Slowing down their start-up investments, VCs aren’t raising as much money these days. Recently Thomson Reuters and the National Venture Capital Association said the third quarter saw the smallest number of venture funds raising money in a single quarter since the third quarter of 1994.
Just 17 venture capital funds raised $1.6 billion in the third quarter this year â€“ in 1994’s third quarter, 17 funds were also raised and the lowest level of dollars were committed since the first quarter of 2003 when $938 million was raised during the dot-com bust. The NVCA says it expects commitment levels to remain modest the rest of the year, with gradual increases beginning in 2010.
Given the state of VC fund-raising and funding, semantic web start-ups perhaps won’t be as well-served by traditional West Coast venture capital firms as they may have been a couple of years ago. So why not try Houston instead?
That’s the location of Creeris Ventures, which is backing some innovative start-ups, including 80legs. In fact, if you happen to be a semantic web business that could leverage 80legs’ scalable web content crawling and processing service, you may want to give Creeris CEO Brad Wilson a call.
“We don’t have any semantic web technologies or companies in our portfolio now,” he says, “but that’s not to say we wouldn’t be interested in either forming or partnering with people [in this area] to create new companies…especially those that would make sense in combination with 80legs’ core technology to drive 80legs usage and possibly higher margins.”
Also note he’s not interested in scientific type-research projects, which may be cool but have limited applicability â€“ only those businesses that have potential for in-demand commercial applicability need apply.
(Speaking of 80legs, that company has just launched a developers’ challenge to create applications that use the platform they can sell â€” and keep 100 percent of the profits for â€” for its App Store that opens in November. The idea, 80legs says, is to make crawling even more accessible â€” so as to expand the market to the non-technically inclined â€” with a rich store of 80apps, so that anyone will be able to execute jobs.)
With its base in Houston, Creeris says it has access to different investors â€” and different types of investors â€” than the typical West Coast outfits. So, while Creeris has felt something of a pinch in these tough times, Wilson thinks the impact probably has been a little lighter on his company. In addition to its location, Creeris also departs from the usual VC model in some other respects.
“We are definitely not the traditional VC where we put in cash and maybe have some involvement going forward, and then come back later and see how everything went,” says Wilson. “We’re very active in our companies â€” in fact, most of the companies in the portfolio were created or founded by Creeris. So we’re really a combination of a VC and incubator model.”
It’s one of a dozen or so companies that take that kind of active role in start-up web ventures. Wilson’s history developing one of the first solid commercial cluster implementations in the ’90s for the oil and gas industry, which he sold to a major oil services firm in 2001, accounts at least in part for the hands-on approach Creeris takes with the companies in its portfolio. Those companies include FileBanc.com, a back-up service that Wilson says has launched and is earning revenue; Plura Processing, a grid computing play; NightOwl Games online gaming; Paypetual, a proprietary payment system; and a handful of others. 80legs, in fact, was an outgrowth of Plura Processing, as the web crawling service leverages the grid’s capacity.
“That was a very good situation for us because it was drop-dead easy to see how to form that company,” says Wilson. So much of the VC-incubator battle comes in searching for and refining ideas, but 80legs’ connection to something that was already in the portfolio was evident right from the start. The other battle that Creeris faces is the fact that it’s a small player, so splitting Wilson and his partners’ time among portfolio companies is a challenge.
“We have to balance both time and capital needs, and maybe having a board seat,” Wilson says. One strategy it takes is to hire into the firm and move talent around in different roles with Creeris and then seeing if they are a fit for a CEO position in one of the portfolio companies, as Shion Deysarkar was for 80legs. “That gives us some flexibility that might not be there for others,” Wilson says.