Featured on Jun 24, 2011
John F Frankel
"We live in an exciting period of change. It is a privilege to be alive at this point in time and to be part of it."
Early stage VC based in NJ/NY. Been investing since 1999 whilst still at Goldman Sachs. Left there in 2008 after 21 years. Qualified as a FCA in 1985 while at Arthur Andersen & Co. MA in Mathematics & Philosophy from Oxford University. Portfolio of investments can be found here.
- Title: Partner, ff Venture Capital
- Age: 50
- Location: Midtown, Garment District
- Contact: @John_Frankel
After working at Goldman Sachs for 21 years, how did you decide it was the time to leave and switch gears to focus more on investing?
21 years at GS is a long time and I was getting to be the oldest person on a trading floor that has a median age 15-20 years younger than I was then. I also felt that I could make a bigger contribution by spending 100% of my time on venture capital than on helping Goldman's bottom line. Not just to my personal bottom line, but also by focusing on helping startups become established. I decided first to take 6 months off from doing anything, yet found myself after five months in a lawyer's office drafting up documents to raise a venture capital fund and raised our first fund with outside money in November 2008… two months after Lehman blew up. My first investors were brave, but I think are very pleased to have placed their trust in me. It is amazing how with hindsight crazy things seem so rational, and putting money to work over the past two years was so rational. Just as it is today.
On your blog you write very confidently about the direction of the economy based on the innovations of of recent technology, such as cloud storage, touch/motion interfaces, and social platforms. You state, “As a professional investor I have to understand when to participate and when to pull back...” What flags do you look for when determining whether participate or pull back?
I have spent a considerable amount of time over the past six months thinking about this very issue - namely whether we are in a bubble right now. My conclusions are likely, as with most of my investment thinking, out of consensus. I see no bubble today though there are a few obvious overhyped companies. I think that we are in a bull market, that you have never had the convergence of so many disruptive themes at once. Not just SoLoMo (social, local, mobile) but also the fruits of Web 2.0, SaaS/Cloud, VoIP, etc. Like all cycles this will end, but I think we have a few years here to invest and reap good returns. That does not mean all or even median returns will be strong. There are an amazing number of silly companies that want to be funded on uneconomic terms (to the investors), but there always are some of these. We target to invest in about 1-2% of what we see and that 1-2% is still amazing. In fact we have invested in over 10 companies over the past six months, about twice our normal rate. These are amazing companies and we are very pleased to be associated with them. There will be a time to pull back, and we are happy to not invest for a year and just focus on accelerating our amazing existing portfolio companies if we see no good opportunities. We follow a very simple investment philosophy: will this company generate strong returns for all involved (the founders and our investors, and thus ourselves)? If so, we invest. We invest for absolute returns not relative returns.
What has been your favorite or most memorable vacation?
Gosh! I have five kids and we have tried to go on vacation every year - now that they are getting older this is tougher to do. Vacations with kids are just special and there are so many to choose from. One that sticks in my mind was before I had children and my (to be) wife and I drove around europe in a beaten up Datsun. We went to southern Germany, France, Switzerland, was caught in a speed trap in Luxembourg, Belgium and Holland. What I remember clearly is that we would go into supermarkets and buy local brands of food that were not obtainable anywhere else. This was pre-globalisation, and the supermarkets were full of surprises with perhaps 50% local brands. Today the world feels homogenized and far less parochial than back then.
You also write, “A time when great wealth is being created, and old fortunes destroyed...” What suggestions do you have for new businesses looking to take advantage of this current situation in technology and the market?
Team up with great cofounders. Find a space that is not only growing, but can be massive over the next four to ten years. Expect to work harder than you ever have in your life and then go for it. Talk to every industry expert and advisor that will give you the time of day. There will be 100 reasons to not go ahead, but then ignore the naysayers and go for your dream.