Please note that this is off-topic for ComparisonEngines, but there are many innovative companies/technologies out there, and I want to share some information that I find interesting.
Moderator:
Eric Janszen, President & CEO AutoCell (moderator)
Panelists:
1 – Mark Heesen
2 – Barry Kramer
3 – Julie Levenson
4 – Jonathan Medved
5 – Janice Roberts
6 – Gus Tai
What’s driving the new interest in VC? What stages of VC are private investors involved in?
1 – VC is a cyclical business. You have to look at things from a 5yr perspective. So you have to look back at the bubble to get a real comparison. Why are we getting this money? Because LPs have the money. They are looking for any place to put their capital. Eventually, you’ll see a lot of LPs very dissapointed that we’re not taking in all the money. But long term they will be happy because we’ve learned from the bubble.
2- After the bubble burst, a lot of the VCs had to spend time tending to their investments. Now that we’ve gotten through the legacy investments, VCs can turn their attention to newer stage cos.
3 – Amount of investment dollars that is actually deployed hasn’t changed that much. If you look at quarterly numbers, about $4B/month is going into investments, which isn’t that much different than before. Right now I don’t see the a significant increase. Early or late stage? A lot of the true VCs that had capital calls and gave money back are sticking to the smaller levels…stick to the $400 – $800m funds.
4 – Europe, there has been a huge cratering. The fundraising hasn’t come back. In Israel, we’ve had a strong couple years. We all hear about China and India. Too much money chasing too few deals might be true here, but not necessarily around the world.
5 – About to close Mayfield 12 Fund. There’s certainly money out there. Funds will be able to raise the money they need, but firms are more disciplined in terms of the funds they are bringing in. Sensible funds go to quality partners.
6 – What is the relevance to being an entrepreneur? There will probably be a surplus of capital over the next couple years.
A lot of private money is going into later stage companies. What happens to comapnies that are pre-revenue?
1 – VC is a cyclical business. Now we see a lot of VC funds fundraising. Over the next 6-18 months, you will see early stage investing. But not necessarily see it in the numbers. When VCs do the small deals, they won’t go out and tell VentureWire.
2 – It’s a good time to be an early stage entrepreneur. But you can’t expect it to be like the boom days; you’re not going to get a lot of money for just having a business plan. You have to go back to ’96 – ’98 for setting expectations.
3 – You have to differentiate between companies that have been funded before. The people who don’t have that track record…you can’t necessarily go to the top tier firms.
You can get an early stage company funded, but you have to expect to give up most of the company at a low price…
3 – Valuation. We’re finding a very big gap between early and late stage funding. VCs are willing to pay up for companies which are late stage.
4 – Just participated in a $20m seed round. This person had put together 2 billion dollar companies before. The big issue is ‘Where are the Angels?’ They got beat up. I’m not sure the angels have come back to the field. If you’re not a name brand entrepreneur, it’s tough to get money.
5 – Top tier funds which have been early stage investors are still early stage investors. You have to think about 3-5 years. Often the first time entrepreneurs can get funded and the top tier funds will fund. Playfirst – a couple guys and Trinity and Mayfield nurtured them.
6 – A lot of these companies have been able to get going without a lot of money. Be open minded that you don’t need venture money in the early days.
One of the laments I get from entrepreneurs involves giving up so much of the company to take in that first dollar…
1 – If that entrepreneur is so intent on keeping control, then that entrepreneur shouldn’t be raising VC. If that entrepreneur is looking for more than just money, then that 50% number is not at the top of the equation.
3 – That entrepreneur is a little short sighted. He has to take a little pain in the short run to make it to the long run. You have to take in the right VC if you are going to take in the money.
4 – Your value goes up as the overall value of the company goes up. Checkpoint Software example. $400,000 loan for 50% of the company. If you ask the people at Checkpoint, they say that they built a great company.
5 – We’re all in business. We’re repsonsible for making money for our limited partners. Entrepreneurs should concentrate on the long run. You have to pick the right VCs.
