas out there to be funded that they can really pick and choose? Is it really almost a real hunt to find the good ideas, the good entrepreneurs, to back here in the state? Talk to me a little bit about what you see.
Matt: It's actually pretty balanced, surprisingly enough. We feel like, and we could be proven wrong, but we feel like we certainly see the lion's share of the opportunities that are being created in the state, and we feel like there's enough opportunity to warrant the investment capital that we're making, but not so much opportunity that there isn't enough capital to deploy. Or on the other end of the equation, so little opportunity that we're out there trolling for good ideas because they're so hard to find. It's pretty balanced here. I think that clearly, Northern California and Boston operate on a different scale, but I also think that generally those places are pretty unbalanced right now.
There's a huge amount of capital to be deployed, simply because of the success of the asset class historically. And while I think there's, in volume terms, a pretty meaningful set of opportunities for those funds to pursue, there's not nearly enough ideas to balance out the capital flows. So New Hampshire, pretty balanced, I think more capital than is necessary in places like Boston, New York and Northern California. And I don't see that changing going forward; I think there's so much capital, so much money flowing into tier one firms like Sequoia and Kleiner and pick your brand name of choice, that that overhang, if you will, is going to be in place for quite some time.
Chip: Does that dynamic create the potential for bubble 2.0 to exist? I can't help but ask that question, since I'm in VC here.
Matt: It certainly creates the potential. I like to think that everybody, everybody, is a little bit smarter this time around, that collectively the marketplace has learned from its past excesses and as a consequence the likelihood of a bubble the size of the one in '99-2000 being created is relatively small. Do I think there's the potential for overinvestment? Sure. All these things happen in cycles, and generally, it flows between overinvestment and too many quote-unquote good ideas, and underinvestment and not enough. It's very rare that the dynamic is an equilibrium, unfortunately, but I think that the chances of any excess being anywhere near the scale of the excess we saw six or seven years ago is really small.
Chip: Excellent. Well, Matt, unfortunately we've reached the end of our time here. I appreciate you taking the time to speak to me. I think it's been a very enlightening conversation. Again, my guest today was Matt Rightmire of Borealis Ventures.
Matt: Thanks for having me.
Transcription by CastingWords
Great interview and some excellent insights. I moved to Silicon Valley for a couple of years and then left again and have been considering moving back. Just got back from a trip there that 100% convinced me not to move. I think Matt's assessment is bang on target.
Silicon Valley is a great place for many things, but it's not the _only_ great place out there.
Posted by: Nick | Tuesday, August 22, 2006 at 12:36 PM