A New York Native Returns: Catching Up with VC David Aronoff

For years, David Aronoff has been trying to move from Boston back to his native New York. Three months ago, the venture capitalist, who has long focused on enterprise and infrastructure companies — first for Greylock Partners and, since 2005, for Flybridge Capital Partners — managed to do just that. He insists there couldn’t be a better time to make the leap, too.

Last week, I chatted with Aronoff about why the change was so important to him and how it might help Flybridge, where he remains a general partner. Our conversation has been edited for length.

You’re on the boards of companies like Calxeda, an Austin-based company that’s building data centers, and Sand9, a Cambridge-based company that makes micro-electromechanical devices. What’s a guy like you doing in New York?

Hah. New York has always had a gravitational pull. I was born in Brooklyn. My family moved to a small town in Vermont when I was four years old, but my father’s family was from Brooklyn and Queens and Long Island, so I spent a lot of time between the two [states]. In fact, I came back to work for Bell Labs here in Gramercy Park after college. Then I left to go to a startup in Boston, intending to spend a year there and, without belaboring my own story, [my wife and I] stayed for 19 years. But my sister lives in the suburbs [of NYC]. My in-laws are on the Upper West Side. My daughter is at NYU. When the opportunity to return coincided with a great opportunity set that we’ve been monitoring for a while, it made sense to come back.

What’s the great opportunity set that you’ve been following?

As a firm, we’ve been primarily investing in two categories as a core thesis: enterprise and consumer infrastructure. So we’ll touch the consumer occasionally, but much of what we do [is invest in] services that power different consumer services. If you look at our portfolio, you’ll see a number of companies that fit the bill around this.

In New York, we’re seeing a wealth of possibilities for us to consider here as [the companies] mature, including in financial technology and advertising technology. We’ve always been a small fund, making a small number of investments here. But we already have three portfolio companies here in the city and we’re about to add a fourth. From a deal flow perspective, it’s certainly on a par with what we’re seeing in Boston.

[Editors Note: Flybridge’s disclosed New York-based investments include 10gen, the company behind the popular NoSQL database MongoDB; the social ad targeting firm 33Across; and tracx, maker of social media analytics software. Another of its New York-based portfolio companies, Jingle Networks, which provided ad services for mobile carriers, was acquired by the publicly traded online ad services company Marchex in April 2011 for $62.5 million in cash and stock. The company had raised more than that amount from numerous investors over multiple rounds, beginning in 2004.]

As an investor, you’ve been coming to New York since before the dot.com implosion of 2000. What are the biggest differences you’re observing between now and then?

What we saw around Internet 1.0 were a lot of businesses that were tech-enabled but not necessarily tech businesses. And you certainly didn’t have the huge culture of startups in the city like you do now; it was anomalous back then. As the gold rush hit and valuations became obscene, you saw a rush of people from Wall Street into these companies, but they weren’t imbued with this culture of entrepreneurship, and when the floor fell out, they quickly retreated back to their old jobs. Of course, too, back then, the knock was that New York didn’t have this wealth of startup investors or founders or great exits or enough engineers to build deeply tech-enabled businesses, because remember, back then, you needed a big engineering team.

Almost every aspect of that has changed. Now there’s an incredible culture; you see it when you look at the number of incubators, the number of active startups, the number of meet-ups in Manhattan. It’s amazing to see this open, collaborative approach to building startups.

Are the investors more collaborative as well? 

I’d say it’s less cloistered than in other environments. I’ve spent time in both Silicon Valley and Boston; from an institutional standpoint, New York isn’t as evolved as the Valley or Boston. There’s an emerging angel class, largely made up of experienced or current entrepreneurs or people who’ve made themselves angels as their main jobs. Then there are a number of seed-stage firms here. Then you have a fewer number of seed-to-scale firms, funds that will invest at the earliest stages [through the mature ones], including RRE and FirstMark and Union Square and Spark Capital. But the volume isn’t as great as you see in the Valley or Boston. So while everyone here is competitive, what we’re finding these days is — since everybody is trying to build the community and energy level here – there’s more openness, which is refreshing.

For example, I was just talking with a guy at another firm about a startup that we can’t both invest in, but we were comparing notes on the industry because both of us know we’re spending time [looking at this particular subsector].

I can’t compare it [to another tech hub]. I can just say that there’s something very special that’s going on here, it’s happening quite quickly, and there’s still room to grow.