Concerning Renowned Venture Capitalist Arthur Rock

July 15, 2009

Spencer Ante has posted an article from IBD on legendary VC Arthur Rock (with an investment resume that includes Fairchild Semiconductor, Intel, and Apple, legendary is an appropriate adjective). Rock is a protegé of pioneering venture capitalist Georges “I’ll take an Grade A individual with a B idea over a Grade B individual with an A idea” Doriot. With the venture industry going through a few hiccups at the moment, it’s a great opportunity to take some time and soak up a bit of knowledge from those who’ve “been there, done that” on a grande scale.

Along those same lines, if you haven’t already done so, I highly recommend reading Ante’s “Creative Capital: Georges Doriot and the Birth of Venture Capital“. As it said in Ecclesiastes, “there’s nothing new under the sun”, and so it may behoove those of us on the investor side to remember a bit more of the history of the industry and occasionally look for advice and guidance to those who came before us (try finding active VCs whose careers in venture pre-date the Netscape IPO. They exist, but they’re rare).

Here’s the article:

View this document on Scribd

Additionally, here’s a video of Rock from a talk he gave at the Computer History Museum a couple of years ago:


13 Things You’ll Never Hear a VC Say

June 15, 2009

Apologies for the long absence, but the MBA is officially over (Free at last! Free at last! Thank God Almighty, we are free at last!) and I’m thinking how to best move forward with the blog. I’ve got several ideas and it’s just a matter of finding the right approach. I do know that it will be more personal (so far the target audience has been students, particularly my fellow classmates, with the content focused on timely stories across the entire spectrum of PE).

Anyway, here’s a fantastically jaded (and unfortunately all too accurate in many cases), take on 13 things you’ll never hear a VC say:

Kevin Delbridge of HarbourVest on Venture Capital Fund-of-Funds

May 13, 2009

Here’s an audio interview from Red Herring with Kevin Delbridge, Senior Managing Partner at HarbourVest on Venture Capital and the problems facing VC Fund-of-Funds.

Upside to interview: Good insight on the changing face of Venture, how problems with endowments is helping FoF’s, the current buyers market, and how big he thinks the industry should be.

Downside to interview: Good luck trying to pay attention to the annoying computer voice! It doesn’t have the same charm as WOPR from WarGames.

What Types of Innovation and Invention Might Attract Funding Dollars in the Downturn?

May 12, 2009

So it’s a pretty weighted question, but it’s exactly what BusinessWeek asked the much hyped YouNoodle (quick note: the site’s startup predictor, which uses an algorithm to predict how much your startup could be worth in three years, is a bit of a gimmick to draw people in, but the site has some interesting content like it’s YouNoodle Scores, which is a metric set up with Sean Gourley to quantify a startup’s “buzz”, as well as nice community features) to try and find out.  We all know the NVCA numbers that showed VC investment for Q1 of this year at a 12 year low, down 47% in dollar amounts from the previous quarter.  

Survey says: YouNoodle tracked 149 venture capital deals worth $1.55 billion among the 53,000 startups it follows (most of which are serious, some only serious in the entrepreneur’s head). Of this dollar amount, 26% was invested in biotech and medical devices; 16.5% in energy and cleantech; 14.3% in consumer Internet; 11.4% in hardware (including semiconductors, gadgets, and PC-related goods); 11.2% in finance; 6.2% in software; and the remaining 14% spread across four other categories such as mobile phones and education, each with less than 6%. The data also showed that most of the funding was later stage and Series B with 34% and 33% respectively, suggesting that VCs are taking a cautious approach at the moment by investing in more proven concepts.

These sector breakdowns by investment show the continued resiliency of biotech as it continues to hold up a bit better than other areas. The article points out that it’s taken 10 years for increased U.S. government grants to the sciences to start to bear commrecially viable fruit. Expect a dose of the same with world government’s increase in cleantech funding.  

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Q1 2009 European Venture Capital Investment Drops 35%

May 6, 2009

With the U.S. and the NVCA grabbing a lot of the VC headlines lately, it’s time to pay a little attention to Venture Capital in Europe. Europe saw 170 deals garner $1.18 billion (€906 million) in the first quarter, down 35% from the €1.40 billion that went into 281 deals during the same period in 2008.  This marks the lowest deal count for Europe since VentureSource began reporting on the region in 2000. However, it’s important to note that the 35% decline is comparatively better than how other parts of the world faired in Q1 VC investment (the U.S., China and Israel saw drops of 50%, 58%, and 75% respectively). Europe now accounts for 21% of worldwide venture investment.

Europe’s information technology (IT) industry is being hit the hardest during the current downturn. IT saw €277 million invested in 82 deals in Q1, down 44% from the €492 million put into 129 such deals last year and the industry’s worst quarter on record. Within IT, the information services sector fared better than most as it accounted for 46% of all IT investment in the quarter with €127 million and 28 deals, which is down 16% from the year-ago period but on par with investment levels the sector has seen over the last two years. 

Investment in the European health care industry outpaced that of IT in the first quarter as venture capitalists put €311 million into 42 health care deals. Even so, this marks a 39% decline from the first quarter of 2008 when there were 70 deals worth €513 million. And for the first time since 2005, Europe’s venture investment in the energy and utilities industry outpaced that of the U.S. and was the only area to see investment actually increase, up 82% to €221 million in 10 deals from €122 million in 18 deals a year ago. This growth was due to a large round raised by NorSun of Oslo, Norway, which landed €147 million in first-round financing.

In France, investors put €117 million in 43 deals, down 41% from €198 million in 53 deals a year ago. In the UK, venture investment fell 58% from €562 million invested in 98 deals last year to €234 million in 50 deals during the most recent quarter.  This marks the country’s lowest deal count on record.

Also, while average deal size fell in every other part of the world it actually went up in Europe (much of this is influenced by the NorSun deal and the bigger piece of the pie that energy investments took) with the median size of a venture capital deal ticking up over 8% to €3 million from €2.8 million.

Dave Hills of KPG Ventures on Now Being Perfect Time to Invest

May 3, 2009

Here’s Dave Hills, general partner of KPG Ventures, talking about how now is the ideal time to start a business. He also talks about the differences/similarities between Silicon Valley and New York:

LP to VC’s: Please Go Out of Business!

May 1, 2009

Adding fuel to Fred Wilson’s recent point concerning Venture Capital’s math problem and there being too much money going into the asset class, at the NVCA’s convention this week Rebecca Connolly, of Fairview Capital (a Fund-of-funds with $3 billion under management and 70% of that being allocated to Venture Capital) gave a talk were she said:

I hope some of you go out of business. I hope that does happen. Let’s just flush everything out and get back to less competition, less money…just not my funds.

To be fair though, while LPs are enjoying their moment in the sun of talking tough and “leveling the playing field”, they’re the ones who gave the underperforming funds money to begin with. There’s plenty of blame to go around. Ultimately if the LPs do their job right, the “bad” firms will fade away as the meritocratic elements of the industry won’t enable those in the lower rungs to raise more funds.