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.
The Ventures
Dafina Toncheva, Partner USVP #smartmoneysv
I interviewed Dafina Toncheva, Partner USVP @C2SV Conference. Shes been in venture capital for about 5 years. She likes to invest in the enterprise sector: enterprise IT & enterprise applications as well as security. USVP has been focusing on these sectors for over 30 years. There’s a lot of money to be made in this area over the next 10 years. Over the years there have been a few female vcs @USVP but Dafina is the only one at present (altho that is still 1 more than 99% of vc firms). A good friend of hers Nat Goldberg says that women fundamentally see the world differently & if you dont have a female @the table, you are missing out on that part of the world. She is the youngest partner @USVP & she has a technical background, shes a foreigner so international perspective. She believes she adds to the diversity of USVP which is important. She spoke about how the vc industry has always been interested in disruptive ideas & models & now the industry itself is being disrupted. She feels the changes are positive because it makes everyone think more carefully about the right ways to invest for their LPs. Competition is good for everyone & ultimately only the best succeed. They all have to be the best they can be in order to deserve & earn the money & the trust that is in their hands. ‘We all need to be challenged & if we are not challenged then we become lazy. This is one of the reasons that venture returns over the past 10 years haven’t been very good. Some firms will have to shut down but thats ok, that’s just the business of Life!”
Robert D Pavey, Partner Morgenthaler Ventures #smartmoneysv
I interviewed Robert D Pavey, Partner Morgenthaler Ventures@NVCA Venturescape. He spoke about his domain experience wireless & smartphones. They want to find waves before everybody else finds them & then find ways to help entrepreneurs build young businesses in those companies. 2 billion cell phones will be delivered in 2013. 300 million of them will be 4G phones and in much of the world this is the only computer that most people have & that means people are moving towards smartphones. These phones are needing to handle multiple frequencies, to cover multiple cellular bands and GPS and Bluetooth and this is basically changing the way that we live. Morgenthaler is focused on Information Technology in general. The firm has been going for about 45 years and has evolved into multiple firms. ”Entrepreneurs are not always the easiest people to work with but we respect them still. To survive some of them are pushy, some of them are aggressive, some of them are overly optimistic but they are very interesting and exciting “animals”. If you understand them & accept them for what they are, then you can help them!” He spoke about how he perceives the changes in the venture industry. ”In amongst all the changes that have occurred in the industry over the years, there has been 1 common denominator that nobody talks about & that is that the venture industry finances about 1k companies a year (that’s the whole industry)!” ”In the US economy there are about 700k businesses formed every year & about 10% raise angel money & about 1/700th of them raise venture money. The industry is a very small fraction of the financial market but it is very important because it creates companies like Google & Cisco who end up being the job creators & the engines of growth.” “There’s a lot of cash both upstream & downstream & our job is to find among those of the 70k that angels finance 1k that can grow to be significant businesses. If we’re lucky we can get it right 1 out of 10 times? And fortunately we get well paid most of the time by that 10% that do work out.” He sees the hurdles mainly from the government changes. Of 1k companies backed by VC each year less than 100 will go public. ”We need an occasional outsize success to make our industry work, and the challenges of being a young public company in the US these days make our job a lot harder!”