q&a: paul singh, founder of Crystal tech fund
S even years ago, when Paul Singh left Arlington for Silicon Valley, he didn’t completely uproot. He kept a house here, he flew back and forth regularly, and he even shipped his car with Virginia license plates back across the country for inspection every year.
Singh, who went on to build a start-up investment empire in California, said he never cut ties because he knew he would eventually return to Northern Virginia. Now he’s back, and he has brought a powerful entrepreneurial brand and plenty of financial firepower with him to a new project in Arlington.
Last week, he opened the doors to his investment company’s new headquarters and new venture fund in Crystal City. Singh has raised an initial $50 million for the fund, called the Crystal Tech Fund, which he plans to invest in small technology companies with high-growth potential.
Singh is an entrepreneur himself, having started and sold several technology companies. However, he rose to fame and fortune as an investor, helping launch 500 Startups, which has become one of the preeminent early-stage seed funds and accelerator programs for tech start-ups in Silicon Valley .
Singh spoke with us last week about his experience in California, what brought him back to Virginia, as well as his expectations for Crystal City, his tech fund and the future of start-up investing.
So, you’re originally from this area, correct?
Singh: “That’s right, when I was born, my parents were living in Reston, and I spent my grade-schools years over in Great Falls. I went to high school at Bishop O’Connell in Arlington, then college at George Mason [University]. Now my wife and I have a house in Ashburn, and we’ve had it for about the past eight years. So, this has always been home.”
What lured you to Silicon Valley?
Singh: “My first exposure to the valley was in 2007. A buddy of mine was starting a company out there and told me to come check it out. At that point, I had never been west of Virginia. He sent me a ticket to come interview, and I immediately fell in love with the area. The weather was great, everyone was so smart. About a week later, my wife and I got an apartment in San Mateo, California.”
But you kept the house here?
Singh: “We did. In retrospect, I never really left Virginia. We spent about half the year here, half the year there over the past few years, and we always had our home in Ashburn. We knew we wanted kids and knew we would eventually settle down in this area.”
How did 500 Startups come about?
Singh: “A friend introduced me to Dave McClure, who’s from Maryland, while we were both in D.C. back in 2010. Our first meeting was at some little Asian-themed bar on K Street, and we just shot the breeze for a little while about what we working on out in the valley. At that point, we were both starting to do some angel investing and managing some money for a couple venture funds, and after that, our circles kept colliding all over the country.
He eventually started talking about the 500 Startups concept, mixing seed funding with a co-working environment, and I thought some of my work would fit in with that vision. Next thing we know, we had started building it together, and I never looked back.”
So what prompted you to leave?
Singh: “I started noticing that the supply-demand curve between investors and founders was shifting. When I first started, if I got into a deal that started to get hot, maybe 20 other investors would start fighting for space on the deal. Now, when a deal gets hot, there are literally a thousand active angel investors and venture firms interested in jumping on the deal, from all over the world.
So, seed-stage demand is now being met. But at the next level, what’s often called the series A round, that money hasn’t increased. If anything, it seems to have consolidated.
What we have been left with is hundreds if not thousands of start-ups that have raised a small amount of money, have some meaningful amount of revenue that could potentially grow further, but they’re having a lot of trouble finding that next round of capital. That’s the gap that this new fund is designed to address.”
So you’re looking for more mature technology start-ups?
Singh: “I’m actually shying away from the word “start-ups.” We’re looking for technology companies that have already raised significant funding, have started to generate revenue and are gaining real traction in their market. From there, we’ll use some of our data-driven tools and analysis, as well as my investment experience, to try to identify the right ones, give them some money, and hopefully ride them right up the curve.
Our initial check sizes will be between a quarter of a million bucks and a million bucks. The plan is to make around 30 or 40 deals in that $250,000 range, and then reserve most of the fund for follow-on investments in the firms that need it down the road.”
Any specific industries or geographic areas you’ll be focused on?
Singh: “No, we’re looking at companies everywhere. I have been talking to a team in Mumbai, another team in Illinois. There are great companies everywhere, and we’re just trying to sort through them all.”
And you’re opening some workspace, as well. So will this be a co-working space similar to 1776 in D.C. or 500 Startups?
Singh: “No, to be clear, we are not a co-working space or incubator or anything like that. What we did was build out some beautiful office space in Crystal City that our portfolio companies can use if they want to — but they don’t have to move here. In other words, what we’re telling them is, “Here’s some money, and hey by the way, if this space is useful, by all means use it however you see fit. Just don’t burn it down.”
So far, some of them have decided to actually move their headquarters here. Others will use it as an outpost or starting point as they build up a presence in the D.C. region.”
Why add office space to the equation, rather than just offering funding?
Singh: “In addition to being in no-man’s land for funding, a lot of these teams are in no-man’s land in terms of workspace and infrastructure. Most of them are now too big for co-working spaces, like a 1776 or WeWork, but they’re not ready to sign a long-term office lease, because they don’t know whether next year they’ll need space for 20 people or 200.
This space gives them a way to move into this market with some flexibility, without having to choose between those two options.”
So why launch this new project here on the East Coast, instead of staying out in Silicon Valley?
Singh: “If I said anything more than this is where I wanted my family to grow up, I would probably be exaggerating. That said, I want my daughter [who was born in January] to grow up in an entrepreneurial environment, where people’s kids can come and get an introduction to technology.
That’s really special, because I didn’t have that growing up. Back then, everything was basically defense, military and contracting. But there are people building a new environment here, and if I can play even a small part in that, that would be really great.”
More specifically, why Crystal City?
Singh: “I knew I wanted a space that would be attractive for the founders. I wanted a neighborhood with great restaurants and great living environments. I knew I wanted Metro access and an airport nearby.
And we leased this space from Vornado, which has most of the buildings in the area. I like that I only have to deal with one real estate player if we need, for example, housing for one of our new founders or if one our companies needs to find their own space someday.”
Do you think your location decision will help the D.C. region gain ground on the likes of Silicon Valley as a hub for start-ups?
Singh: “Honestly, my responsibility is to provide a return to my investors, and my plan is to do that by helping these companies get to the next level. If that helps the community as a byproduct, then that’s great, too.
Sometimes, I think we put too much emphasis on that community aspect. Companies like Opower and 2U [which both just went public] didn’t make it because of more community, they made it because their founders and employees put their heads down and gritted it out.”
A new baby, a new venture fund, a new headquarters — it sounds like a busy but exciting time for you.
Singh: “It has been. It’s funny though, I think people’s perception of venture capital is like mahogany speedboats and Bentleys. I’m telling you, I’ve been sitting here smelling paint fumes for the past month, choosing carpet colors, telling contractors where to put nail lines. All the while, I’m herding investors and herding founders.
The bottom line is building a venture fund — and building a company, for that matter — they’re both inherently unsexy. I love it, though, and I’m excited to finally get this started.”