I caught up with Robinson yesterday to talk about what’s happening in New York, as well as to learn more about what’s happening specifically at RRE, a firm that now invests 75 percent of its capital in New York-based companies. Our conversation has been edited for length.
RRE has raised five funds to date. Will you be raising a sixth soon and if so, how much will you be targeting?
We’re still investing our fifth [$230 million] fund; we’re mostly through that. And we’ll raise a new fund shortly in the same, $250 million range.
Would we ever see RRE raise a bigger fund?
Fund sizes go in an out of vogue, but you go bigger either to do bigger deals or hire more people. Bigger deals have never been our business model, and we’ve always liked our size and shape: five or six partners, a couple of principals, a couple of associates. During the dot.com era, we’d gotten bigger and we sort of concluded that we didn’t want to grow our practice, [because] we felt a little more disconnected, both from our partners and the companies we were funding. When you have 10 VCs standing in a field, they’ll argue about the weather.
There’s obviously a lot going on in New York. Is there too much going on?
Are there too many startups right now? Probably. When you start hearing about whether you should bother with college or start a company instead, it’s probably [a bad sign], but these things [sort themselves out]. I think it’s probably more acute out there [in California]. Most people would rather do a little more following than leading in life, which is a normal human condition, and you don’t get to do that in a startup.
RRE has enjoyed some nice exits, including, most recently, the sale of payments company Braintree to eBay for $800 million in cash last month. I understand you had a chance to invest in the seed round of Square, too, but didn’t. Is that your biggest miss?
Hah, no, not even close. We’ve been around 20 years. We have a bunch of those. We didn’t do Priceline and should have. We didn’t do PayPal and should have. Long ago, we’d invested in Apriva [a point-of-sale dongle made to work with once-ubiquitous PalmPilot handhelds] and barely gotten our money back, so we were leery of incumbents in the payments processing world. We also worried about [Square's] price. It seemed expensive to us at the time.
Many VCs argue that it’s worth paying up for the right deal. How do you feel about being price sensitive?
If you pay up and it works out great, you say, “Great, this was sensible.” If you pay up and it doesn’t work out, you don’t talk about it. If I had a growth fund here, there’s no question that I’d say on occasion, “This is too big an opportunity.” Then again, price is a function of supply and demand. We disregard it at our own peril.
What do you think about the digital currency bitcoin?
We’ve been looking at bitcoin technology for over a year. We’ve probably looked at 20 [bitcoin-related] companies seriously and we’ve made very small seed investments in two, but we’ve been reticent to place a major bet on one to date. It gets down to regulatory issues, which seem to indicate that if you’re an institutional investor in a digital currency company, there’s some legal liability. If there are problems in the system, [the liability] doesn’t just stop at the company but can go through investors and even, potentially, investors’ investors. It’s just not field-tested yet.
No doubt we’ll have a major investment in a [bitcoin] company, whether it’s in one year or three years. But we’re watching what’s happening on the federal and state and international level right now. We’re still in studying mode.
Photo courtesy of Privcap.
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