Revolution in the Air
Posted on May 18, 2012And on the ground, here in DC, to help companies to grow; with venture capital and speed up capital. Below is an excerpt from a Washington Business Journal article on the Revolution Growth Fund and the work of Revolution Ventures. If you’re a subscriber, you can find the whole article here.
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Getting a deal done is no longer such a casual thing for Leonsis, who launched the $450 million Revolution Growth fund in December alongside Steve Case and Donn Davis. For the first time in the three men’s careers, they are in control of a giant pot of outside cash. The funding rounds are bigger and fewer. Vetting entrepreneurs is far more involved. Deals must align with a charter drawn up at the outset of the fund. And perhaps most important, returns must be big enough to justify such an ambitious raise. So it goes when you’re managing other people’s money. “Certainly when we’re talking to a founder, we’re crystal clear that it’s no longer just my money or Steve’s money,” Leonsis said. “We have investors, partners. They expect a return and an exit.” … Geography is key to those hopes for outsized returns, which depend equally on big exits for the company and favorable terms for the investor. Revolution Growth plans to largely steer clear of hypercompetitive Silicon Valley deals, where white-hot valuations mean stakes come at a premium. Instead, Revolution will focus on regions where expansion capital is far scarcer and terms are move favorable. “The ground isn’t as tilled here,” Leonsis said. “The disadvantage is young entrepreneurs and startups gravitate toward Silicon Valley. We adhere to the ‘rise of the rest’ notion.” Playing in the expansion stage carries less risk and reasonable returns, but can be expensive. So focusing on underserved markets “is actually a very good strategy,” said Jeffrey Sohl, director of the University of New Hampshire’s Center for Venture Research. “The thing with underserved markets — and I’m sure they realize this — is you need boots on the ground.”
