By SARA FISHER
As managing director of Zone Ventures, Frank Creer has a birds-eye view of the local technology industry.
Based downtown, Zone Ventures specializes in helping L.A.-area Internet start-ups get off the ground. Zone Ventures is affiliated with Draper Fisher Jurvetson, a leading Silicon Valley venture capital firm with a reputation of thriving on the bleeding edge.
Creer sits on the board of Internet companies emWare Inc., e-Style Inc., RocketRadio Inc., Lasso Inc. and AllPets Inc. , and also is a partner at Salt Lake City-based Wasatch Venture Fund.
Question: Zone Ventures is nearing its first anniversary in September. How has the first year gone so far?
Answer: Fantastic. The L.A. business community has been very receptive. From a business perspective, there’s been a lot of deal flow with a lot of good companies coming our way.
Q: Have there been any stumbling blocks in 20/20 hindsight?
A: In venture capital, there’s always 20/20 hindsight. You look at your portfolio after a year and say, “Why did I invest in that?” But we haven’t hit that mark yet. It’s too early. We’ve invested in about seven companies so far that we think have enormous potential.
Q: In L.A., everyone has a screenplay. Now it seems like everyone has an Internet business plan. How many proposals are crossing your desk?
A: We’re reviewing a couple hundred a month. As we grow, we’ll start seeing a lot more. I know that Draper in Silicon Valley sees 10,000 a year.
Q: Are you seeing any particular themes emerge from L.A.’s tech entrepreneurs?
A: It’s pretty much in line with what everyone is saying: We’re seeing a lot of e-commerce companies and a lot of content companies.
Q: What catches your eye when you look over a business plan?
A: First, we’re looking for a really strong business model and strength of the management team. The management doesn’t have to be experienced necessarily, but you look for someone who really has a fire in their eyes. They’re so excited about the product that you know that whether you fund them or not, they’re still going to go ahead with their business.
We also want the targeted market itself to be big enough that if the company is successful, it can be a billion-dollar company. It also has to be a step beyond the curve for its niche.
Q: You’re currently enjoying a pretty open field when it comes to L.A.-centric VC firms. How long will the honeymoon last before more VCs start bidding up deals?
A: To be honest, I think it will be when we have a very successful portfolio. People have already taken notice of what’s happening down here, with the companies like eToys and Ticketmaster Online-CitySearch doing a great job. Now you have the first VC fund dedicated solely to this market. Once we have three or four good stories come out of here, then you’ll see the other VC companies come in.
Q: What’s going on regarding the criticisms leveled at the Los Angeles Community Development Bank, claiming that it had inappropriately used federal funds by financing your first round of investments?
A: I never really caught the ripples of that at all. I heard about it, but it never reached my desk. I have no doubt that the critics wanted the LACDB money for their own purposes. The bank has been fantastic, and shielded us from that so we wouldn’t get distracted. I can say that the entire bank wants sincerely for this program to work. They’re in a tough position, with a lot of people watching them. They’re trying their hardest to put their money to work, and they see us as a strong way of creating success in L.A.
Q: The premise behind the LACDB financing your fund is that tech start-ups will be crucial in revitalizing downtown. How is that panning out?
A: We have brought seven companies downtown, which are seven that weren’t there before. There will be a huge trickle-down effect that is only just starting. It’s a different approach than other lending programs. It’s top-down. We’re finding very talented people in a major city to move their business downtown. They’re hiring people from the region. Financial services, professional services and education sites then flock around successful tech companies. Imagine what would happen if there were another Microsoft downtown. The potential is huge. If you see one success come from the area, you’ll see a new dynamic emerge.
Q: Where does your second fund, which is autonomous from the LACDB, currently stand?
A: We’re closing in quickly on our $75 million target. We had our first close for over $20 million on July 1, and the second close will be on August 1 with a bunch of other institutions and some pretty big individual investors that wanted to come in with us. We’ve had to go out and forge new relationships with the financial groups out there, but as more people find out about us, more people call us and ask for us to send out our prospectus. This one may not be the biggest fund we do.
Q: How is the company’s social networking arm, the Zone Club, doing in getting the local tech community together?
A: We had over 600 people at the last event at Traxx. L.A. already has a lot of different trade groups that get together. But it’s never had a money arm complete the equation, saying, “Let’s have a party.” More people come to these kinds of events when the money is there. Then you have all the elements the idea guys, the management and the money to have deals work out on the spot.