On January 26, 2010 at Pillsbury Winthrop in Palo Alto, SDForum held the Quarterly Venture Breakfast Series in collaboration with PWC.Â Allison Leopold Tilley of Pillsbury Winthrop moderated panelists Steve Bengston of PricewaterhouseCoopers, Winston Fu of USVP, Ryan Sweeney of Accel Partners and Ann Winblad of Hummer Winblad Venture Partners. Text from DJCline.com
The changes over the past decade from the dotcom bust simply accelerated over the past year. From 2002 through 2008, U.S. venture investing stabilized between $22-30 billion annually. In 2009, VC investing was about 18 billion. Steve Bengston believes that too much money in a boom market inevitable cycles through to a bust that is fifty percent off the peak. He thinks 2010 will be as flat as 2009. Of course, less money invested means less coming out in exits. In 2000, most exits were IPOs. By 2010 most were mergers and acquisitions. With IPOs, fewer people want to be CEOs responsible for signing Sarbanes Oxley forms that could put them in jail. Mergers and acquisitions are safer but don’t pay off as well. Text from DJCline.com
For VCs and their startups, the first part of 2009 was a period of shaking out and locking down from the collapse of 2008. Allison Leopold Tilley said the tourists left the industry. As new government policies took hold in the second half of 2009, deals cautiously came out of hiding. Lots of VCs, limited partners (LPs) and angels have been badly shaken and are just keeping the lights on. Even more established VCs with deeper pockets are looking for capital efficiency for early stages and wanting serious revenue in later stages in the seven to nine year cycles. Ten years ago you might have seen a different VC involved in each round. Now you will see a VC stick with a company through C series. If you want to know if a potential VC is serious ask them when was their last big deal. If they can’t tell you, keep moving. Text from DJCline.com
IPOs and and M&As are not the only options. VCs like to hear a plan for a profitable independent company. The downturn is forcing lots of companies to take stock and rethink how they do business. Now is great time for a startup that can disrupt existing structures. Startups that become standalone game changers like Apple or Google are ultimately the most profitable investments. Ann Winblad said a good company is bought not sold.Â Go to meetings with developer communities and look for opportunities. Is there a large new market? Why is no one in it yet? Text from DJCline.com
Ryan Sweeney sees an economic recovery in 2010 from enterprises but not consumers. Winston Fu sees promise in green ideas that demonstrate dramatic efficiencies for limited investment. Look for an increase in IPOs as sign of recovery. New companies mean new jobs. Text from DJCline.com
The room was packed with entrepreneurs. They were advised to do their homework, get a good law firm, a good accounting firm, a good VC and most importantly, a good idea. Text from DJCline.com
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