We are the Most Active Moment-of-Inception Investor, and That’s a Great Start

We were gratified by the CB Insights report that showed Social Starts as the most active moment-of-inception VC fund in New York, and second most active in California (right after 500 Startups; you can see the full report here). As CB Insights notes, with many VCs moving back to bigger early-stage rounds, later in the lives of start-ups, the first under-$1M round is becoming a distinct investment category and a unique investment opportunity. Our singular investment strategy at Social Starts, in part, hinges on being a dominant moment-of-inception investor in our core markets of New York and San Francisco. Overall, New York and California had 95 moment-of-inception deals in 2014; we did 26 of those. In the first half of 2015, New York and California had 33 of these deals and we did 19 of them.

As pleased as we are to see this success emerge, we recognize that volume alone isn't enough. Our strategy demands three other elements for success.

The first is focus. We aren't simply putting money into a lot of young companies. Rather, we are focusing 100% on social/mobile start-ups because we believe this is the defining shift for the future of business, commerce and society. Further, within that framework, we focus deeply on five core areas: media, analytics, mobile commerce, new ways to work, and software related to the Internet of Things. These are areas where we have substantial domain expertise, and connections where we see enormous opportunity.

Our goal in these five areas is to achieve unprecedented context to our investment choices. This demands not only focus, but also intense pre-investment research. This is the second additional element our strategy requires. In the first half of this year, for instance, our team discussed 641 companies in our five target areas, drawn from a universe of more than 2,000 teams we identified through a wide range of research approaches. Only by tracking every deal in our areas of focus, and meeting with the best prospects, can we know we are investing in the right entrepreneurs and ideas.

Finally, our strategy demands not just volume, but efficiency of success. We love unicorns as much as the next investor, but from the super-early stage, unicorns are hard to predict. (We didn't know Coldbrew Labs would become Pinterest, when we were their moment-of-inception investor.) From this vantage, success is defined by progress of companies to the critical gates of the A and B rounds. If our approach is right, we should see more companies making those gates than other investors. If that happens, our potential for unicorns, and other kinds of positive outcomes, soars.

What have we seen so far? Our moment-of-inception funds are young, just in their fourth and first year, respectively. But signs are distinctly positive. Social Starts 1, our original fund, has 81 investments. Of those, 37 have already reached the A round and 21 the B round. And five of those companies already exceed $100M in value. That puts us well ahead of venture market norms. As a comparison, during its first 8 years, Y Combinator moved 24 companies to $50M in value, 4.2% of the 571 companies they worked with. In less than half that time, we have moved 4.7% of our investments past that value.

It’s a great start, and we’re thrilled to be at the top of the list.