The NY Times proclaimed on Saturday that the venture capital business is dead, based upon one venture firm going wobbly at the knees. This simply is not true, and other forces are likely at work here.
I just wanted to cry at the sadness I felt for Sevin-Rosen in pulling their tenth fund. This is a venerable old firm, which funded such legendary Silicon Valley founders as Compaq Computer. "The traditional venture model seems to be broken," said partner Steve Dow. Too much money chasing too few deals!! As Claude Rains said in Casablanca, "I'm shocked, SHOCKED I tell you!" to find lots of money pursing good venture investments.
This has been the operative environment since I joined the venture capital business in 1987. It is just a competitive business, folks. Is now and always has been. It is a hard, rigorous, risky business, requiring hard work and harder huevos rancheros.
And Sevin-Rosen is telling us they can find NO GOOD DEALS throughout the US' $11 trillion economy, in any of the sectors of:
- alternative energy
- software
- nanotechnology
- semiconductors
- wireless technology
- data storage ?
Wow! I just want to fold up my tent and go home – Entrepreneurialism must be dead! We are finished!
This is just not true. I do not know what is really going on here, but I do know that any smart, aggressive and creative venture firm with access to leading managers can still find excellent opportunities. The market is competitive and the IPO market is what it once was, but there are as many great entrepreneurs as ever needing venture dollars. There is nothing wrong with the "business model."
My guess is that there are a couple of things going. Most likely, when a fund like this is pulled, it is a sign of problems in the senior levels of the partnership itself. Perhaps a key partner wants to leave or they are just not getting along. This is no small decision as it impacts the younger folks at the firm adversely. Or, perhaps, the partners here have just gotten so rich that they have become lazy – "wow, nobody called and offered me another Google today – boy this is a lousy business." And finding deals when one is rich and lazy is just no fun.
But it ain't because the venture business is going away!! Upward and onward.
Rick Rickertsen is a managing partner at Pine Creek Partners, a Washington, D.C.-based private equity firm, and author of Sell Your Business Your Way.
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Reader Comments (Page 1 of 1)
10-09-2006 @ 12:53PM
Gary E. Sattler said...
You would expect blathering tripe like this out of the NY Times right now wouldn't you.
Let me guess... the Times is held by a consortium of bankers... right? Well, maybe not.
In any case, bankers world wide are sticking their bottom lips out because we won't let them play with all the money any more and in the face of slower housing prospects the banking realm is looking mighty cash strapped... or will be.
Smile and wave at your friendly corner banker as you drive past his bank and his $1200.00 mortgage closing fees. Then stop by your credit union, slip your debit card in the slot and grab your cash for the groceries.
10-09-2006 @ 1:41PM
MillionDollarCountDown said...
Agree with you. VC business is not dead. It can't be. Most people tend to associate VC business just with internet related companies but it spans much more. I bet there are good companies who would love to get more VC funding.