David Teten, founder of one company that mines social networks for deal leads, another that mines social networks for recruitment leads, another that connects hedge fund managers with industry executives, and another one (alas, now defunct) that provided investment banking services to buyers and sellers of domain names, has landed a gig as a venture capitalist.
Teten has become the second partner at New York-based ff Venture Capital since its inception in 1999. The firm holds stakes in such notable companies as Klout Inc. (mine is 50, thank you very much) and Hashable Inc., a company that stands at the crossroads of CRM and, yes, hashtags. Having known Teten for nearly a decade, and admired his mastery of the social networking scene, I thought I’d catch up with him with five questions to find out more about his new firm.
1) David, you’ve founded and headed up four companies–GoldNames, Teten Executive Recruiting, Circle of Experts and Navon Partners. Update please. I’m transitioning to a chairman role at Navon Partners, an early-stage startup whose business is making more efficient the process of identifying investment leads for private-equity firms. For example, we built out a head count growth index, which identifies how fast companies are adding new employees as a percentage of total head count. We have some early clients, like LLR Partners and Birch Hill Equity. We’re talking with some potential replacements to take over my CEO role. Circle of Experts I sold to Evalueserve in 2007, which recently announced it [Circle of Experts] was being sold to Advantus Global Inc., a company doing a roll-up of expert networks. Teten Executive Recruiting I sold to Accolo, a Bay area-based provider of recruitment leads and related services. GoldNames, which focused on the market for international domain names, was ahead of its time. We raised $2.2 million dollars from 34 investors. We had 450 clients, and 50 employees from 19 countries. Then we had a shrinking-down in the wake of the dot-com bust, which ultimately killed the company in the fall of 2001. I no doubt made a lot of mistakes. In fact, I gave a presentation in Israel [where the company was based] on all the dumb things I did. But the precipitating factor was the dot-com meltdown.
2) How will your experience founding and running companies inform your approach to venture investing? There are three main parts to the VC business. One is raising capital. Two is finding great companies and investing in them. Three is helping their growth. In the VC world, a typical company has far more missing in their organizational chart than your typical private equity-backed company. So they have a much greater need for operational support. But historically VC firms haven’t viewed operational support as a separate function. Part of what I’m doing at ff Venture Capital is building a portfolio acceleration team to support our portfolio companies. I’m not starting this from scratch. We already have a three-person team, led by Alex Katz, who’s our CFO, and he and his colleagues support our portfolio companies and their financial management needs. That’s been very very successful. We eventually plan to build out similar forms of support in other functions for our portfolio companies, such as marketing and website design—every function of a business you can think of.
3) I’m gathering you’ve done some extensive due diligence before joining ff Venture Capital as its second partner. Tell me about two exciting companies in the portfolio. One company your readers may be interested in is CapitalSpring. They provide preferred equity and debt capital to people who need money to open up McDonald’s restaurants and other franchisees. They raised tens of millions of dollars (UPDATE: $70 million, to be exact) in just the last few months, with help from investment bank Moelis & Co. Another is Hashable. They are building a Web-based CRM system that lets you track interactions with customers and tag them. For example, let’s say I send you an email introduction to Joe Fernandez [CEO and co-founder of Klout Inc., who Teten did indeed introduce me to earlier today]. I can put in the email subject line #introduction, and copy dontpost@hashable.com. Hashable records the introduction automatically, and lets me track it over time, as well as group it with related records. The hashtag used to be a geeky concept. But Twitter has made them mainstream and they’re being used more and more in everyday conversation.
4) I also have to ask you about Klout, which we’re big fans of here in my group at Thomson Reuters. How are they doing? Klout, which measures your influence on social networks, is doing very very well. It’s just growing at an astonishing pace. They are on track to process 1 billion API calls per month [the number of times that a website accesses Klout], which isn’t that far below the rate seen by Bing and Google. Of the companies that are achieving that level of volume, Klout is the only non-tier-one Internet brand. That gives you an idea how pervasive the Klout brand and metric system have become.
5) Wonderful, but how do they make money? As far as I know, I’m not paying anything to Klout. There are a variety of ways to make money there. One is by selling analytics on the Klout scores—showing firms how they can improve them. Theoretically, Thomson Reuters [publisher of peHUB] could be a client, so they could figure out how to boost the Klout scores of their reporters. Klout has also run campaigns for clients such as Audi, Nike, Disney, and Hewlett-Packard, in which they help those companies connect with their most influential customers in a way that boosts sales.
Edited for clarity
David M. Toll is editor-in-charge of sister magazine Buyouts. Opinions expressed are his own. Follow him @davidmtoll. Follow Buyouts @buyouts.
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