Betaworks Trilogy, Part II: Expanding The Vision
Betaworks Trilogy, Part II: Expanding The Vision
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You’re reading Part II of a deep dive into the origins, work, and ethos of betaworks.
In Part I, we went back to the firm’s foundational beliefs and building roots. This week, we’re unpacking how betaworks grew into the multifaceted business its founders always envisioned.
Backing innovators: the path to betaworks Ventures
For betaworks, building and investing were always one and the same: “Investing has second-order effects in terms of understanding the market, keeping yourself alive to the innovation that's happening out there,” Borthwick once explained. This thinking made the lines between the two intentionally blurry.
But this was true only to an extent. Some semblance of separation was still maintained in practice, with each activity falling primarily to one of the two co-founders. A maker at heart, Borthwick appropriately took charge of the operating side of things; Weissman focused on betaworks’s investment portfolio.
Of the two, Weissman undeniably kept a lower profile, letting Borthwick take care of the storytelling — a task made all the more mandatory by the company’s ambiguous model. From what little coverage I could find, he seemed more at ease backstage than in the spotlight, alternatively a confidant, a cheerleader; and a godfather to New York’s vibrant startup scene.
While Borthwick’s apparitions in the media shaped the public’s understanding of betaworks, Weissman favored sharing his thoughts in writing; his blog, an eclectic journal where the personal still coexists with wide-ranging musings on taste, identity, and, of course, technology. Across decades of entries, Weissman also displays many of the attributes you’d expect from a savvy investor. His strong sense of product and excitement about novelty shine through, natural complements to his reflections on the investing process and mindset. As one observer noted, as an investor Weissman seemed especially intent on backing companies that made people feel unique through self-expression: Tumblr, Kickstarter, Medium, some of the most notable names in the betaworks portfolio, all fell under that category.
In 2011, Weissman jumped ship to join USV. It wasn’t that big of a leap, really: betaworks and USV already shared a few investments at the time, which prompted some to predict a natural alliance between the two. Mostly, it seems like Weissman was interested in expanding his work beyond the seed stage that had been betaworks’s sole focus. From that view, USV, a firm known for its love of reserves, must have seemed like the best place to scratch that itch.
Betaworks’s investing work didn’t end with Weissman’s departure. While there had been plans for a dedicated fund before, the company’s own investors had long pushed against it, for fear that betaworks might end up directly competing with them. Once things were set in motion, however, no time was wasted. In 2015, Peter Rojas joined the firm from AOL’s Alpha group as an Entrepreneur in Residence to support betaworks’s investing activities on the West Coast. (Like Borthwick before him, Rojas had joined AOL in 2013 as the result of an acquisition — incidentally, GDGT, the company in question, had previously received funding from betaworks.)
Betaworks Ventures was made official in 2017, one year after the first $50 million fund had become active, with both Rojas and betaworks’s Director of Seed Investments Matthew Hartman joining as partners. The funding gave betaworks the ability to invest across all three of its main activities, including its startup studio, its thematic accelerator Camp (more on this in a minute), and outside companies.
Five years later, its portfolio speaks for itself:
In fact, the picture above, though taken from the firm’s website, isn't even up-to-date. Workflow, not pictured, was acquired by Apple in 2017. Trash, in December 2020 by VSCO (also a betaworks Ventures portfolio company). Both Squad and Breaker were acquired by Twitter, respectively in December 2020 and in February 2021, while 8th Wall was acquired by Niantic in March this year.
Including deals made prior to the launch of the Ventures arm makes for an even more impressive feat. Betaworks gained a chunk of Twitter stock after Twitter acquired Summize and Tweetdeck, two portfolio companies, respectively in 2008 and 2011. As mentioned, Instapaper sold to Pinterest in 2016. In 2014 alone, betaworks invested in CrowdTangle, a social analytics tool acquired by Facebook, and Product Hunt, acquired by Angellist, both in 2016.
With early entries and numerous exits, all signs point to an impressive track record. Though finding insights into betaworks's performance is not easy — VC is a notoriously hermetic asset class, and the only numbers I could find are from the firm's 2015 shareholder book —, a few elements stand out:
Between 2007 and February 2015, betaworks invested in 106 companies, excluding the companies built at the studio. By December 2015, that number had reached about 120 deals, from just 71 in March 2014.
Over the period, an average of 13 deals per year were made. In 2015, the company announced a target of 20 deals per year. The actual number, it wrote, depended on "the quality of companies [it] saw in any given year and [its] perspective on the relative cost of investing in equity external to betaworks compared to building things at the studio."
It invested an average of $123K in each company.
Its portfolio was geographically concentrated, with almost half its active portfolio companies in New York. A quarter were in San Francisco, but less than 5% in Silicon Valley. The remainder were in the rest of the U.S., London, Paris, Berlin, Poland, and Israel. (I believe this is still true today, though the share of non-US companies may have increased.)
Of the $13.1M it invested over the six-year period, it had $72.4M of realized and unrealized returns, split roughly evenly between realized and unrealized.
The combined Total Value to Paid In (TVPI, the cash-on-cash return of an investment including unrealized returns) was 5.5x.
In short: betaworks invests at a fast pace (an average of 13 deals per year is impressive for such a small team); leans heavily on its local and domestic ecosystems; and generates great returns — Cambridge Associates data for US firms put the average TVPI for the vintage year of 2007 at 2.12x. In 2019, the firm debuted Fund II, with plans to raise up to $55M.
Evolving the venture studio: betaworks Camp
Launched in 2016 as part of betaworks Ventures, Camp is "a thematic investment and in-residence program for startups building in frontier technologies." Highly selective, it takes place once or twice a year at betaworks's offices in NYC (global pandemic allowing), each time focusing on a specific area of technology related to the firm's wider thesis. Past themes include:
conversational software and messaging (Botcamp)
voice interfaces (Voicecamp)
augmented reality and computer vision (Visioncamp)
live interactive experiences (Livecamp)
synthetic media (Synthetic Camp)
audio experiences (Audiocamp)
fix the internet (Betalab)
Camp was designed from the start as an integrated program. In addition to pre-seed funding of $200K — often a company's first check — participants receive hands-on guidance from betaworks and mentorship from experts, partners, and investors; perks from select vendors; access to betaworks's early adopter network; and an opportunity to present at Camp's Demo Day and Summit events. In other words, Camp integrates the venture studio model with that of an accelerator.
The program has become central to betaworks's offering. For one, it's a recurring source of media attention, as the theme, then the participants of each new batch get their own announcements. It's also a powerful discovery engine that enables the firm to identify and work with great teams in the areas it deems most promising.
Working on specific verticals within consumer media helps betaworks dive deep into the core technologies and behavior shifts that make these new forms of media possible. This maximizes resource allocation, since all efforts are concentrated on a single area over a short period of time. (The idea might have come from Borthwick himself, who TechCrunch reported "takes a few months each winter to look at trends that fascinate him.")
Importantly, Camp's in-residence model fosters collaboration — as one writer put it in 2016, "At the end of the day, betaworks is interested in clusters of companies that can help each other." This works well since the program only hosts a small number of teams all working on the same medium. At the very least, this enables them to pool resources in areas like access to data, user research, and partnerships. At best, collaboration can go much further, as promiscuity enables participants to get a feel for another company's vision and values. For example, Streem, a company that took part in Visioncamp, ended up acquiring Selerio, a fellow company from the same program.
Building bridges: From betaworks's office to betaworks Studios
Camp is also representative of a broader theme at betaworks: community.
Ever since its inception, the company was carefully designed by makers, for makers. To help founders bring the best out of their vision, the team knew it needed to provide not just a bunch of resources, but a full-fledged ecosystem.
At the heart of it would be the firm itself. Because of this, betaworks's offices have always been central to its model. Not only do they host Camp's cohorts a few times a year, they're also a hub for the local tech community, as well as a venue for regular talks on product, ethics, and policy.
This has served the company and its portfolio well. After all, much of a network's value comes from luck encounters: a VC who shows up to meet one of betaworks's partners might end up investing in a company's next round; the sponsor of an event might be a startup's next customer. A strong physical presence made betaworks a de facto connector and enabled it to add value in various, informal ways — in an interview in 2015, Borthwick estimated that “more than a fifth or quarter of [his] day is trying to connect companies together.”
This focus quickly expanded beyond the confines of the betaworks office. From its beginnings, betaworks's goal has been to grow an interdisciplinary network of individuals, companies, and institutions that could support each other and collectively ensure continuous innovation.
That strategy was twofold. Part of it was about sharing data, to enable early-stage companies to compete with incumbents whose troves of accumulated data often made them hard to displace. Part of it was about sharing ideas, to push the industry forward and come up with solutions to its most pressing challenges. Combined, both ideas and data would prove over time that there is strength in numbers.
In 2018, betaworks took these efforts a step further with Studios, "a social club for builders." In line with betaworks's offering, Studios was designed as an interdisciplinary physical place where entrepreneurs, engineers, and creatives could work on their respective projects and collaborate. Launched as a new business under the betaworks umbrella, Studios was a way to extend the firm's community to people outside its portfolio. A live concierge, coupled with dedicated software, would facilitate connections.
Then, COVID-19 happened, and Studios' physical location had to close. As companies everywhere shifted to survival mode, betaworks launched Circles, a peer support system to "help CEOs and senior leaders get the confidential advice, support and connections they need to keep their companies alive and thriving." Only a few weeks in, the program had received overwhelming demand, and new circles continue to form.
But Studios was always designed as a club, “a gathering space for in-person connections and events.” As the project’s website now states, “For two years, COVID and unpredictable post-pandemic social/work habits made it impossible at times, and challenging most of the time, to realize [the team’s] vision.” As a result, Studios (the company) shut down in May this year; betaworks is now reopening the space as a lounge for NFT creators and collectors.
Taking the long view
From betaworks Ventures to Camp, to Studios and Circles, every new program expanded on betaworks's original thesis: that an evergreen network, complete with ad hoc resources, could help both individuals and companies go places. Each of these added an extra layer to the firm's offering, springing more, and more diverse, connections over time.
Preserving this network's value while gradually broadening access can be challenging. Early on, betaworks Ventures' and Camp's selection process alone meant that only a handful of companies eventually made it to the firm's official portfolio. Later on, Studios' and Circle's paid model appeared to build off a different kind of exclusivity. The fact that they could be accessed remotely did extend their reach, but it might also have loosened what until now had remained a tight-knit community.
Now fifteen years in, it's worth asking how effective betaworks's model has been over the years. Valuable connections take time to form, and forcing things would only lead to clunky one-offs. Yet a few examples, and the many connections they've built both with and inside betaworks, prove the relevance of this kind of networked approach to success — you could call it betaworks’ very own social graph. Examples abound:
Matt Hartman: Originally at Hot Potato, a betaworks seed investment, Hartman joined betaworks in 2013 to help structure the venture business. He is now a venture partner and spinning out something new, in which betaworks is set to be an investor.
Maya Prohovnik, who ran community at betaworks, joined portfolio company Anchor as VP of Product. Anchor was acquired by Spotify, where Maya now serves as Head of Talk.
Sam Mandel: After starting at betaworks, Mendel moved to Tweetdeck as COO, before coming back to betaworks after Tweetdeck sold to Twitter. He then partnered with Daphne Kwon, the President and COO of Studios, and became the CEO of Poncho. Mendel moved back to betaworks after Poncho sold.
Julie Zhang moved from betaworks, where she oversaw finance, to become the COO of Charm, a company founded by two other betaworks alums, Christian Rocha (previously at Glitter and betaworks Studios) and Toby Padilla (ex. Tweetdeck).
Alex Chung: Giphy's co-founder Alex Chung later invested in Uru, a computer vision company that was part of Visioncamp. Now featured as a betaworks Ventures Fellows, he has made multiple seed investments alongside betaworks.
Hilary Mason: Formerly a Chief Data Scientist at Bitly, Mason went on to found Hidden Door, a new AI creator company seeded by betaworks.
Paul Murphy launched betaworks’s hacker-in-residence program, which spun out a total of 8 products, including Giphy and Dots — of which he became the CEO. Now investing at Lightspeed, Murphy has led multiple co-investments with betaworks, including in Mason’s Hidden Door.
Andrew McLaughlin joined betaworks after running policy for Google. Having spent a year with betaworks’s portfolio company Tumblr, he came back to betaworks, where he worked on building Digg and Instapaper. He then moved to Medium, also a portfolio company.
Jack Kim, who worked at Bloglovin (in which betaworks invested at both the Seed and Series A stage), later joined Giphy, before founding Duo AI, which was part of Voicecamp in 2017.
Marco Ament, formerly the CTO of Tumblr, a portfolio company, founded Instapaper, of which betaworks acquired a majority stake in 2013.
Jake Levine, originally an Entrepreneur in Residence at betaworks, became the General Manager of Digg after it was acquired. He started Electric Objects, a pioneer in the digital display and NFT space, which was sold to Giphy. Giphy then formed Infinite Objects, which betaworks seeded.
Gilad Lotan: The Head of Data Science at betaworks, Lotan assisted with the creation of a host of betaworks companies. After an entrepreneurial stint, he joined Buzzfeed (a betaworks portfolio company), where he still leads Data Science.
Josh Auerbach joined betaworks after Summize’s acquisition by Twitter, before moving to Aura, a betaworks company.
I’ll stop here, but the list goes on. From founder to investor and from customer to advisor, the role, or roles, of each individual may change over time. But the network as a whole keeps getting denser as the number and variety of the connections within it increase. This generates valuable network effects, which multiply not only the opportunities accessible to each individual node, but also their appeal to aspiring members. And because access remains exclusive, individuals are incentivized to continuously add value. Meanwhile, betaworks itself remains at the center of it all, a vital catalyst and facilitator for new relationships.
That’s it for Part II! In Part III next week, we’ll take a closer look at how betaworks’s ethos has prompted it to build a safer, better internet for all — and which technologies the firm is now leveraging as it enters its next phase.
Many thanks to John Borthwick, Matt Hartman, Billy Chasen, and Andy Weissman for reviewing early drafts of this piece and sharing their insights with me.
Thanks also to Devon, Fawzi, Neer, Pénélope, and Morgan for their thoughtful feedback.
Thanks for reading. As always, I’d love to hear your thoughts! You can find me on Twitter, or just reply to this email.
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