BostInno
by Walter Frick
Avalon Ventures announced this morning that it has led a seed investment in LoopIt, a social shopping startup founded out of Redstar Ventures. Redstar isn’t a VC firm, but a “foundry” that helps start companies based on demonstrated market opportunity. (More on that in a bit.) The amount of the seed investment was undisclosed.
Interestingly enough, LoopIt’s value proposition sounds a good bit like a use case for Facebook’s new Graph Search:
Ever been in a situation where you’re just about to make a purchase, but you’d love to get your friend’s advice first? Or, you’re just starting to do some shopping research, and you’ll take all the suggestions you can get? … LoopIt let’s you easily connect with either your closest friends, your knowledgeable friends-of-friends in your broader circle – or both!
The similarity illustrates both the opportunity for such a solution and the difficulty of beating existing players to it.
But what’s perhaps most interesting about this news is that it marks the first funding for a Redstar company, and therefore a glimpse at what the “venture foundry” model can produce. Here’s how the Avalon press release describes Redstar:
LoopIt follows Redstar Ventures’ “top-down” approach to building companies based on researching, staffing, and investing in market-driven businesses, as opposed to product-driven companies, to increase exit potential. It is just one of the operating companies Redstar Ventures will formally announce in 2013.
“At Avalon, we’re not just investing in promising ideas, but also the markets that these future companies are in and the executive teams building the organizations. Being part of Redstar Ventures’ foundry means that the market, idea, business model and executive team have been vetted through a thorough and credible process,” said Rich Levandov, managing director, Avalon Ventures, in the release.
Redstar details three “themes” for its research and founding process on its website, though it’s not clear which of these LoopIt fits into. One is media; the others are “the rise of the gray market” (aging population) and the underemployed.
Two of RedStar’s co-founders – Jeet Singh and Joe Chung – were co-founders of Art Technology Group, which went public in 1999 and was acquired by Oracle for $1 billion in 2011. The third, Matt Beecher, co-founded the investment firm SCS Financial.
Whether you think this model can work says a lot about what you think the value of founders really is: execution? ideas? a passion for a specific problem? If it’s primarily the former, this model makes a lot of sense. But can the model of founder obsessed with a problem fit with Redstar’s idea generation process? I suppose it depends on the stage at which the team is brought in.
We’ll see if LoopIt can establish itself in the face of strong incumbents, but regardless I’m sure we’ll see many more interesting startups out of Redstar in the near future. I’m curious to hear your thoughts on the Redstar model in the comments.