I interviewed Larry Marcus, Managing Director Walden Ventures @GLAZED Conference. Walden Ventures invest in post technology, post product. Larry likes to see something with his own eyes that generates visceral excitement in himself or the target market so it all starts with a great demo. They dont do seed investing. They invest in digital media & cloud based products & services (digital media is defined very broadly services, infrastructure & content). He became a vc because he just loves technology & innovation & he loves products as a user. He was in Equity Research & was taking companies public & spent time with the vcs who had really helped build the business. To him that seemed like a great spot to be & at the time in the ’90s those were Series A & B companies that were entering into the market. He has a real passion for the people & products & building brands that can deliver to the mass market. He really values deep feminine passion & has recruited into senior management for SoundHound, Pandora & BandPage. He also has been advising Rivet Ventures which is a team of female vcs who fund early stage women ventures. He spoke about the changes that are happening in the venture industry as it has contracted dramatically from hundreds of firms to maybe a hundred firms that can actually do a legitimate Series A investment (& most of those wont be able to invest in particular sectors). Theres never been more angels – there’s probably 60k to 70k investments done a year. But with all those seeds out there, very few can sprout & turn into something. In between once they have great market traction theres not a lot of capital – the Series A Crunch. The big firms have gotten bigger & write larger checks. They do deals in US based areas. The more angel & seed investing there is the more innovation & he’s a big supporter of that because theres more opportunities for them to get involved in companies: building their brands, building their teams, helping them scale.
Scale Venture Partners
Sharon Wienbar, Managing Director Scale Venture Partners #smartmoneysv
I interviewed Sharon Wienbar, Managing Director Scale Venture Partners @NVCA Venturescape. Scale Venture Partners had just raised their 4th fund $300m very quickly & at their hard cap. Scale invests in companies that are in the scaling phase. After you’ve got product market fit & you’ve found that early sales channel thats working, you may be lucky to raise money from them to help scale the business. Their companies average about $4m in revenue in the year they invest & they average a growth rate of about 97% a year (some of them are much higher). She also spoke about the changes to the venture industry. The biggest most important thing is that innovation keeps happening regardless of economic cycle. For example, right now you’ve the twin trends of cloud & mobile changing the computing architecture completely in the same way that emergence of the web did in the mid 90s. That’s creating opportunity across the spectrum both consumer facing companies, enterprise applications & core computing infrastructure companies. There’s a massive upheaval of new companies & new technologies that customers are buying. That’s a ton of opportunity! On the other hand there is the whole financial sector, what’s happened in venture capital, how much capital is there & what’s happening in our little ecosystem. We’re about .2% GDP, a tiny piece of GDP even though the companies they invest in end up driving about 21% GDP. That current GDP that is being invested is down sharply from over 1% GDP at the peak of the bubble of the bubble of 1.0. So people think of that as the hey day of venture capital & in fact it was this crazy spike of returns that came from that new architecture. But then it pulled in so much capital, flooded the market that it ground venture capital returns for the ensuing 10 years. So really the industry has right sized itself now to about the same size it was as a % of US business in the 70s & 80s. Its about the right size now – there’s plenty of capital for companies but not so much that you fund 20 competitors for every good idea & then tank the market.
Kate Mitchell, Managing Director Scale Venture Partners #smartmoneysv
I interviewed Kate Mitchell, Managing Director Scale Venture Partners who won an award @NVCA Venturescape. She received the Outstanding Service Award. Along with being a great vc she started the IPO Taskforce which she worked on for 10months which resulted in the JOBS Act. The center piece of this is access to capital for small companies. It smooths the path all the way from the private end of things, crowdfunding all the way through going public for small companies. She refers to it as a ‘Purple Issue’ because both the Democrats (Blue) & Republicans (Red) care about jobs & innovation & that’s what entrepreneurship is about. Her domain expertise is enterprise technology. Scale Venture Partners has made a large practice out of investing in that area. She feels that the entrepreneurs inspire them: “They keep our gas tank full!” She spoke about the changing face of venture capital industry. On the one hand it is good that there have been cut backs: “It’s the tree that needs to be pruned but none of us want to be the limbs that have to be cut off!” It means that the great companies that are out there have a better chance. There’s also been a shift with micro VC, emerging manager small ‘back to the future’ funds. This is really what the industry was founded upon. She’s thrilled about that development as it complements what they do. Corporate Venture has grown hugely – they have come back in a more sophisticated way, are partnering & understand & help but not necessarily dominate the companies that they’re investing in.