NYC’s Top VC Fred Wilson Is Rich . . . and Grumpy

Last November, Fred Wilson had the privilege of sharing a stage with John Doerr, the wealthiest venture capitalist in the world, a man Amazon’s Jeff Bezos once called the "center of gravity in the Internet." Next to this titan of Silicon Valley, Wilson, who co-founded the venture capital firm Union Square Ventures in 2004, was "a puppy," as the panel’s moderator put it.

But Wilson was there because, in addition to his having made some successful investments, he’s become a spokesperson for New York City’s digital entrepreneurs, who have no greater champion. Beyond the financial backing he provides, Wilson, largely through his popular blog, AVC: Musings of a VC in NYC, is the staunchest and most outspoken advocate of the city’s tech scene—aka Silicon Alley—as well as a passionate detractor of the titans of the Internet’s true capital.

The problem for Silicon Alley entrepreneurs is that USV’s success has largely come from West Coast investments, namely Twitter and Zynga.

For the New York City-based tech startups out there, including the ones that make up two-thirds of USV’s portfolio, Wilson is an odd, reluctant leader. A spokesperson must speak; Wilson, though he blogs frequently, rejects media attention.

Wilson declined to be interviewed or otherwise cooperate for this article. "I don’t want to do a profile," he told me by email. "It’s not my thing." When he found out I was contacting his partners, he seemed livid: "i would like to reiterate that i don’t want any profiles of me. i am not newsworthy. the companies we invest in are. i will not cooperate with this profile and i’ve asked my partners not to cooperate and if you reach out to others and they mention this to me i will ask them not to cooperate either.

"i have nothing to hide," he went on. "i am open and transparent. people know me from my blog, my talks, my activities, and my work. but i do not want to be the subject of a profile. this is not about adweek. i tell the same thing to everyone who asks me to do a profile and most respect my wishes."

This was the beginning of a series of caustic emails that Wilson sent, in which he argued that "profiles aren’t journalism" and told me that I "might want to think about making friends instead of pissing people off."

Wilson is right. People know him. Thanks to his blog, and to all of his other proselytizing on behalf of Silicon Alley, he’s been elevated to a somewhat mythical status. The city’s would-be Mark Zuckerbergs talk of "Fred" in soft, worshipful tones. But USV is still, as Wilson put it, "a sleepy little firm," and if he actually cares about maximizing Silicon Alley’s potential and turning New York into a true, lasting tech hub, he still has his work cut out for him.

"Everyone reads his Twitter feed," Newser CEO Elisabeth DeMarse, who has known Wilson since the 1990s, told Adweek by email. "Is he as influential as Bob Kagle from Benchmark? Or John Doerr at Kleiner Perkins? Or Tim Draper from Draper Fisher? Or anyone in California? No, but that is no slam on Fred; it’s simply because . . . New York has [only] just begun to outpace Boston in venture investing."

The rise of Union Square has been a second coming for Wilson. From 1996 to 2001, he and Jerry Colonna ran Flatiron Partners, investing in a number of high-profile Web startups, including Kozmo.com (a once popular online delivery service) before the dot-com bubble burst, the startups started to fold, and Flatiron stopped making new investments.

Wilson, now 49, began his career in venture capital in the mid-’80s. After graduating from MIT and earning an MBA from Wharton, he became an associate at Euclid Partners, a New York-based firm that focuses on life science and info-tech investments. In 1987, he married Joanne Solomon—who was selling advertising for the Silicon Alley Reporter while Wilson was at Flatiron, and who now blogs about her life under the moniker Gotham Gal: "Someone called me the ‘woman around town’ which I thought was quite appropriate," she once wrote.

Wilson started his own blog in late 2003, at the same time that he and Brad Burnham, with whom he co-founded Union Square Ventures, were first looking for funding. Their investment strategy was based on an idea that was unique at the time: the belief that the Internet’s "next wave" would be in Web services, the "application layer." (Back then, apps were still a novel concept.) The two started their first fund in 2004.

The strategy paid off big, at first. The year after USV launched, one of the first companies it funded, Del.icio.us, was sold to Yahoo for a reported $30 million. USV made seven times its investment on the deal. In 2007, two more early recipients of USV funding, FeedBurner and Tacoda, were sold. FeedBurner went to Google, reportedly for $100 million, and AOL doled out a reported $275 million to acquire Tacoda.

That same year, USV was involved in the deal that really made its name when it led a $5 million funding round for Twitter. (At the time, Twitter reportedly had a valuation of $20 million. USV participated in two later rounds of funding but has stayed out of later rounds as the valuation of the company has climbed to what’s been reported as anywhere between $5 billion and $10 billion.) In 2008, it added Zynga to the portfolio. Those two companies alone should be enough to keep USV’s partners fat and happy for years.

While USV was building its roster, Wilson was blogging every day—mostly about investing and technology—and becoming increasingly engaged with social media, which has made him beloved by the CEOs and founders of USV’s portfolio companies, who emphasize Wilson’s passion for Web 2.0 technology and his commitment to product development.

"Everybody reads his blog; he’s a celebrity, so I’m thinking he’s probably overhyped," Ted Livingston, the founder of Kik, a group-messaging application that got $8 million from USV and two other firms, recalled thinking before he met Wilson. "But he’s not. He uses the product, cares about the product, works with you on the product—whereas most investors just look at the numbers."

Though it’s USV partner Albert Wenger, not Wilson, who sits on the board of Foursquare, which USV helped fund,  co-founder Dennis Crowley says, "I get emails from Fred on the weekends or in the middle of the night. He’ll say, ‘At dinner, I was talking with my son about [Foursquare], and we thought of a great idea.’"

At least one CEO in USV’s portfolio thinks Wilson’s engagement will set the standard for venture capital going forward. "Guys like Fred will make the standard, prototypical VC endangered at some point," says Michael Yavonditte, the CEO of Hashable, a business networking service. "If you lack the desire to use these technologies over time, it’s going to be nearly impossible to compete with guys like Fred."

But Wilson’s passion doesn’t always get channeled in such positive ways. Sometimes, instead, there are tirades against California’s Internet titans. Facebook is "a photo-sharing site." Google hasn’t produced anything great since Gmail. Apple is "evil" because "they believe they know what is best for you and me." (In January 2009, Wilson announced that he was selling his shares in Apple, then trading at $91.36, because he didn’t believe Apple was being honest with investors about its CEO’s health. Twenty-seven months later, Apple’s stock was at $338.08.)

Watching Wilson attack these success stories can be a little like watching an emotional adolescent get angry because his older brother won’t acknowledge his opinions. At one point during the Web 2.0 Summit, while arguing that Facebook hadn’t invented anything original recently, Wilson choked up and looked like he was about to cry.

Some of Wilson’s arguments are valid, but they don’t change the fact that—as Doerr reminded Wilson at the Summit—Facebook, Google, and Apple are three of the companies "driving the Internet today." And all three of those companies are in California—just like Twitter and Zynga.

Still, Wilson makes a solid case for why New York should take more of a prominent place in his industry. Asked in a 2009 interview to list the city’s advantages over Silicon Valley, Wilson said, "I think New York is a more creative place, I think New York is a more commercial place, and I think there’s a certain chutzpah of entrepreneurial energy that’s resonant in New York broadly." At the 2010 summit, he pitched New York as the place where "the fashion world, the finance world, the marketing world, the advertising world, entertainment, media . . . are colliding with the Internet."

But he acknowledges that New York has obstacles to overcome. "The perception is that [the West Coast] is where you need to go to build a great company," Wilson said in that 2009 interview. "One of the things we have to do here in New York is we have to change that perception."

Problem is, Wilson himself isn’t doing nearly as much on that front as he could be. He, personally, is in a very good place—USV now makes its investors more money for each dollar they invest than any other venture capital firm in the world, according to Preqin, a private equity data company. But New York City isn’t. There’s no Twitter, never mind a Facebook. There’s not even a Zynga.

"[What] we really need is a huge IPO in a really sustainable company that trades up and really becomes a 30, 40, 50 billion dollar company," Wilson said in 2009. "We haven’t had that."

The city is still waiting for something that big. Getting there may require a leader who is willing to acknowledge his role—to be more huckster than Hamlet.