Taking the Temperature of Venture Capital
by KG Charles-Harris
Last week I again attended the AlwaysOn 2010 Summit at Stanford, held at Stanford University in California. It was a beautiful setting with people from all parts of the technology ecosystem—from very large companies such as Hewlett Packard to small 2 person startups, banks, venture capitalists, angel investors and consultants.
One of the most interesting takeaways from the conference was the very different views that people had on how the venture capital industry was developing in the present environment. On the one hand, there were strong assertions that the VC industry was in good health and that there was a lot of money looking for investment. Most of the VCs I encountered asserted that they were very much interested in early stage investments and that they provided a unique service to founders and early stage management.
However, this was in stark contrast to the intense frustration many startups were expressing when describing their hunt for capital. They felt that VCs were far from interested in early stage investments and were mostly focused on follow-on investments in portfolio companies or syndicated deals. Some (probably about 70% of the people with whom I spoke), who had received investments felt that the VCs were often a distraction on the Board and either were micromanaging or otherwise not helpful. Yet these founders and executives have little choice but to continue to seek venture money to fund their growth.
Could these developments be due to the fact that many of those running the largest firms are no longer the seasoned operating managers that brought forth the storied companies of old, like Apple, Cisco, Fairchild Semiconductor, Silicon Graphics, etc.? Many have the impression that the generation of VCs that joined when the names on the door wanted to kick back are simply bankers; portfolio managers unable to take risk or understand a vision.
The industry has always been prone to “herd mentality,” where a lot of VC firms invest in similar startups; as was blatantly obvious during the dot com debacle.
A preference for financial manipulation and unwillingness to take risks combined with a lack of operating experience and little vision could signal a death knell for the kind of leaps that created high tech in the first place.
The upside is found in younger VCs and angels; men and women who founded or worked in startups and are putting their money where their mouth is to help create the next wave.
The question is there enough of them or will it be a case of too little too late?
KG Charles-Harris is CEO of Emanio and a special contributor to MAPping Company Success.
