With $2 billion in new funds, Spark Capital doubles down on tech

But Spark also had a dominant strand of Hollywood DNA. One of its founding partners was Dennis Miller, a former Turner Broadcasting and Sony Pictures exec, and another founder, Todd Dagres, has been a producer of several independent movies. Another Spark founder, Santo Politi, had done a stint at Blockbuster Video, and yet another, Bijan Sabet, had been an early employee at WebTV, which built one of the earliest devices that connected the Internet to televisions.

From the start, says Dagres, “we were thinking about the consumer and how media was being disrupted by technology. These things that we take for granted now as obvious — back then, they weren’t. People were still hurting from the dot-com bust and lots of talk about a digital Hollywood” that wasn’t generating any real revenue. The Spark founders used the acronym MEAT to talk about their investing focus: media, entertainment, and technology. They were also interested, Dagres says, in ways that consumers, not studios, would create content that others might want to consume — a trend that became known as “user-generated content.”

That focus led the firm to make some bets that paid off big. Its very first investment, thePlatform, was snapped up by Comcast to help the cable giant manage digital content. Two other early hits were Tumblr, a service that made it easy to start a blog and attract followers, and Twitter, the social media platform geared to short attention spans. (As expected in venture capital, there were plenty of flops, too, companies that were sold at a loss or shut down, like Boston-based mobile-ad firm Jana.)

Spark didn’t want to be constrained to investing in local companies — in part because Boston has never been fertile ground for entertainment and social media startups.

“From day one, we said that we were going to do the best deals we could do, but do them from Boston,” Dagres says. “Our first deal was in Seattle. Our first big hits were Tumblr in New York and Twitter in San Francisco. The action was mainly in California and some in New York. Boston was at best third.” Dagres says the attitude was, “You go where the deals are. You don’t do the best deals near you.”

Sabet, a New York native and avowed Yankees fan, put money into startups like Omgpop, maker of the once-hot game Draw Something, and the mobile app Foursquare. He and Politi helped define the firm’s reputation as one that would take a flier on unproven concepts and first-time founders, well before a company had brought in its first dollar of revenue.

Eventually, the firm began hiring investors in New York and San Francisco and opened offices there. A key early export to San Francisco was Nabeel Hyatt, a Cambridge gaming entrepreneur who joined Spark in 2012.

When you look at the firm’s website today, it lists some of its biggest successes, and the vast majority of those first dozen companies are headquartered in New York or San Francisco, like Slack, Oculus (now part of Facebook), self-driving car tech firm Cruise (now majority-owned by GM), and Discord, which many regard as “Slack for young people.” Spark has also backed the eyewear retailer Warby Parker in Manhattan and Snap, the social media app headquartered in Los Angeles. The two Boston investments that show up high on that list are Wayfair, the home goods e-commerce site, and Flywire, a digital payments company that went public last May. Spark invests broadly across consumer-oriented companies — like a new Silicon Valley laptop maker called Framework — as well as those that sell to businesses.

Gender equity has been a big issue in the venture industry. Spark had hit its 10th birthday before it brought on its first female investment partner, and in recent years, the firm has added four others. (The first hire, Megan Quinn, later left to help run the gaming company Niantic as chief operating officer; Niantic, which makes mobile games like Pokemon Go, was a Spark investment.)

“We weren’t necessarily on the bleeding edge of that,” Dagres admits, “but we weren’t trailing either. We tried to do it naturally.”

These days, Spark partner Yasmin Razavi says there is more concerted effort applied to “scanning candidates, and asking if we are looking wide enough.” Razavi, a Harvard Business School alum, says that “there is a ton of incredible talent entering our ecosystem at every layer.” The nonprofit All Raise found in 2020 that women represented about 13 percent of all VC investors in the United States, and 65 percent of firms did not have a female partner; Spark’s current team is about one-quarter female.

Dagres and Sabet have stepped back from active roles investing at Spark, leaving two investors operating out of Spark’s Boston office — and another 13 based in New York and San Francisco. Spark’s financial operations and its investor relations staff are still based in Boston, says partner Alex Finkelstein, and the firm just signed a 10-year lease for new space in the John Hancock building.

“We’re definitely not leaving Boston,” Finkelstein told me by phone from Zurich, Switzerland, where he was spending several months with his family. Finkelstein mentioned a Boston startup that he was putting money into, founded by MIT students, but he also noted that he would soon travel to Berlin to visit a construction software company that he’d invested in via Zoom, without having met the founders face to face. Another similar Spark deal was in Norway.

“There’s a lot going on in Europe,” says Spark partner Natalie Sandman. And the firm’s geographic scope continues to expand.

Venture capitalists used to say that they didn’t want to invest in startups that were more than a short drive from their office, says John Landry, a former software industry executive and longtime angel investor in Boston. During the pandemic, though, with so many meetings happening via Zoom, “VCs have had an awakening that they’re not geographically limited.”

Spark started life that way; Finkelstein mentions an investment he made several years ago in Andela, a platform for recruiting software developers that was founded in Lagos, Nigeria, and is now valued at about $1.5 billion. (Finkelstein was also the partner who led Spark’s investments in Boston-based Wayfair and Flywire.)

For Spark and its new billion-dollar funds, one challenge will be writing checks at the right price. As more money has flowed into the VC industry, that has created more competition and forced the firms to pay higher prices for a slice of equity in a promising startup. Dagres calls it “just another form of inflation.”

But as the Nasdaq index has slipped in recent weeks, some of the competitive frenzy has ebbed. Finkelstein says that is “a more healthy environment,” without multimillion-dollar investment decisions being made in the span of a week. Meanwhile, Spark’s ambition is still to be the money helping to launch a whole new generation of pioneering companies.

Scott Kirsner can be reached at kirsner@pobox.com. Follow him on Twitter @ScottKirsner.