Friday, January 28, 2011

Making Fast Money

Union Square Ventures is putting together a new fund to help it participate in later rounds of funding for growing companies. The VC says the new Opportunity Fund, first hinted at a couple of weeks ago, will allow it to continue to invest in social media and networking start-ups like its existing portfolio companies Twitter, Foursquare and Tumbler as they grow beyond the early stages that the firm has traditionally focused on.

The new fund, which Techcrunch said is $165 million, will complement USV’s core funds said managing director Fred Wilson in a post on the Union Square blog, and will include most of the existing investors from those funds. The new vehicle gives USV the ability to invest from “$250,000 or $25 million,” and participate in later rounds (as an example, the VC firm didn’t participate in the latest $200 million round for Twitter, which was led by Kleiner Perkins). Wilson said investing in social media and networks has become a much bigger opportunity, with some companies getting valued at $50 billion. As the opportunity and competition evolves, it requires USV to think bigger, he said.

“In 2004 the entire market capitalization of the social media sector was probably less than $100M. Today a single company in that sector is valued at over $50B. The amount of venture capital focused on the sector has exploded. Networks that did not exist in 2004 now consume a huge chunk of users’ time and attention, making the launch of new networks more challenging. The opportunity to invest in networks has changed, and once again we are changing with it,” Wilson wrote. “The availability of this additional investment vehicle will allow us to 1) continue to invest in our most established and successful companies, 2) invest in more established networks that have been funded initially by others, 3) invest in special situations like the spin out of a network of scale, and 4) respond to attractive opportunities as the broader market continues to evolve.”

This comes at a time when there’s increasing competition in early stage funding and deals are growing fast and getting done quickly, something Wilson noted last year. While Wilson warned about the activity, the new fund will allow USV to be more stage agnostic and will arm it with the money to get in on deals as they grow. The firm has signed on John Buttrick, a longtime advisor to USV, as a partner in the Opportunity Fund. USV won’t push to put all the money to work, Wilson said, and will only charge fees on the capital invested.

Related GigaOM Pro content (sub req’d):

  • Why Google Should Fear the Social Web

  • Lessons From Twitter: How to Play Nice With Ecosystem Partners

  • What We Can Learn From the Guardian’s Open Platform

Coming to a station near you any time soon?Photo: Tim GilliamPresident Obama doesn't seem
like he's going to let this high-speed rail thing go, making it a centerpiece
of the infrastructure section of his State of the Union Address last night:

Within 25 years, our goal is to give 80 percent of Americans
access to high-speed rail. This could allow you to go places in half the time
it takes to travel by car. For some trips, it will be faster than flying --
without the pat-down. As we speak, routes in California and the Midwest are
already underway.

Sounds great, if you're a
high-speed rail fan. But last fall's midterm elections exposed GOP opposition
to Obama's plan to bring fast train service to all regions of the country. As a
gubernatorial candidate, Republican Scott Walker of Wisconsin made opposition
to a Milwaukee-Madison high-speed route a centerpiece of his campaign. After he
was elected, he
handed the feds back $810 million that would have funded the line, on the
grounds that it would be too expensive for the state to run. It was a move
echoed by New Jersey Gov. Chris Christie's rejection of funds for a regular-speed
rail tunnel under the Hudson River (Christie is fighting hard not to repay money the feds already spent on that project).

And in California, which
ended up getting some of that Wisconsin money, there's been controversy over the first phase of the state's own HSR project, with detractors calling it "a train to
nowhere" and farm communities worried about the impact on available land.

So it's notable that Obama
doesn't seem to be backing down from his push to make HSR part of his legacy.
That 80 percent figure is pretty aggressive.

The president also hammered
away at the need for the need to continue upgrading and repairing the
transportation infrastructure we already have:

over the last two years, we've begun rebuilding for the 21st century, a project
that has meant thousands of good jobs for the hard-hit construction industry.
And tonight, I'm proposing that we redouble those efforts.

put more Americans to work repairing crumbling roads and bridges. We'll make
sure this is fully paid for, attract private investment, and pick projects
based [on] what's best for the economy, not politicians.

stance was cheered by Transportation for
America (T4A) a coalition group calling for a reform of the nation's
transportation system. At the same time, the group's statement also acknowledges the difficulty of
getting projects funded. From the statement released by T4A's executive director, James Corless, today:

We were thrilled to hear the President come right
out and say that investment in transportation and other infrastructure is
central to rebuilding and growing our economy. An upfront investment in the
most-needed, clean transportation projects is a great opportunity to create
near-term jobs and lay the groundwork for the future economy.

He acknowledged that money will be tight and we
have to make the best of use it. That requires fixing the 20th century
infrastructure -- our crumbling roads and bridges -- as we build out the
infrastructure for the 21st. That certainly includes
high-speed rail, but it also means helping communities get moving on
long-planned networks of light rail, street cars, rapid buses, and making
progress on road reconstruction to make our streets safer people walking,
biking and driving.

The President's vision for infrastructure is not just about
near-term construction jobs. It is, as he said, about growing new businesses,
livable neighborhoods and dynamic regions that can attract a young and mobile
workforce and compete with our international competitors. It's about the jobs
associated with new transportation technologies
and manufacturing modern transit vehicles, everything from real time
information systems to make our highways and transit corridors smarter, to the
new rail cars being built today by United Streetcar in Oregon that can breathe
new life into our cities and suburbs.

T4A's Equity Caucus, which focuses on
the needs of poor, working-class, and minority Americans, had this to say:

[O]ur inadequate, outdated,
and underfunded transportation systems are keeping too many struggling
Americans -- young and old, rural and urban -- from fully connecting and
contributing to the national economy.

 Millions of Americans
rely exclusively on public transit, walking, or biking to get to work, to the
doctor's office, to school, and to the grocery store. Nearly 20 percent of
African American households, 14 percent of Latino households, and 13 percent of
Asian households live without a car. Fifteen percent of Native Americans must
travel more than 100 miles to access basic services.

 Smarter transportation
investments can unleash the under-realized economic power of communities across

All this comes in the context
of a transportation reauthorization bill that has been stalled for the past year and a
half in Congress -- and that was when the Democrats controlled both the House and the
Senate. With Republicans now in control of the House, things are bound to get more complicated. Rep. John Mica (R-Fla.), the new Republican chair of the Transportation and Infrastructure Committee in the House, had this to say about the president's call for more infrastructure spending (via Transportation Nation):

After the Administration derailed a major six-year transportation
bill in 2009, it is encouraging that they are now on board with getting
infrastructure projects and jobs moving again. However, just another
proposal to spend more of the taxpayers’ money, when we have billions of
dollars sitting idle tied up in government red tape, will never get our
economic car out of the ditch.

We’ve got to do more with less to improve our infrastructure in a fiscally responsible manner.

Central to all future
discussion about infrastructure enhancement and repair will be the question of
money. With lawmakers avowedly against raising the gas tax, finding the cash to
build new systems -- or to stop the proverbial crumbling of the old ones -- is
going to be the biggest problem.















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