So Is Venture Dead?

Christian at his penthouse flat.

I attend the Industry Ventures general meeting which takes up the morning. It is a good moment to catch up with the team, where I am a Venture Partner, and see investors - I have dinner with two colleagues who manage many billions of alternatives for several Dutch pension funds. They have decided to take a pass on venture for the next two years and we debate whether the venture model broken. Easy to be dispirited, too, when the industry has returned a median 4% on invested capital since '00 (the Dow, by comparison, about the same place but with huge volatility). Investors want a premium for their ten-year cash lock-up and VC ain't doing it. On the bright side, the over-supply of capital working its way through the system and we are near the end, one hopes: 1999-00 vintages done though may receive an extension. Once Industry Ventures bought these tired funds and limited partners but now we focus on 'secondary directs' - focusing on the great company rather then a portfolio and writing off the dogs. No need for the extra-step as deal flow has increased maybe tenfold since I first met Hans and Mike.

So is venture dead? Every day m and a exits net 5-10X cash multiples on smaller, less visible deals; there are 120 tech IPOs filed with the SEC. Many will not get out but, still, there is money to be made. Managers now raise less capital and concentrate on highly specific areas like nano-technology or cancer or whatever. Their companies advanced when they raise institutional support, and less of it. This year Silicon Valley will rake about $14 billion or the same as last year when fundraising at historical lows. Without pensions, fund managers will remain lean - here lies the opportunity.