Some potential questions (with TheFunded.com in mind):

• What are the investment relations of the VC(s)?
• How are they related to other VCs?
• How are they related to board members and/or management team members?
• What other companies has the VC (or multiple VCs) invested in? 
• In what sector? 
• Over the what time period? 
• With what keywords? 

Let’s look at an example:

True Ventures is currently rated as one of the top VC firms by the members at TheFunded.  Let’s examine the relational network map for True Ventures’ portfolio companies in the Silicon Valley:

True Ventures Relational Map.  Notes: (1) All of the active companies are private companies (blue rectangles); (2) Three Angel investors (yellow ovals) have multiple capital relations with True Ventures: Auren Hoffman (Meebo & BrightRoll) and Michael Tanne & Jeff Clavier (BrightRoll & Maya’s Mom) have two common investment ties with True Ventures; (3) Three Board/Management Team Members (tan ovals) have board/management team interlocks with Sphere and Automattic: Phil Black (True Ventures), Toni Schneider (True Ventures & Automattic CEO), and Matt Mullenweg (Automattic founding executive).  Double click on each tan oval in the map for their LinkSV bio (in a new window).  Here is a complete view of all of the relations for True Ventures Silicon Valley active companies (including all co-investors and related management team and board members). (Source: LinkSV.com)

Here we gain a sense of the Silicon Valley company portfolio of True Ventures as it relates to its co-investors and board/management team interlocks.  LinksViewer provides a handy (and clickable) representation of the relational capital for each VC firm.  Below are some other potentially interesting maps for start-up entrepreneurs: 

Sequoia Capital + Accel Partners: Round 1-2 Internet Sector companies funded in 2005 or later 

Sequoia Capital + Accel Partners: Round 1-2 Keyword “Wireless” companies funded in 2005 or later

Entrepreneurs are encouraged to try out LinkSViewer for a free two-week trial (particularly when in capital-seeking mode).  This allows the user access to multiple map views, search, filtering, and a number of other features.  After the two-week trial, LinkSViewer is available on a per seat monthly subscription basis for $25/month.  Check it out, it may save you money in the long run…

Example 1:  I am interested in recent investor activity in 1st round SV-companies the Internet sector (let’s say I was an investor who wants to keep abreast of other investor activity).  Who were the most active investors over the past 3 months in funding Internet sector start-ups?

From the LinkSViewer home page, I started at the Search Most Active Investor Networks and from each pull-down menus I selected All Investors, 1st Round, 7 days, 3 Months, and Internet Sector, and clicked on Show Results.  The results returned 8 matching investors (Shasta Ventures, Jeff Clavier, Ron Conway, Emergence Capital, Greylock, Khosla, NEA, and Redpoint), listing the number of investments in this time period, name of investor, and total number of investments.  At this point I can select any combination of the results in displaying the map.  For this example, I selected all of the investors (Clicking on the first entry and then holding the shift key on the last entry) and clicked Show Relational map.  

Relational Map of Most Active Investors in 1st Round SV Internet companies over the past 3 months.  Notes: (1) Conway and Clavier both invested in Kaboodle; (2) Redpoint and Greylock both invested in Oodle; (3) Emergence and Shasta both invested in Lithium Tech.; and (4) NEA and Shasta are linked by Nikhyl Singhal (SayNow Founder & Teracent Board advisor). (Source: LinkSV.com)

Realize a few things from the above map: (1) the results indicate the most active investors in your chosen time period (i.e., those with more than one investment); (2) the resultant companies shown on the map are filtered to meet your chosen activity specifications (i.e., 1st round Internet companies over the past 3 months) - this is by default displayed at the top of the map to remind you of how companies on the maps are filtered; and (3) each of the filters can be changed by clicking on the Company Filter link (top center) which allows on-the-fly changes to your current settings (round, sector, or funding dates) or other settings (including amount of capital, company keyword, or start year).   

Example 2:  I am looking for Internet VCs (let’s say I am a 1st-round funded Web 2.0 company looking for 2nd round financing).  What VCs invested in 2nd round Internet companies this past year?

From the LinkSViewer home page, I started at the Search Recent Funding Networks and from each pull-down menus I selected Venture, 2nd Round, 12 Months, and Internet sector, and clicked on Show Results.  The results returned 16 investors listing the number of investments in this time period, name of investor, and total number of investments.  At this point I can select any combination of the results in displaying the map.  For this example, I selected the 6 VCs with 3 or more investments fitting my activity criteria investors (Clicking on Sequoia and then holding the shift key on Lightspeed) and clicked Show Relational map.

Last year 2nd Round Internet investors Relational Map.  Notes: (1) Sequoia Capital has the most investments (5) with co-investments with DFJ (Meebo), Lightspeed (RockYou!, TutorVista, & NetPickle), and Accel (AdMob); (2) Benchmark Capital has the 2nd most investments (4) with co-investments with DAG Ventures (Gaia) and Accel (AdMob); and (3) Randy Kormisar (KPCB) is the only board member on the map via DAG/KPCB co-investment (Aggregate Knowledge & Pinger).

Of course there are several ways to further explore investor activity maps.  I provide a few of these below:

Most Active Individual (Angel) Investors in the Internet Sector over the past 2 Years.  Ron Conway, Jeff Clavier, Josh Kopelman, and Reid Hoffman are the most active investors in this space over the past two years.  Note how 10 other angel investors (yellow) appear on the relational map as well as 4 earlier-stage VC firms.

Last Year Most Active Biotech Investors People Map (Pendants dropped).  Note the large number of board interlocks for active investors in the Biotech sector. 

Infinera had a 14M share offering with a price range of $10-12, it priced at $13 and opened yesterday at $16.04.  It closed at $19.71 after reaching a high of $21.24 in mid-day trading (low = $16.00).  As a result, Infinera (INFN) was up 52% if you got in at the IPO and up 23% if you got in at the opening bell.  This is particularly noteworthy because the NASDAQ was down 1.77% yesterday.  From the CNN article, independent IPO analyst Tom Taulli states, “In hindsight [Infinera] looks like it was underpriced.”  This hails the sentiment I offered in my March 2 blog post, Infinera IPO Filing: The Juniper Net Works?  Here I was bullish on Infinera because of its relational capital via co-investor ties to 24 public companies and multiple board ties to Juniper Networks.  I repeat two of these maps below:

Infinera Investment Relational Map. Notes: (1) Juniper Networks as both an investor (orange oval) and related company (green box) via Kleiner Perkins & JAFCO; (2) Kleiner multiple public co-investment ties to Venrock (Photon Dynamics, Pharmacyclics, Geron, Echelon, & NeoMagic) & Sprout (Synaptics, Verifone, & eHealth); and (3) 17 investors on the map reflecting 7 rounds of capital ($315M total raised). (Source: LinkSV.com)

Infinera & Juniper Networks Board Relational Map (Pendants dropped).  Notes: (1) Direct tie to Pradeep Singh (Juniper CTO/Founder); (2) Multiple direct ties (Kenneth Goldman, Pradeep Singh, & Vinod Khosla (Former)); and (3) Multiple indirect ties (Alex Balkanski, Reed Hundt, Dan Maydin, & Peter Wagner (Former)). (Source: LinkSV.com)

Two interesting changes on the map occurred since the March 2 post: (1) Reed Hundt (Former FCC Chair) now on the Board of Infinera; and (2) Vinod Khosla (Khosla Ventures, Former KPCB) now a former board member on Infinera.  Such changes are important to note in the days preceding the IPO. 

My main point is that relational capital networks provide valuable additional information for IPOs.  A couple of key factors make IPOs particularly salient for capital network analysis: (1) S-1 filings indicate the actual amounts and percentages of ownership in the company (this becomes public for the first time); (2) Investors and board members care greatly about early-IPO pricings because federal regulations require a lock in period of at least 180 days before such insiders can sell their shares; and (3) When insider shares are sold, they typically trigger immediate market reaction. 

Don’t get me wrong, fundamentals are important in predicting IPO success, but they do not tell the whole story.  Look for key relationships (such as the Juniper tie, public company affiliations, key co-investments, and people ties such as Reed Hundt now on the board) to add to the data gathering process for IPOs.  LinkSViewer maps assist in this process because (1) pictures are quick reads (important in a time crunch), (2) network maps depict relationships in one place (and can be manipulated by the end user); and (3) this information is available much prior to the IPO (known at time of filing).  Realize that our source of data (LinkSV), only reports on (in the most part) Silicon Valley hi-tech companies, investors, and management teams - as a result there may be some missing information.  At the time of IPO, however, any information is golden because of the high level of uncertainty in at IPO.  Pricings factor in fundamentals, but to what extent do they include relationships?  I claim this is a key strategic advantage for would be institutional investors and day traders.  I repeat and expand upon the earlier quote:

“In hindsight [Infinera] looks like it was underpriced,” said independent IPO analyst Tom Taulli. “But it’s tough to get these things right. The market has been down quite a bit for the last couple days, but it really hasn’t impacted high-flier IPOs.”

Two of Taulli’s points are of further interest: (1) “…hasn’t impacted high-flier IPOs” demonstrates how IPO speculation can be used as part of a hedge strategy countering overall market inertia (at least in the current environment) - this was exemplified by the Infinera gain on a bloody market day; and (2) ”…it’s tough to get these things right” underscores the amount of incomplete information associated with an IPO.  More on this last point…reducing uncertainty requires a wide variety of sources such as network analysis in evaluating upcoming IPOs.  For example, I examine the pedigree of co-investors in an IPO company based on the idea that “success breeds success.”  Yet, this type of speculation has garnered some negative criticism.  As an example, I recall a comment I posted on the GigaOm website on debt-laden IPOs.  My comment touted Aruba Networks (prior to its IPO) based on its pedigree of investors Sequoia Capital and Matrix Partners:

Interesting post. Clearly there is a strange dynamic based on the BigBand and Clearwire IPOs. Who says the stock market is rational? Another way to speculate about IPOs is based on investor pedigree. I posted an item to our blog (2/7/07) illustrating the investment networks of BigBand, GluMobile, and Aruba. Of the three, Aruba has the best pedigree with their ties to Sequoia Capital and Matrix Partners (Apple & SanDisk as other co-investments). For those interested:
http://linksviewer.com/blog/?p=40

The comment elicited the following response:

Pedigree? Voodoo science…very irrational way to look at IPO’s or a company’s survability. Think about competition, product portfolio, and profits to get past smoking mirrors.

I found it unnecessary to comment on the above response because Aruba Networks (ARUN) gained 29% on its IPO date (3/26/07) and is currently one of the top IPOs in 2007.  This reply actually reiterated my point - that IPOs are often irrational.  The key point is that they are not necessarily irrelational.  Competition, product portfolio, and profits are presumably figured into the price point as valuation indicators.  But how can you put a price on capital relationships?  Realize that I consider myself an outsider on investing matters, merely pointing those in the know to information and metrics that may not be readily available and thus not factored into IPO initial pricings.  As another example, even after the Infinera IPO, I found no sources that tied Infinera to Juniper Networks.  IPO speculators, I surmise, are hungry for any information that provides them a strategic advantage - and capital networks and IPO network metrics seek to fill this void.  By the way, Infinera was up another 28% closing at $25.16 today (a 94% gain from its IPO price).  For more information behind the Infinera IPO, check out GigaOm’s recent post: From Zepton to Infinera, a start-up story.

While there was some speculation as to the reasons why eBay made this deal, the capital network shows some indirect ties between StumbleUpon and eBay.  This is noted in the below relational map of eBay (as investor and company) and StumbleUpon: 

Relational Map for eBay/StumbleUpon.  Notes: There are two capital paths between eBay and StumbleUpon: (1) eBay as an investor (orange oval): eBay as investor in Feedster –> Josh Kopelman (Board Advisor to Feedster) –> StumbleUpon (Kopelman as Board Member); (2) eBay as a company (green box): Benchmark Capital (eBay investor) ties to Ram Shriram (via Friendster), Mitch Kapor (via Linden Lab), & Ron Conway (via OpenTable & oDesk) as angel investors in StumbleUpon; and Bob Kagle (Benchmark) board interlock tie to Ram Shriram (via Friendster) as angel investor in StumbleUpon. (Source: LinkSV.com) 

Venture Beat posted a poll on the top 5 Silicon Valley VCs under 40, in reference to a San Jose Mercury article.  I figured it would be interesting to answer this question using their SV capital relations with one another.  For this post, I mapped together their relational networks with each other - this illustrates the common SV company ties of Roelof Botha, Kevin Efrusy, Peter Fenton, Danny Rimer, and Peter Thiel (LinkSViewer registered users can see each individual VC’s capital networks by clicking on each user in the map and then displaying their relational map from the information window).   First, I mapped their current and former company direct ties (as board/management team members & investors) by filtering out all other people and investors: 

Top 5 VCs Under 40 Relational Map (Investors & People Excluded).  Notes: (1) Peter Thiel is the only VC that is also listed as an individual investor (yellow oval); (2) Direct Ties: (a) Peter Thiel & Roelof Botha (PayPal former management team; Xoom current/former board interlock); (b) Peter Fenton & Kevin Efrusy (Hyperic & Terracotta board interlocks); (3) Of the 28 SV companies affiliated with the VCs, 10 were acquired and 18 are currently private; (4) 4 of Danny Rimer’s SV boards were acquired (MyCFO.com, Ofoto, Neoteris, & TellMe Networks). (Source: LinkSV.com)

While the above map illustrates how these top young VCs were directly related to one another, I next examined how they were indirectly related to one another.  For this, I examined their People Map and dropped pendants (one-tie links) to underscore relations:

People Relational Map for Botha, Efrusy, Fenton, Rimer, & Thiel (Former Ties & Inactive Companies included + Pendants dropped).  Notes: Indirect People Ties: (a) Thiel-Botha: Reid Hoffman (PayPal, Tagged, & LinkedIn); and Keith Rabois (Xoom & LinkedIn); (b) Thiel-Fenton: Josh Hannah (Friendster & Benchmark); Jim Breyer (Apexon & Facebook); (c) Fenton-Efrusy: Peter Levine (Mendocino & XenSource); (d) Efrusy-Rimer: Larry Augustin (Zend &  Hyperic/XenSource); (e) Rimer-Fenton: Larry Augustin (Zend & Hyperic); Kevin Harvey (TellMe & Terracotta); (f) Rimer-Thiel: Charles Moldow (TellMe & Powerset); John Doerr (TellMe & Friendster); and James Joaquin (Ofoto & Xoom); and (g) Rimer-Botha: Mark Andreessen (Zend & Meebo); and James Joaquin (Ofoto & Xoom); Multiple Other People Ties: (a) Rimer: Jim Clark (Neoteris & MyCFO); Jim Barksdale (Ofoto, MyCFO, & TellMe); (b) Thiel: Matt Cohler (Facebook & LinkedIn); and David Sze (Wink & Facebook); (c) Fenton: Li Ping (Reactivity & Mendocino).

Next, I decided to examine the investor relations for the Top Young VCs to see how they were related to VC firms.  I used the Person-Investor Map to illustrate cluster relations.  Users should look for groupings and key links (i.e., cliques & boundary spanners from a network perspective). 

Person-Investor Map for Botha, Efrusy, Fenton, Rimer, & Thiel (Former Ties, Inactive Companies included + Pendants Dropped).  Notes: (1) The most (thickest) ties are between Accel Partners & Efrusy/Fenton (no surprise here); (2) Benchmark Capital provides a key link between Rimer & Fenton/Efrusy; (3) Greylock Partners provides a key link between Thiel & Efrusy/Fenton (Accel); (4) Three main clusters form: (a) Thiel/Botha (PayPal cluster); (b) Efrusy/Fenton (Accel cluster); and (c) Rimer (Solo cluster). 

Summary, Network Analysis, & My Vote

The purpose of these maps is to show how the top young VCs are related to one another.  Several interesting tidbits can be gained from the network analysis of their Silicon Valley connections: 

From the first map, we noted the direct ties between Botha & Thiel (PayPal) & Efrusy & Fenton (former Accel).  Rimer was direct-tie isolated from the other four (perhaps in large part due to his living abroad), but had the highest acquisition rate for his outside-board SV companies.  Thiel is the only investor of the five and it is important to note that he has management team, board, and investment ties (not to mention his role as a Managing Partner at the Founders Fund).  From a network perspective, his diversity of ties increases the reachability of his network. 

The second map demonstrated key people linkages and is perhaps the most informative of the three.  Some examples: (1) the Netscape connection of Jim Barksdale and Marc Andreessen aligns with Rimer; (2) John Doerr (Sequoia) provides a link between Thiel & Rimer; (3) the LinkedIn connection of Reid Hoffmann and Keith Rabois aligns with Thiel (as an investor and board member) and Botha; (4) Jim Breyer (Accel) forms a tie to Peter Fenton and Peter Thiel; and (5) Larry Augustin (Azure Capital/VA Software) forms multiple ties to Kevin Efrusy.  While these ties mostly reflect current and former board memberships, it is interesting to note how more experienced VCs and managers can help foster the development of and/or share innovation experiences with younger VCs.  From a network perspective, such “cosmopolites”   (generally associated with innovation and early adoption in network diffusion studies) can be found near the center of the map (betweenness centrality) or via multiple-connection ties (degree centrality).

The third map locates the VC connections of the previous maps (note how this could also have been gleaned from the Investment Map), but also provides some key linkage and clustering information.  Three clusters classified as PayPal (Thiel & Botha), Accel (Efrusy & Fenton), & Solo (Rimer) differentiated the network based on boundary spanning links between Benchmark-Accel-Greylock.  The ties between Benchmark and Accel can be associated with Fenton (who moved to Benchmark from Accel in 2006) and Efrusy.  From a network perspective, the betweenness centrality of Accel is the highest in this network (this is to be expected).  But the Greylock link is significant because they have no direct affiliation with any of the five VCs - from a network perspective their alignment with Thiel ties a boundary-spanning VC firm to an individual liaison with multiple affiliations.  There were also other VC alliances internally connecting each cluster: Sequoia Capital (Botha & Thiel); Foundation & Focus Ventures (Fenton); and Kleiner Perkins & Barksdale Group (Rimer).   

From a network perspective, I would cast my vote for Peter Thiel (not that I’m a VC expert, and yes, I’m a network junkie).  I base this on his diverse ties (as a board/management team member & angel/VC experience), relative centrality in the preceding networks, and PayPal connections.  Pragmatically, I would couch this in the requisite success of his Web 2.0-ish companies, but they seem as up-and-comers.  And I certainly can see arguments for each of the other candidates (Botha: Sequoia as prolific & PayPal + YouTube ties); Fenton for his former tie to Accel as THE key VC firm in the last network and current tie to Benchmark as a linking VC firm; Efrusy for his current tie to Accel as THE key VC firm in the last network; and Rimer for his exit success and soloability as an outsider.  Hopefully, this post has yielded some insight into the top young VCs in the Valley.  I encourage readers to cast a vote on the Venture Beat post.  May you make your own informed choice, but pay heed to the networks!     

The apparent acquisition of Photobucket by MySpace for $250M has some precedence from a venture capital perspective.  By examining the capital map combining MySpace with Photobucket I found a former tie between the two.  Realize that each only has one main investor: Trinity Ventures (Photobucket) and HP (MySpace).  By filtering in inactive company ties, one connection emerged between HP and Trinity: Speedera Networks.  Speedera Networks (total capital raised in 4 rounds = $53.3M) was acquired by Akamai Technologies for $130M in 2005  - Trinity and HP were among 10 of the investors in Speedera.  Thus, HP and Trinity have had a previous acquisition experience together, albeit they were on the same side of the table on the deal.  This relationship is shown in the below map (pendants dropped), followed by a map including pendants = current and former board and management team members for Photobucket and MySpace (Source: LinkSV.com).

NeurogesX Relational Map (Active companies only).  Notes: (1) Alta-Walden co-investments: Plexxikon, Terawave Comm., Metabolix, & Corcept Thera.; (2) Alta-Global Life Science Ventures co-investment: Coapt Systems; (3) Alta-Arch Ventures co-investments: R2 Tech.; (4) Alta-Walden public company tie: Corcept; and (5) Alix Marduel (Alta Ventures) board interlock: Metabolix & Corcept ties.  Below is the Relational Map for Active & Inactive companies.

NeurogesX Relational Map (Inactive companies included). Alta-Walden Inactive co-investments: (a) Acquired: Premisys Comm., Elantec Semi., TSquare, & Fibex Systems; (b) Private: AuraVision, Stylus Assets, & JTS; and (c) Public: Biocircuits.  

Cavium Networks is the latest among recent successful IPOs.  An earlier post examines the Relational network of Cavium Networks, highlighting its predominant Active Acquired company connections.  One of its connected companies also recently went public, Mellanox Technologies.  In light of their recent IPOs, I decided to examine the capital links between Cavium and Mellanox Technologies.  First I illustrate using their combined Relational Map.  Because of their multiple connections, I filtered out pendants and increased the MinLink to 3 (including only those companies with 3 ties in the network) in their below Investment Map.

Cavium & Mellanox Investment Relational Map (MinLink=3, Pendants dropped). Note the tie to Ikanos Communications, which went public in late 2005.  Here we see a multitude of investors and related companies because both Cavium (10) and Mellanox (14) each had a large number of investors.  To simplify the map, let’s remove the investors from the map using the Investor Filter.

Cavium & Mellanox Investment Relational Map (MinLink=3, Pendants dropped, Investors filtered out). Here we see only the direct connections between Cavium and Mellanox.  This visualizes only the common investor connections between the two: Saints Capital and China Development Industrial Bank.  Let’s examine this relationship in further detail by mapping these investors together, dropping pendants, and filtering out companies from their investment map.

Saints Capital & China Development Industrial Bank Investment Relational Map (Pendants dropped). Notes: (1) They have no inactive common portfolio companies; and (2) Of their 8 co-investments: 2 recently went public (Cavium & Mellanox); 3 were recently acquired (IXI Mobile, Tropian, & Silverback Systems); and 3 are private (InnoPath Software, Atrica, & Pixim).  Over the past year, 5 of the 8 companies co-invested by Saints & CDIB had exits.  Following this trend, the co-invested private companies of InnoPath, Atrica, & Pixim deserve close watch, especially since they all received recent round fundings.

Data Domain filed for its IPO on April 4.  The Data Domain Relational Map provides some insight into the co-investment relations between its three investors: Greylock Partners, Sutter Hill Ventures, and NEA.  Along the way, I would like to point out some key transition points that will help LinkSViewer users to navigate from complex to simple maps.  First I started with a relatively complex relational map - I searched for Data Domain and then filtered in current and former people and dropped pendants.

Data Domain Relational Map (Pendants dropped).  Notes (1) Co-Investment Ties: Sutter Hill-Greylock (Trusted Data); NEA-Sutter Hill (QuickLogic, Kovair); and NEA-Greylock (PortAuthority, SiTime, PolyServe, Tabula); (2) People Ties: Geoff Barrall (Trusted Data CEO); Reed Hundt (Former FCC Chair); Aneel Bhusri (Greylock); Scott Sandell (NEA); Ron Codd (PeopleSoft Former CFO); and Michael O’ Donnell (Network Appliance Former Director of Federal Sales); (3) Strong Company Ties: Trusted Data (Geoff Barrall, Greylock, & Sutter Hill); Kovair (Scott Sandell of NEA & Sutter Hill). 

Network Commentary: The active company ties include 4 public companies (QuickLogic, Network Appliance, Adept, & Openwave), 3 active acquired companies (Kovair, PortAuthority, & PolyServe), and 4 private companies (Trusted Data, SiTime, Tabula, & SymphoniQ).  Of particular interest are the 4 public company ties.  There are also three main clusters centered around each VC with seven companies connecting these clusters. These clusters are amplified by Excluding the Target Node in the below map.

Data Domain Relational Map (Exclude Target Node, Pendants dropped).  Notes (1) Here we clearly see the links between investors (PolyServe, SiTime, Tabula, PortAuthority, Kovair, QuickLogic, & Trusted Data); and (2) We can also see the strong relationship between former FCC chairman Reed Hundt with Greylock Partners.

Network Commentary: By removing the target node we are in effect demonstrating how the companies, people, and investors were related to one another before considering Data Domain - are there preexisting ties that bind?  This map illustrates investor clusters on the map by removing the influence of Data Domain on its capital relations.  Moreover, we can now focus in on only the strong-tie companies.  This is performed by increasing the MinLink to 3 from the first map.  The below map only includes those companies with at least 3 ties:

Data Domain Relational Map (Pendants dropped, MinLink=3).  Notes (1) Here we see the strong links between investors: (1) Greylock & NEA are linked by PolyServe via Reed Hundt & Aneel Bhusri; (2) Sutter Hill & NEA are linked by Kovair via Scott Sandell; and (3) Greylock & Sutter Hill are linked by Trusted data via Geoff Barrall.

Network Commentary: By increasing the MinLink to 3 we are in effect illustrating multiple ties between investors and companies on the map - what are the strongest ties that bind?  This map shows only the strongest relationships from the previous maps.  Here we demonstrate the process of taking a complex map and simplifying it to detect only the strongest of relationships (as denoted by the most common ties). 

Data Domain Relational Map (Exclude Target Node, Pendants dropped, MinLink=3).  Here we see a strong-tie circle investors (i.e., each investor has a strong-tie connection to one another).  The fact that each investor has a pre-existing strong tie relation may bode well for Data Domain - relational ties could pave the way for a smooth IPO. 

Venture Beat cites a VentureOne/Ernst&Young Report indicating a 65% increase in spending in 2007 Q1 in the Health Sector and only 10% in the Internet/Info. Services Sector.  I examined these two Sectors SV maps to: (1) see who the key investors were in each sector (and how they were related); and (2) look behind the numbers to see some general trends in these investments.  I started by mapping the most recently funded (1/1-3/1/07) Biotech + Medical sector companies (= Health).  I then filtered out all other companies and dropped pendants in the below Relational Investment Map. 

Health Company Investment Map (1-3/07).  Notes: (1) 19 companies funded in 2007Q1 are on the map; (2) 18 investors have at least 2 investments on the map; (3) Alta Partners has by far the most investments (=7: Aerovance, Sanarus, DiscoveRx, PneumRx, Intarcia, ChemoCentryx, & Coapt), followed by InterWest Partners (=4: Intarcia, TransOral, Fluidigm, & Gynesonics), and Bay City Capital (=3: Intarcia, Gentiae, & MAP); (4) Intarcia Pharma was invested in by all three key investors (+ NEA & NewLeaf); and (5) Optovue is the only company that does not have a linked investor on the map. (Source: LinkSV.com)

I next performed the same mapping strategy for Internet sector companies funded in 2007Q1.  I then filtered out all other companies and dropped pendants in the below Relational Investment Map. 

Internet Company Investment Map (1-3/07).  Notes: (1) 19 companies funded in 2007Q1 are on the map; (2) 8 investors have at least 2 investments on the map (6 VCs & 2 Angels); (3) DFJ has the most investments (=3: Meebo, Flurry, & Pulse Mobile), followed by InterWest Partners; (4) Meebo (DFJ & Sequoia), LinkedIn (Sequoia & Greylock), Vizu (Ron Conway & Mike Maples) are the only companies on the map with at least 2 of the key investors; and (5) LiveOps, cFares, Jacent, Outspark, Mino are all companies that do not have a linked investor on the map. (Source: LinkSV.com)

Map Comparison

A few main points should be gleaned by comparing the two maps:

• The number of companies on the map are the same (19)
• The number of investors on the map are different (18 for Health; 8 for Internet)
• General connectedness for the Health Investment Map is much higher than the Internet Investment Map
• Alta Partners is a key investor on the Health Map (7 investments)
• InterWest Partners (4 investments)
• Bay City Capital (3 investments)
• 15 other investors have 2 investments on the map
• No significant key investor distinguishes themselves on the Internet Map
• DFJ has the most investments (3)
• 7 others have 2 investments on the map
• 2 of these are angel investors (Ron Conway & Mike Maples)

Company Trends

Examination of the funding numbers (From LinkSV.com company summaries) provides some insight. On Average:

• Health companies were on Round 3.2; Internet = 2.3
• Health companies received $25M in recent Round funding; Internet = $8.9M
• Health companies received $65M in recent Round funding; Internet = $24M
• Health had 8.4 investors; Internet = 5.4
• Health $/Round = $20.4M; Internet $/Round = $10.6M
• Health $/Investor = $7.8M;; Internet $/Investor = $4.4M

Summary Stats

• Health companies had about 1 more Round than Internet companies
• Health companies received around 2.8X Round funding than Internet companies
• Health companies received around 2.8X Total funding than Internet companies
• Health had 3 more investors than Internet companies
• Health companies received around 2X as much Funding per Round as Internet companies
• Health companies received around 2X as much Funding per Investor as Internet companies

Conclusions

1. While Health companies received more funding than Internet companies, they were more mature
2. While Health companies received more funding than Internet companies, they needed more funding
3. While Health companies received more funding than Internet companies, they had more investors
4. While Health companies received more funding than Internet companies, their investors had to shell out more money

What this means is that the total 2007Q1 capital reported in the Venture One report is a bit misleading because Health Sector companies needed more capital than Internet companies.  The number of investments in each sector was equal (for SV companies).  Because Internet (particularly Web 2.0) companies generally require less start-up capital, the actual $ funded may not reflect activity trends, but rather perpetuate traditional VC investment patterns.  For example, 2 of the Internet company investors were Angel Investors reflecting early-stage companies - this implies that traditional VC funding may not be necessary for these companies.   The main conclusion here is that while funding for Health Sector companies was higher, activity (in terms of number of fundings) was the same as the Internet Sector (in SV). 

Realize that the maps only indicate SV activity, which comprises about 44% of the deal flow and 48% of the total capital, thus only including a sample of the VentureOne data.  From the VentureOne/Ernst&Young Report, the overall 2007Q1 vs. 2006Q1 funding for Information Services was up 10%.  Taking this report with a grain of salt, one would expect that Health-sector companies generally require more funding, have the propensity to mature to further rounds, and may not return $ on investment until later stages.  One noteworthy trend is that the costs associated with Health Sector seem to go up (following general economic indicators), while Internet start-up costs seem to be going down (following increased availability of applicable open-source tools).  Moreover, the Venture One trends seem to be charting VC activity versus angel investment activity (this I am not sure on).  If the data does not include angel activity, then the Internet sector investment activity may be on more of the same level as the Health sector.