Venture And A Conviction
Pictured, the Prudential Building at Holborn on a wet day (water mark included) - this the last great gothic revival building in London, erected in 1879.
Well, we all know it is a rough time for venture capitalists and worse for entrepreneurs as the IPO markets are null and void while the capital crisis has crunched M&A. In short: there are no exits, which drives the venture model from risk to joyous liquidity. And how bad is it? The first three months of the year saw one soliltary IPO (a big one though: $828 million deal by kids food maker Mead Johnson Nutrition). In contrast, the first quarter of 2008, when IPO flow was already starting to fall off a cliff, had 10 deals yielding $20.6 billion. March '09 the second quarter in a row to see only one deal, the first time such a six-month drought has happened this decade. Ouch. Here is what my friend John Malloy of BlueRun Ventures in Menlo Park said at the Red Herring North America 100 Conference yesterday: "I can think of two words that epitomize the situation for many startup ventures. One is constraint, and understanding this is a new world of constraints. The other is optionality. Remember there are multiple ways to solve a problem." and further, “you certainly shouldn’t believe just what your bankers tell you.” Amen, brother.
Of course one man's misery is another's opportunity, which is why I am an investor in Industry Ventures who aims to buy venture positions in the secondary market. The ugly word is "distress" while the more gentlemanly "transfer" or "early liquidity" is what I choose. Either way, it is a motivated seller who has other things to own than some non-performing partnership which has promised returns starting ten years ago but never delivered. There are many of these funds which sit at 50% cost while the manager collects fees (and surely will never work again). So the Valley needs a re-boot. There are plenty of good tech and IT companies growing >10% per year despite the recession; the trick is buying into their capital structure without paying a primary-rate. Today's environment opens these doors and many guys will benefit.
Sonnet's remarkable case at the Old Bailey comes to its conclusion yesterday with a double-life sentence conviction. The case against two murderers from Shri Lanka who are part of the Tamil Tigers and inside the UK illegally. They brought their violence with them, using a samurai sword to hack to bits one victim while knifing the next - these gruesome murders witnessed by neighbors. The villains fled for home in '03 but were extradited at an estimated £6 million to the British tax-payer. Sonnet notes justice served and the British judicial system impressive in the extreme.
