To get a quick snapshot of the venture capital sector right now, check out “Business Exits in the Current Economic Environment.” It’s a summary of a panel discussion sponsored recently by the Wharton Entrepreneurial Program.
Wharton management professor Raphael (Raffi) Amit highlighted the major shifts in the sector. No surprise in the steep decline in the number of IPOs by venture-backed companies in the U.S. The number of IPOs plummeted from 260 in 2000 to 13 in 2009, and VC-backed M&A transactions dropped to 260 deals worth $12 billion (as compared to 462 deals worth $99 billion in 1999). Amit also said that investors have reduced their commitment to the industry, from $41 billion in 2007 to $15 billion in 2009 in the U.S.
This crash has been deeper, broader, and much more global than the dot.com debacle of 2000 to 2003, according to Frank Quattrone, co-founder and CEO of Qatalyst Partners, a technology-focused investment bank in San Francisco. And the near-disappearance of credit is putting a further damper on IPOs, particularly for mid-size and smaller cap start-ups. “It’s going to take a longer time to come back…. We’re going to need to get the credit flowing in the economy again before things really open up,” Quattrone said.
The playing field among banks has changed dramatically, too. In the 1980s and 1990s, big investment banks such as Morgan Stanley and Goldman Sachs handled between 5% and 10% of the key technology IPOs. The remainder, including what turned out to be high-profile IPOs for firms such as Sun Microsystems and Adobe, was handled by smaller boutique firms.
“Today, it seems like the feeling is if Morgan and Goldman won’t take your company public, it’s not worth it. It’s like saying, if you can’t get your kids into Wharton or Stanford, they might as well work in the coal mines,” said Quattrone.
What do you think? Is the VC industry “broken” or on the mend? Add your comments below.
A new crop of venture capitalists is springing up that not only want to earn a profit but also to invest in ventures that make the world a better place. One of them, a firm called Good Capital, even sponsors an annual conference to gather like-minded investors, employers and venture capital job seekers together in one setting, reports Fortune.
Billed as a blend of profit motive and the desire to make a difference, the originators are calling it “social capital” and have developed a website devoted to information about trend, www.socialcapitalmarkets.net
The founding partner of Good Capital, Kevin Jones, says they are looking for people with financial, marketing and manufacturing experience and skills. Examples of the type of companies they invest in include Root Capital, a Cambridge, Mass., company that provides credit to small businesses in rural areas of developing countries that grow coffee, cocoa and vanilla.
Another hybrid venture capital firm called Kaboom, based in Washington, D.C., began with the mission of installing a playground in every urban neighborhood in the country. The VC firm is now launching a for-profit spinoff that makes a playground-in-a-box. Other ventures support literacy programs, affordable housing and organic foods from small farmers in developing countries.
Marketing is critically important in the venture capital world, yet it plays a different role depending on whether you’re working at the venture capital firm or the start-up companies in which they invest.
Smaller VC firms may hire outside consultants or marketing firms, while a larger, more established VC firm may have the resources to hire an in-house marketing professional.
For the venture capital firm, marketing involves a number of activities to attract high net worth individuals and institutional investors to the firm. These activities can include developing the firm’s website, PR activities such as arranging media interviews for the principals, articles, creating presentations about the firm, and producing investor relations materials such as quarterly reports, alerts and brochures. Today, particularly in the high tech venture capital world, VC marketers must also have expertise in the use of social media such as blogs, Linked-In, Twitter and other tools to broaden the firm’s exposure on these increasingly popular channels.
On the other side of the venture capital equation, the start-up portfolio companies, marketing is a life or death proposition.
A well-planned PR campaign can attract interest from venture capital firms and make the difference as to whether the start-up receives VC funding or not. With limited funds, start-ups will often hire outside marketing consultants to help with these efforts.
Once funded, marketing can determine whether the start-up makes it to the next round of financing. Marketing is so important, well-known venture capitalist and commentator Guy Kawasaki ranks it as among the two most important traits for a venture capitalist. Along with engineering (because it helps you understand the complex technologies that are often targeted in venture capital), Kawaski says a venture capitalist needs a sales background. Once you have a great product, you have to tell the world about it in the most effective way. It’s a key driver for the success of most start-up companies.
For these companies, marketing efforts will hinge on the type of product or service being sold, and more closely resemble the marketing for other companies. High tech companies will want to set up sophisticated lead generation systems to funnel prospects to their sales reps. A consumer product company may use mass marketing (TV, radio, print advertising, Internet) and set up a distribution network.
If you have a strong marketing background and an interest in finance or the entrepreneurial culture, you may want to explore jobs within the venture capital industry as way of bringing together your diverse skills and capabilities.
References:
www.perecruit.com
www.walkersands.com
www.glocap.com
www.altassets.com
www.identitypr.com
