All the Right Connections

This matchmaking also diffuses potential tensions among member companies. At one dinner, executives from AtomFilms and Ububu realized that their salespeople were calling on many of the same companies for possible deals. Rather than resenting each other for targeting the same partners, the business-development managers at the two companies agreed to help each other make contacts and close deals. "When you're dealing with a growing market," says Hoegh, "the more that companies help each other, the more successful they are. It's about increasing the probability of success."

There's one final principle behind how Arts Alliance works with its portfolio companies. The firm is prepared to invest not just in business plans but also in the (often very young) leaders behind those plans. Unlike other VC firms, Arts Alliance doesn't expect to toss out twentysomething founders in favor of veteran managers recruited from big companies. "We don't just invest in ideas," says Victoria Hackett, 33, a partner in the New York office and mentor extraordinaire to the CEOs in the Arts Alliance portfolio. "We back people. Talent is the most important asset when managing the hypergrowth of a startup."

Consider the case of Warren Adams. When Adams, 34, started PlanetAll, a contact- management and calendar service that was sold to Amazon.com in 1998, Arts Alliance coached him on everything from how to conduct effective meetings to how to negotiate a business-development deal. "They believed that I was the right person to build the company," says Adams, who is now a member of Arts Alliance's board of advisers. Apparently, Amazon agreed: It decided to keep Adams on as director of product development for its community and wireless initiatives, rather than send him off with a nice severance package and a press release. (Adams left Amazon in January to become a managing partner at Vineyard Ventures LLC.)

What's good for portfolio-company CEOs is also good for partners and associates, all of whom must have operational experience in order to work at Arts Alliance. If someone has never before worked at a startup, the firm sends that person off to one of its clients for a crash course. Hillary Hedges, 29, a principal in the London office, came to Arts Alliance after spending four years working at GeoCapital Partners, another VC firm. She spent her first six months not reviewing business plans but working at lastminute.com, a UK-based startup that uses the Web to help people make last-minute travel, dining, and entertainment plans, among other things. The company was rapidly growing -- from 30 to 160 employees -- and was getting ready to launch in three countries. Instead of sticking to departments with which she was familiar -- such as business development or finance -- Hedges worked in product development and in hiring.

The experience earned her credibility with the entrepreneurs in the Arts Alliance portfolio and helped her to network with other UK companies. More important, she says, it gave her an in-the-trenches perspective on startup life. "Never again will I sit on a board and criticize an entrepreneur for not doing something yesterday," says Hedges. "I better understand now how to help companies, rather than issue unrealistic demands."

The Creative Connection

Where do great ideas come from? How do we gain access to more than our fair share of those great ideas? These are urgent questions that every venture-capital firm in the world is facing. Arts Alliance tries to answer those questions by making one last set of connections -- between the present and the future.

A case in point: the Arts Alliance Laboratory, in San Francisco. Hoegh and his partners have recruited graphic artists and computer programmers to build a freestanding R&D shop for the firm and its portfolio companies. The lab will investigate new ways to broadcast music, experiment with text, turn a handheld device into an artistic platform, and otherwise innovate the total customer experience. The goal is to explore ideas and technologies that the firm's startup companies can't, so that CEOs can benefit from the results without losing their focus on the immediate needs of their businesses.

Arts Alliance has assembled a network of creative advisers and technology partners to brainstorm for the future. One of those partners is KnitMedia Inc., a company that runs a chain of nightclubs, including Manhattan's popular Knitting Factory. It also has a partnership with Sun Microsystems to help portfolio companies with the technical problems inherent in hypergrowth environments. Although Sun offers its services to other VC firms, Sun strategist John McClure says that Arts Alliance is the most aggressive about finding ways to help its portfolio companies. A unique feature of the relationship: Sun and Arts Alliance provide scholarships to European students. The goal is to increase the pool of technical talent in Europe and to give Arts Alliance a chance to mentor potential entrepreneurs.