By Hillary Canada
The daunting task of picking the winners and losers among start-ups, and the pressure to make money and return it to investors is enough to make even the most seasoned investors crack up, according to Spark Capital Founder and General Partner Santo Politi.
?You can lose your mind out there,? Politi told attendees of the 2011 Dow Jones Private Equity Analyst Conference at the Waldorf Astoria, noting that the goal of many VC investors is to find at least one company that can be sold for ?20x? and return a fund.
Spark is no stranger to those types of deals. The firm was an early backer of online-advertising start-up Admeld which agreed in June to be sold to Google in a deal reported to be worth roughly $400 million. (Though that deal has been waylayed by the DOJ.) The firm is also an investor in Web highflier Twitter.
Politi pointed out that much of a venture capitalist job is ?predicting the future.? But the key, at least when it comes to investing in social media, is finding companies that have bridged the divide between real world interests and the web. He cited Groupon as one successful example. ?Everyone loves a sale,? said Politi. ?They found a way to close that gap from the physical to the digital.?
Start-ups and Web 2.0 businesses have come a long way since even the mid-2000s, said Politi, noting that Facebook and Zynga were more heavily focused on monetization than their predecessors like MySpace and Friendster, and their mass appeal was drawing advertising dollars away from other media outlets.
As for Spark?s portfolio, Politi said he?s most excited about Foursquare. He said Spark had tracked the business since its debut at South by Southwest a few years ago and while it was outbid in the first two funding rounds, it watched closely and came in an as an investor in the company?s $50 million Series B round in June, which valued the start-up at $600 million, The Wall Street Journal reported at the time.
?When you believe a company has enormous potential, it?s okay not to be price sensitive,? said Politi.
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