VC NEWS DAILY: Scott, two Massachusetts companies, CSN Stores and Tesaro, recently raised more than $265 million in venture capital between them, which is more than the whole region typically sees invested in an entire month. Is this a bizarre funding anomaly or the start of something big in the Bay State?
KIRSNER: I think obviously that's a funding anomaly. The CSN deal is almost is a private equity investment that VC firms are making. It's a company that already has around 800 employees and is going to have $500 million in revenues this year. And then Tesaro is a classic "aim for the fences" biotech investment, which we see a lot of in Massachusetts. But those two things happening on the same day, or the same week, I think is anomalous. I don't think we can continue to count on that sort of stuff.

VC NEWS DAILY: There has been a proliferation of incubators in the Bay State-- Critical Mass, Tech Stars, Dogpatch Labs. Dogpatch bills itself as a "frat house for geeks." Is a "frat house for geeks" really going to lead to important new companies being created, or just creating a space for a lot of socializing.
KIRSNER: I'll be interested to see if Dogpatch and Mass Challenge, and other incubation spaces, really do produce big companies. And the same is true of the Y Combinator program, which used to operate in Cambridge and now just is in Mountain View (Silicon Valley). But I'm not sure they've yet proven that those are breeding grounds for really successful companies. But it may just be a matter of time. I hate to be too skeptical about it as Y Combinator did produce Dropbox through their program when they were still in Cambridge.

VC NEWS DAILY: Locally?
KIRSNER: Yeah, although Dropbox is out in the Bay Area now.

VC NEWS DAILY: This kind of brings us to the age-old topic of the Massachusetts inferiority complex: that is, given our university resources we have some of the greatest intellectual capital in the world, but we're not building billion-dollar, disruptive companies like Silicon Valley. What's wrong with the Bay State?
KIRSNER: Well, I kind of have been trying to get away from thinking about the inferiority complex, just because I think when you look at it globally, there's nothing to feel inferior about. And I just feel that comparing us to Silicon Valley is pointless. It doesn't make sense to do. I think there are two things that we could focus on to produce billion dollar companies, and one is just stronger relationships with the business investing startup scene here and in universities. I think the sieve is a little too leaky in terms of people who come here and get really smart over the course or four or six or eight years, and then go somewhere else to start companies. I think we should focus on retaining a lot more of those people and having them work for companies here; having them start companies here. It gets to the Facebook problem: why couldn't we have found a way to fund Facebook?

VC NEWS DAILY: Okay, let me challenge you on that for a second, because if we don't necessarily compare ourselves with Silicon Valley, what if we just compare Massachusetts today with the past. In the '80s we produced several multibillion dollar hardware companies. The '90s, we had communications, software, storage, i.e. EMC, Cascade, Sycamore, Parametric. Why haven' we had big success stories over the last decade?
KIRSNER: Well, what I think is happening now is that the stuff producing wealth in the Bay Area and in New York (to some extent), is in digital media and social networking. When you think about the wealth that was created with Ad Mob, LinkedIn and Facebook, and all the social networking companies in the Bay Area, that stuff is creating really fast wealth. I think a lot of the really big bets in Boston right now, however, are on much longer term returns.

It's companies like Tesaro in biotech, where it's going to take 10 years, 12 years, 15 years for there to be an exit potentially. I think we have a lot of big bets in energy, whether it's bio-fuels or new battery technology, or other kinds of power generation i.e smart grid technologies, where it really is a "Hail Mary" type pass. So I think we're working on stuff where a lot of our bets have been placed, and it's just is a longer term payout.

VC NEWS DAILY: So we should remain patient and sanguine?
KIRSNER: I just think that for whatever reason, there are certain waves that we haven't caught. And I think we could say, look, "We didn't catch the PC wave in Massachusetts, and that sucked." I think you could say, "We didn't catch the social networking wave, and that sucked." But there are other areas that I'm hopeful will generate big companies. Like we did catch the Robotics wave in a way that Silicon Valley didn't. And if you believe that robotics are going to be really important to the future, all kinds of intelligent roving mobile systems in consumers' homes and in businesses and for the military, then great, it's lucky that we have iRobot, and now two iRobot spinoff companies from the founders. And Kiva Systems-- this really interesting warehouse robotics company. You can say that's a wave where we've got a lot of chips down on the roulette table.

VC NEWS DAILY: You did a "salon" at the Cambridge Innovation Center a couple of years ago about blogging. Do you think that blogging is still an important or critical communication channel for a company, or have LinkedIn, Facebook, and Tweeting supplanted blogging to a large extent?
KIRSNER: No--I think a good way for companies to kind of get on the map and get some recognition, and build some "thought leadership" is blogging. And it's great for SEO (Search Engine Optimization) for the companies, and it's also a good way for a reporter who may not understand the space or understand a company's positioning, to read up on it, rather than having to do an hour long interview and get briefed on the space. So, I just think it's a win/win situation.

I mean, the interesting question now is if you have some news, like you've just raised $10 million, do you blog about it first? Or do you go to media and say "Hey, we'd like you to break this news first?" It was interesting that Bijan Sabet from Spark Capital announced on his blog that Biz Stone, one of the co-founders of Twitter, was joining Spark as a Strategic Advisor.

VC NEWS DAILY: Did he announce it on his blog first?
KIRSNER:He did.

VC NEWS DAILY: Or, did he Tweet first?
KIRSNER: He blogged and then tweeted about it, as opposed to saying, "Hey, I want the Wall Street Journal or the Boston Globe or Tech Crunch or somebody to have this news first." So, I think there's still some thought that should go into that in terms of: can you make the biggest splash with news on your own blog? You can, maybe, if you're Bijan, and you've got lots of Twitter followers, and lots of people reading your blog. But, I think for a lot of companies and venture firm announcements, you can make a bigger splash by saying "Hey, this is an exclusive, and I'm going to go to publication A, B or C with it before we publish our blog post."

VC NEWS DAILY: What's the Massachusetts company that's going to get to $500 million first: Constant Contact, CSN Stores, Zipcar, none of the above?
KIRSNER: Well, CSN Stores says that they are doing a run rate of $500 million this year. And they're doing a rebranding, where they're going to start using the brand "Wayfair." If that works, and it's executed well, I think they're going to be a fast riser. They're already in the top 100 online merchants, according to Internet Retailer.

VC NEWS DAILY: Internet Retailer is a...?
KIRSNER: Some trade publication that ranks who are the 500 biggest e-commerce companies. We have number two, interestingly. I think everyone forgets that Staples is number two after Amazon; above Dell, above Apple. But Staples is a distant number two in overall revenues.

VC NEWS DAILY: For overall online revenue?
KIRSNER:Yeah.

VC NEWS DAILY: Staples? (Incredulous)
KIRSNER: Yeah.

VC NEWS DAILY: Not Wal-Mart?
KIRSNER: No. It's interesting. I would put more of a bet on Zipcar than Constant Contact. And CSN-- it's maybe a foregone conclusion that they'll be a half-billion dollar company this year.

VC NEWS DAILY: Is there an early stage company that you've come across recently where you're really intrigued by their technology, and you think, "Wow, these guys are going to get on the map soon?"
KIRSNER: Because we hit on robotics before, I think Kiva Systems is a huge opportunity. The Kiva model uses these mobile robots to move merchandise around. It unfortunately requires customers to redesign their entire warehouse, like sort of blow up their warehouse, and start from scratch. But they already have a lot of big name customers including Staples, Walgreens and Zappos.

There are also some really interesting biotech and medical device companies. I was just reading this morning about Spring Leaf Therapeutics, which is in this drug delivery cluster in Massachusetts; companies thinking about new ways to deliver drugs without poking you with a needle. And obviously that's huge. The first company that develops a patch or some kind of vibrating device, so that you don't have to poke yourself with a needle every time you need insulin--that's going to be great.

VC NEWS DAILY: Women might prefer the vibrating device.
KIRSNER: No comment.

VC NEWS DAILY: You recently wrote a column that several prominent VCs are moving from Waltham and their suburban digs to Cambridge, is that a move that is long overdue?
KIRSNER: Yeah, I forget when I first wrote about that. It may have been in 2009. It was a piece called "Why Waltham Doesn't Matter." And it was just sort of making the case that Waltham was about entrepreneurs in the suburbs in the1980s, 1990s era, with the communication companies and PTC (Parametric Technology) getting built out there; and a bunch of companies that liked the suburban environment. But it felt that in the 21st century, the shift has been back to the city center, and to young entrepreneurs.

VC NEWS DAILY: Dormitories.
KIRSNER: Yeah, and dorms, and people working out of Starbucks or working at a Dogpatch [Incubator]. And so, it just felt like the model of the entrepreneur having to ascend the flanks of "Mt. Money," and go knocking on doors to get meetings, felt detached from the real energy of Boston and Cambridge.

And I think VCs have realized that. [When you hear] the great story that Larry Cheng (former Battery VC) tells about Eduardo Savarin and Mark Zuckerberg from Facebook having to take a $50 cab ride to get to Waltham, you know that was not a good model anymore.

VC NEWS DAILY: Bloomberg ran a piece recently about Massachusetts bemoaning the fact that Mark Zuckerberg built Facebook here in Massachusetts, and then left to grow the company in Silicon Valley. And I re-read that Larry Cheng blog piece which tells the story of his meetings with the Facebook founders. It looks like they were doing more of a touch and feel kind of thing. It doesn't sound like it was that serious. As far as you know, was Zuckerberg really soliciting funds from Battery? And was Zuckerberg formally turned down for an investment? Or was he really interested in going to Silicon Valley anyway? Should we really beat ourselves up that we missed out on Mark Zuckerberg?
KIRSNER: I think that they were probably, as I understand it, planning to go to Silicon Valley that summer anyway. But I do think that there was that possibility that had Battery invested in Facebook and said, "Hey, we have some office space for you, we're happy to set you up here; we'll help you hire," that the future could have been changed, if you want to take that "Back to the Future" kind of concept. I think anytime someone has a meeting at a VC firm, that's an opportunity for the VC to give them money, and sort of have some influence over where that company's going to be located. Battery didn't invest. They had invested in Friendster. That investment was going south. I think they felt like they had been kind of burned by social networking once. And when Zuckerberg and the team went out to Silicon Valley that summer, as chronicled in the "Social Network," Peter Thiel met them and put the first money into the company.