One of Silicon Valley’s Best New Angel Investors Steps Out of the Shadows

Steve Anderson has been a number of things in his 42 years: a Stanford MBA, a general manager at Starbucks Coffee, a product manager at eBay, a partner at Kleiner Perkins, a senior director at Microsoft.

Right now, he’s one of the best angel investors in Silicon Valley.

Anderson began investing a pool of individual investors’ money in 2006 under the name Baseline Ventures. Since then, he has provided seed funding to 40 companies, a stunning 8 of which have been acquired. This morning, DocVerse, whose software invites users to collaborate on Microsoft Office documents and that had raised just $1.3 million, was acquired by Google for a cool $25 million.

Baseline’s other exits include the Web operating system Parakey, which raised an undisclosed amount of seed funding beginning in 2005 and was picked up by Facebook for an undisclosed amount (“all cash unfortunately,” says Anderson); social search engine Aardvark, which raised $6 million beginning in 2007 and sold to Google for $50 million last month; and Mixer Labs, which raised an undisclosed amount of seed funding beginning in 2008 and sold to Twitter last December for $5.2 million in stock.

More returns — possibly big ones — could be forthcoming. Anderson also has stakes in several of the Valley’s most financially promising startups, including the microblogging platform Twitter, the payments platform TrialPay, and the email company Xobni.

Anderson is about as low-profile as it gets. Though Baseline became best known for investing on behalf of angel Ron Conway for several years — then breaking with Conway, who last summer decided to narrow his focus, as well as to invest smaller amounts in more companies than does Anderson — Anderson himself doesn’t usually talk with reporters. (Coincidentally, or not, Anderson has shared a Palo Alto office with Michael Dearing, another press-shy angel who reporter Kara Swisher recently called the “hottest angel investor you’ve never heard of.” Indeed, Dearing also scored today with DocVerse.)

Yesterday, during a phone conversation about Anderson’s first exit this week — CoTweet’s acquisition earlier this week by ExactTarget — Anderson finally opened up a bit about Baseline and where he is shopping.

Do you have a discrete fund, and do you have any institutional investors?

It’s more evergreen, and it’s all individual LPs, though institutional LPs are interested in this [seed-stage] asset class. I’m being courted by some of these larger institutions; they suddenly see this as one of the places to make money.

Will you take their capital?

You never say never, but you have to ask: what are the objectives of the people trying to raise capital? Once [you’re] established, your sources of capital are less important than how you’re deploying it and making money.

I will tell you that as hard as it is to raise money as an entrepreneur, it’s twice as hard to raise a fund. There’s a tremendous amount of doubt among institutional people [when it comes to microfunds]. When I wanted to start [Baseline], I had access to [institutional LPs] through KP’s partners [alongside whom Anderson had worked earlier in the decade] but none of them were interested. It was too subscale; they were used to writing $30 million checks. That may be changing now.

Can you talk about how big a pool of money you are managing?

I’d prefer not to.

When Ron Conway split off from Baseline last year, a couple of your colleagues, David Lee and Brian Pokorny, went along to help him. Have you since rebuilt your team?

I wouldn’t use the word “rebuilt.” I’ve got some analysts who are computer hackers; they’re great. And I’m still working closely with Ron and David and Brian.

You’ve made 40 investments so far across a spectrum of Web companies. Has your criteria changed at all in the last couple of years? Are you zeroing in on real-time technologies along with Ron?

Not really. Real time and Twitter are a significant part but not the only part of what I’m doing. If you think about it, cloud computing and [Amazon Web Services] didn’t exist when I started, but it’s been such a watershed for all sorts of Web entrepreneurs. I just invested in a company that’s already become a top 1,000 Website. It’s amazing what you can do now without a lot of infrastructure.

Because of my background, my skill sets cross a bunch of different verticals, which is why you see me in real-time startups like Twitter, ecommerce startups like TrialPay and infrastructure companies, including [cloud computing startup] Heroku. The common thread is that they are all capital efficient.

You’re investing in around 10 companies a year; how big are the checks that you’re writing?

Between $300,000 to $500,000 typically.

And you tend to work with the same people time and again, including in CoTweet, which involved Ron, First Round Capital, and Founders Fund.

Yes, that was a awesome syndicate. There was a great syndicate involved in Aardvark, too. I’m a big believer in [investing alongside groups of] people like [First Round founder] Josh Kopelman, who add a lot of value to the companies with which they work. It’s good for the entrepreneurs and it’s how VC started. In fact, as far as I can tell, it was only because of bigger and bigger funds that people began to have sharper elbows at the upper end of the market.

Every angel investor I talk with makes their business sound very collegial; in fact, the angel scene now seems as clubby as venture capital has long been perceived as being. Is that your experience?

Well, I think the word “clubby” is slightly pejorative. My advice to entrepreneurs is that you want everyone to be contributing, so when you’re assembling a syndicate, make sure you have people at the table who are going to do work. It takes a village to build a real company. As it happens, a lot of the same investors actually do a lot of work, which is why the same names keep coming up: Ron [Conway], Josh Kopelman, Josh Felser [of Freestyle Capital], Mike Maples.

Obviously, there are many other angel investors, but many do it for sport and have vicissitudes of interest. And there have probably been a thousand people who’ve dabbled in angel investing and quit because either they are operators who wanted their hand on the wheel or they began to realize that it’s an awfully long time to outcome at this stage.

I mean no offense, but do you ever worry that you’re all succumbing to groupthink? The same group of people can form a sort of echo chamber over time, can’t they?

I don’t think that’s the reality here. If you map the investments, you don’t see the same people all the time. It’s a loose confederation as opposed to a tightly knit group of investors — which is what I love about it. I’d posit that most of the people I’ve coinvested alongside are independent thinkers. For example, if you look at someone like Mike Maples, we’ve done a lot together, including CoTweet and [the free Web creation site] Weebly, but there’s almost of an equal number of things where one of us has said yes and the other has said no. I just led an investment in another opportunity and I really wanted Josh Felser and [Freestyle cofounder] Dave [Samuel] and they declined because they didn’t have the same opinion. That’s the free market, and that’s what makes it healthy.

[Update: This post has been updated to reflect Anderson’s newest exit, DocVerse, whose sale was announced Friday morning.]