New York angel investor Roger Ehrenberg is raising up to $25 million for a venture capital fund focused on “big data” startups. It will be called IA Venture Strategies, and is expected to hold a final close within the next two months.
At first blush, this is a surprising development. Ehrenberg has long said that the traditional VC fund model is broken. In fact, he and I discussed that very subject during a panel discussion at Columbia Business School, nearly one year ago to the day (we were in basic agreement).
So is this an about-face?
No, says Ehrenberg, pointing out several structural differences between IA Venture and typical VC funds. First, and most important, he is not seeking capital from traditional VC funding sources (pensions, endowments, etc.). Instead, he’s raising money from people who either are within the “big data” space, or those who could help make valuable introductions to IA Venture portfolio companies. To be very cliche about it, these would be “value-added” limited partners.
Second, Ehrenberg believes the fund size is small enough that he and this three-man team will be carry-driven, rather than fee-driven.
Finally, IA Venture is designed to be a “real” venture capital firm. No growth equity or PIPEs here. Just seed-stage and early-stage investments of between $250k and $750k, for science-heavy startups.
In August 2008, Ehrenberg began incubating something called Kinetic Trading Strategies, which he describes as being at “the intersection of quantitative trading and machine learning.”
Word of the project began to leak about six months ago, at which point Ehrenberg began to be pitched all sorts of related efforts. Cutting-edge database architecture, predictive analysis, high-performance computing and the like.
“These opportunities didn’t feel like angel to me,” Ehrenberg explains. “They felt more strategic, because I wanted to play a bigger role in these companies… help them build their own product roadmaps.”
Thus the fund. IA Venture already has held a first close in order to begin doing deals — the first one is a stealth-mode predictive analytics company in Boston — and is casting a fairly wide net. Around two-thirds of its investments are expected to be within the U.S. Air Shuttle corridor (DC-Boston), but Ehrenberg also expects to be active in Israel, the UK and West Coast.
IA Venture portfolio companies will not be rolled into the Kinetic Trading platform, but are expected to benefit from that group’s working scientists.
Ehrenberg’s team also includes Brad Gillespie, a former Lockheed Martin and Microsoft staffer, and recent Columbia MBA grad Ben Siscovick. News of the fund was first reported by VentureWire, based on a regulatory filing.