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Andy Marcuvitz on venture capital's conviction deficit

Posted by Scott Kirsner  January 25, 2010 07:35 AM

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You won't find a listing for Alpond Capital on TheFunded. The investment firm also doesn't have a Web site.  Founder Andy Marcuvitz, who splits his time between Lincoln, Mass. and Newport, Rhode Island (where he owns a waterfront home on Alpond Drive), does not blog or tweet.

But Marcuvitz, who left Matrix Partners in 2004 after a successful 14-year stint with the Waltham firm, is charting his own course through the changing world of venture capital —rather than just jabbering about how the current structure of the industry can't endure (and hoping that the shake-out will only affect other investors).

I caught up with Marcuvitz on Friday, when I was working on this post about Project Concord, one of two local start-ups he has backed (and helped to found) since leaving Matrix. Both are in the digital video space.

Practicing venture capital intelligently isn't about avoiding risk, or chasing trends, Marcuvitz believes, but "taking risks in areas where you have strong convictions." There's a "gross deficit" right now, he said, of "people practicing [venture capital] with strong convictions."

When people started talking about venture capital as an "industry," Marcuvitz said, that may have signaled a fatal shift. An industry implies something that can grow and grow and grow. "Venture capital is not scalable," he told me. "As you pour more money into the pool, it doesn't create a greater number of opportunities." What it does create, though, is more firms chasing the few worthwhile opportunities, and lots of pressure to do deals at valuations that likely don't make sense.

"In 1990, when Matrix was the one firm in Boston doing communications investments, anyone in the country doing anything of interest would walk through our door," Marcuvitz said. "When I'd make an investment, I could be sure that I'd seen every potential competitor." But that dynamic had vanished by the late 1990s, "when you had a day to make up your mind about whether you wanted to invest in a start-up, or else someone else would do the deal." (One of the companies he funded at Matrix, Starent Networks, was sold last year to Cisco for $2.9 billion, two years after going public.)

With Alpond, Marcuvitz has no limited partners to answer to: it's all his own money. "My mode of operating is not to wait for things to come to me." With both ZeeVee and Project Concord, Marcuvitz said, "I've gone out and found the people and said, 'Hey, guys, how about something like this?'" 

He doesn't think of what he's doing as angel investing or even seed-stage investing. "The term sheets look similar to the way they looked when I was at Matrix, and the amounts of money are consistent with what an A round would have been at Matrix, and we operate the companies the same way."

Andrew Prihodko, the co-founder of Project Concord, told me last week that "it was an entrepreneur-friendly term sheet," and that he didn't shop the deal to other local venture firms.

Worth reading, if you want to know more about Marcuvitz, is this excerpt from Charles Ferguson's book "High Stakes, No Prisoners," which ran in Fast Company in 2007. (Ferguson was the founder of Vermeer Technologies, the early Web site creation software that became Microsoft FrontPage.) It begins:

Andy Marcuvitz is heavyset. He wears badly fitting suits. He has no discernible personality, sense of humor, or compassion. All of which are ideal traits for a venture capitalist. During 18 months of extremely intense interaction, we never had a personal conversation, I never heard him make a joke, and he rarely smiled. Indeed, a smile from Marcuvitz is not a good sign. In arguments he's relentless: His voice remains even, he never loses his temper, and he can dig in for hours. If I had known when I started Vermeer that Marcuvitz was going to be one of the most important people in my life, I would have seriously reconsidered the whole thing. And yet, he was good for me, and, in a slightly twisted way, I respect him a great deal.

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Scott Kirsner was part of the team that launched Boston.com in 1995, and has been writing a column for the Globe since 2000. His work has also appeared in Wired, Fast Company, The New York Times, BusinessWeek, Newsweek, and Variety. Scott is also the author of the books "Fans, Friends & Followers" and "Inventing the Movies," was the editor of "The Convergence Guide: Life Sciences in New England," and was a contributor to "The Good City: Writers Explore 21st Century Boston." Scott also helps organize several local events on entrepreneurship, including the Nantucket Conference and Future Forward. Here's some background on how Scott decides what to cover, and how to pitch him a story idea.

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