Union Square Ventures recently closed a new $156 million fund in capital commitments, which partner Brad Burnham (pictured) says is "large enough for us to be able to act on our conviction and to support our portfolio, but small enough to enable us to flexibly build positions in attractive, capital-efficient Web services."

The New York venture capital firm known for backing young, as-yet-unproven entrepreneurs such as Tumblr Inc.'s 21-year-old founder David Karp will maintain its investment focus on Web 2.0 companies but with "subtle differences" from its original fund, explains Burnham on the firm's blog. He points out that the environment is "quite different today than it was when we closed our first fund four years ago. Then, the economy was just emerging from the collapse of the dot-com bubble, and the opportunity for Web services like del.icio.us and Feedburner was not yet broadly understood. Today, the global economy seems to be headed into a recession, and the market for lightweight Web services is arguably over populated and over invested." 

Burnham answered Tech Confidential's questions about the new fund and about USV's new partner, Albert Wenger, a serial entrepreneur who was president of del.icio.us when the social bookmarking site was acquired by Yahoo! Inc. for $30 million in 2005.  - Mary Kathleen Flynn 

Tech Confidential: What are the "subtle changes" you envision for USV's investment strategy in the new fund?

Brad Burnham: The Web 2.0 early adopter community does not have the time to engage with every new Web service presented to them. This was not true when del.icio.us and Flickr launched into a relative vacuum. New services will need to be very distinctive to get the core group of sophisticated users to displace current services with new services, or the services will need to target new markets that are less saturated.

What will be involved in being "even more selective" about the early-stage Web services you will back?

There is no change in our deal-vetting process, but all of us are sensitive to this issue so it is harder to get consensus to make an investment in a company that has not yet demonstrated that they can deliver enough value to users to deserve the investment of their time.

The new fund will include later-stage opportunities as well as early stage. What will be the focus of your later-stage investments?

Can't talk about specific deals that we are working on and can't think of a good example of a deal that another firm did that would be representative. I think this will become clear as the portfolio for the new fund takes shape.

What does new partner Albert Wenger bring to USV?

Lots. He has founded five startups, has a lot of operating experience and now a lot of deal experience. He also complements Fred and me. Fred is a great deal guy and an avid user of Web services. I have spent 25 years thinking about the intersection of technology and markets, and Albert is a technologist that can go toe to toe with most of the CTOs we meet. He has also been working closely with us for several years. He was the president of del.icio.us and has co-invested with us in Tacoda, Etsy, Bug Labs, Tumblr and Clickable.

How will Fred Wilson, Wenger and you divide up the roles and investments?

Each of us has specific board seats that we are responsible for, but all of us work on all of the deals.

See March 5 post from unionsquareventures.com
See Nov. 2 post on USV from Tech Confidential