David Tisch - Tech Investing Outside of Silicon Valley

**Patrick O'Shaughnessy** (0:00)
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Hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, methods, stories and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com.

**SPEAKER_2** (0:59)
Patrick O'Shaughnessy is a principal and portfolio manager at O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.

**Patrick O'Shaughnessy** (1:21)
My guest this week is David Tisch, who is instrumental in building and fostering venture capital investing in New York City. If you liked my conversation with Jerry Neumann, who incidentally introduced me to David, you're going to love this one. David was a co-founder at TechStars, New York's answer to Silicon Valley's famous tech incubator Y Combinator. He now runs the Box Group, a prominent seed stage venture capital firm which has looked at thousands of startups and invested in more than 200 We explore tech investing outside of Silicon Valley the tech accelerator model, the evolution of early stage investing, and why the best companies may start coming out of non-traditional venture hubs.
David does a great job of explaining how things have changed for technology startups and why certain strategies, especially those for acquiring customers, won't work nearly as well in the future. I learned a lot during this hour and I think you will too. Please enjoy my conversation with David Tisch.
So I thought we would begin by talking about New York City. We're sitting here right in the heart of it, right south of Union Square, and one of the things that, one of the main reasons I wanted to talk to you was because of your role in building up the venture capital technology investment scene in New York away from, I guess Silicon Valley, maybe even Boston as more traditional centers for venture type investing. So I want to open it up there and just have you talk about what were your motivations, how did you go about doing that, and I want to get into kind of what makes for a rich fertile soil for venture investing to begin with.

**David Tisch** (2:52)
Well, thanks for having me. It's great to do this. You know, I think historically, if you go back in time and look at the types of businesses that venture capital was funding and that technology entrepreneurs were pursuing, it developed logically. You at first were building an infrastructure layer and then you were building services to connect the infrastructure layer with other sort of more consumer facing services. And as those two sides of the technology world developed, it made sense that those were built in the valley where hard technology and research and R&D and all of the sort of big brained tech development was happening. I think what you've seen in the past probably seven to ten years is a huge shift in the types of companies that technology entrepreneurs are trying to build. And that's anything from brands which are built through just distribution online, e-commerce, D to C brands, down to just consumer experiences and that could be in media, that could be in social. They're less dependent on building the infrastructure. The infrastructure today is a service. So when we funded a company called GroupMe back in 2009, GroupMe is a group text messaging service. It was before iMessage allowed you to do groups. It was the best way to do a group text message.
Today, it got sold to Skype, which then got sold to Microsoft, so it's part of Microsoft. It's ranked in the top 50 apps in the App Store. Still, despite the fact that the functionality that they built, which at the time, they literally needed to invent how to do group text messaging. Today, it's a layup. You can do that on many services. Between 2009 and now, you've seen this huge shift where all you need to do is plug into the existing services and really only focus on what is the core of what you're trying to build, the features. If you think about that shift, it allows for just a wider array of companies and the focus of the founders has shifted from deep tech to the actual consumer experiences that need to get built to touch a wider set of customers.