Now that we are up and running and making new investments, one of the questions we are often asked is "what types of companies do you guys like to invest in?" That is usually followed up with "what sectors do you find interesting?"

The easy question to answer is the first; we like to invest in seed and early-stage information technology companies. The harder question is the one about which sectors we invest in. We like to call ourselves "thematic investors," which as an answer to the sector question is usually met with "huh?" Let us 'splain...

We view the traditional sector approach as a vertically focused and somewhat stove-piped view of the technology landscape. Common sectors include storage, semiconductors, enterprise software, consumer Internet, communications equipment, etc. While we think this is a perfectly reasonable way to segment the technology universe as a means of ensuring portfolio diversification (or specialization), it is perhaps more appropriate for larger funds with larger teams playing across a broader spectrum of technologies, markets and company stages.

Because we confine ourselves to the software/Internet/IT "sandbox" when we consider new investment opportunities and because we are technologists ourselves at heart and are each comfortable within this chosen sandbox, we instead use a thematic lens to evaluate the companies and technologies we encounter.

Our themes tend to be horizontal in nature and are often based on an underlying protocol, standard or market trend that we believe is on the cusp of widespread adoption that has the potential to drive a cycle of innovation and company creation for at least a five to ten year period. We try to focus on themes and their underlying technologies that are ready to be rolled out to consumers or the enterprise and are well beyond the science-experiment phase.

To make this concrete, some examples of themes we are excited about presently and historically include email, RSS, the implicit web and human-computer interaction (HCI). Because themes are inherently horizontal, they have often have applications in the consumer and enterprise markets and can be delivered in myriad ways, whether it is via a web site, SaaS, a gadget, an appliance or good old-fashioned downloadable client or server software.

We usually have half a dozen or so themes active at any one time and are constantly looking for new ones. We seek to invest early in the lifecycle of a theme, and often make multiple investments early-on to provide ourselves with a broad perspective on the market dynamics as the theme develops, and to provide our companies with the opportunity to collaborate and learn from one-another as they actively shape and create their new market space.

To provide additional context, examples of companies we've invested in within certain themes include Critical Path (IPO), Message Media (acq. DoubleClick), Return Path and Postini (acq. GOOG) in the email theme, Technorati, NewsGator and FeedBurner (acq. GOOG) in the RSS theme, Lijit in the implicit web theme and Akustica and Oblong in the HCI theme.

We will continue to blog in detail about our active themes and will take you through the details of how we think about specific themes, past, present and future. Stay tuned.

And before you ask "do you ONLY invest in companies that fit neatly into one of your themes?" the answer is no. While most of our deals do fit into one of our themes, we are looking first and foremost to find great companies and great teams to invest in, and we will not pass on a fantastic opportunity just because it isn't easily categorized into one of our thematic buckets. In fact, we'd love it if you opened our minds to a brand new theme...

Posted by: Jason Mendelson   |   Category: Themes