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18

Apr

2011

The Monday Meeting with John Backus PDF Print E-mail

Emily Mendell

Written by Emily Mendell   
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As we move our Monday meetings to a monthly basis, we are pleased to hear from John Backus, co-founder and managing general partner of New Atlantic Venture Partners located in both Reston, VA and Cambridge, MA.  John is a seasoned technology investor, entrepreneur and policy advocate with more than 25 years of experience investing in and managing emerging, high-growth technology companies. Prior to forming New Atlantic Ventures in 2007, John spent nearly a decade as a general partner with Draper Atlantic.

Before his career as a venture capitalist, John was appointed as President and CEO of InteliData Technologies. He joined InteliData through the acquisition of US Order, a company he founded and led through a successful $65 million IPO in 1995. He currently serves on the board of directors of Qliance, Healthwarehouse.com, Koofers, AppTap, Ftrans and RemitPro. He is the past Chairman of the Wolf Trap Foundation Board of Directors, the past Chairman of the Northern Virginia Technology Council (NVTC), the founding Chairman and current Board member of the NVTC TechPAC, and was appointed by former Virginia Governor Mark Warner to co-chair the Virginia Research and Technology Advisory Commission, which he served on for 4 years. John began his career at Bain & Co. and Bain Capital, where he was the first Bain & Co. management consultant to take a full time operating role (as CFO) in a portfolio company. He received his BA in Economics and his MBA from Stanford University.

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John Backus, Co-Founder and Managing General Partner, New Atlantic Venture Partners

Q.  From which industry sector do you think we will see the most innovation in the next 2 years?

 A.  Healthcare services and delivery.  Working from the National Capital Region, where politics permeates, I seem to have a front row seat watching legislators attempt to modify our country’s health policy. When there’s dramatic change like this, combined with our own personal frustrations with the system, it opens up big opportunities in the business side of healthcare. This is a $2.6 trillion dollar industry crying out for serious change.

The industry incumbents have set up a game and until now, no one challenged their process or pricing structure. Did you know that 40 percent of the cost for a primary care doctor to see you or treat you goes to cover the insurance bureaucracy?  And, that companies routinely receive bills for prescription drugs from their pharmacy benefit managers every two weeks, and are required to pay them within 48 hours without reviewing them? And, you are almost always paying too much for generic drugs when you pay your co-pay and paying cash and not using insurance is almost always cheaper? Consumers and businesses are finding smarter ways around this and entrepreneurs who started companies like Qliance, Truveris and Healthwarehouse.com are changing the healthcare system forever.

Q.  2011 is the year ...

A. ...…that experimentation with the venture capital model - incubators, super-angel funds, mixed stage funds, seed funds inside traditional VC funds, pre-IPO funds, single purpose funds to invest in one company, private stock trading platforms - peaks - before most of these experiments crash and burn in the next few years.

Q.  The biggest threat to the US venture capital industry is ...

A.  …the unintended consequence of well-meaning legislation written in Washington DC.

Q.  What is your favorite book of the last year?

A.  Fall of Giants by Ken Follett. This is a fictional novel that shows how small things can lead to big conflicts around the world.  It puts the Middle East uprisings in perspective. We live in a global economy and US companies need to pay attention to what is happening around the world in order to win big.

Q. Name a venture-backed company you are are not invested in but wish you were. 

A.  It is too easy to pick a big winner by looking through the rear view mirror. I would love to be an investor in Khan Academy, if it was a for profit company. Khan is turning the classroom upside down and has the potential to change our outrageously outdated education system (which I blogged about here).

Q.  Name a practicing VC from another firm who you admire and why?

A.  Peter Barris, the managing general partner at NEA. He steers one of the largest venture capital firms, which consistently delivers solid results, with companies that are reshaping the technology, healthcare and energy business.

 

Last Updated on Monday, 18 April 2011 06:42
 

15

Apr

2011

Sometimes No News is Good News PDF Print E-mail

Mark Heesen

Written by Mark Heesen   
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When in comes to venture investment, sometimes an uneventful quarter is just what the industry needs.  Today the NVCA and PwC issued the Q1 2011 MoneyTree Venture Capital Investment report based on data from Thomson Reuters.  For the first quarter, venture capitalists invested $5.9 billion dollars into 736 deals.  To say that there is little to report about the quarter's VC trends is not to say there isn't anything interesting happening.  There are countless investing nuances occurring within the venture industry.  However, the biggest news of the quarter is the consistency of investment across sectors.  It may not be buzz-worthy but it's important just the same.
 
In an environment where there is constant talk about the next Internet bubble, investment in this sector actually declined in Q1.  In the life sciences sector where there are significant challenges with the regulatory process, investment dollars in biotechnology and medical devices increased.  Clean tech funding topped $1 billion this quarter for the fourth time in history driven by a trend we have been seeing now for the last two years -- large later stage rounds to capital intensive sectors.  One might say that the quarter was characterized as business as usual.  For the venture industry, "usual" is defined as a long term commitment across multiple industry sectors, ebbing in some quarters, flowing in others, but staying within an investment band that is sustainable for the long term, despite short term market dynamics.
 
If you are interested in reading about our analysis of the quarter, we recommend you review our press release.
 
If you want to see what is happening nationally by industry sector, stage of development or first time financings, see our national data charts.
 
Want to see how your local area is doing, our regional charts show investment by MoneyTree region and state.
 
Who received the most money in the quarter?  View our top 10 deal list.
 

15

Apr

2011

NVCA Comments on Clean Energy Standard PDF Print E-mail

Emily Baker

Written by Emily Baker   
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Recently, Senate Energy and Natural Resources Committee Chairman Jeff Bingaman (D-NM) and Ranking Member Lisa Murkowski (R-AK) introduced a white paper soliciting public comments on a Clean Energy Standard (CES).  The purpose of this document was to lay out some of the key questions and potential design elements of a CES in order to solicit input from a broad range of interested parties and to ascertain whether or not consensus can be achieved. The Senate white paper did not specifically lay out a proposal, rather it put forth questions on a myriad of topics and sought comments from the private sector. 

Since the venture capital industry and VC-backed portfolio companies are an important and unique voice in this debate, NVCA provided comments to each of the questions asked in the White Paper. There are many Senators who are reluctant to enact a CES, believing that such a government mandate is over-reaching and will drive up consumer cost.

NVCA shared the White Paper with members of our Cleantech Advisory Council and encouraged all to provide comments.  NVCA Board members were instrumental in helping provide responses for our submission.

Developing a low-carbon standard will not be easy, but Senator Bingaman has proven himself to be very adept at getting bipartisan legislation through the Energy committee. The challenge, of course, will be to keep all of the various interest groups and stakeholders on board and moving forward together. Any proposal that does not include “something for everyone” could derail the entire effort.

You can view the NVCA submission here.

 

12

Apr

2011

Model Legal Docs Now Updated for 2011 PDF Print E-mail

Jeanne Metzger

Written by Jeanne Metzger   
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NVCA is pleased to announce that our legal doc templates were recently reviewed and updated to incorporate feedback and the ever-changing legal environment. The  revisions contain some important and useful new provisions, a number of which come in response to recent Delaware Chancery Court decisions of importance to venture capitalists.

Thank you to all the general counsels (both within VC firms and outside counsels) who volunteered their time to review these docs and incorporate the changes. On behalf of NVCA, we greatly appreciate your time and effort!

Spearheaded by Sarah Reed of Charles River Ventures in 2003, these model docs are widely used and have been adopted by many of the law firms that are active in the venture capital ecosystem.  In fact, since they were posted the model docs webpage has been the most visited page on the NVCA website. Sarah received the NVCA Outstanding Service Award in 2007 for her work to launch this project.

Having an agreed upon starting point for legal docs necessary to complete venture capital transactions saves venture capitalists and entrepreneurs both time and money. These model docs establish an even playing field allowing venture capitalists and entrepreneurs to come together and focus their negotiations on the uniqueness of each particular deal.

We encourage you to download the updated versions of the templates.

Key Highlights:

MODEL CHARTER

  • Added language to the protective provisions in response to Fletcher Int’l, Ltd. v. ION Geophysical Corp., Case No. C.A. 5109-VCP (Del. Ch. Ct. 5/ 28/10), stating that, if any of the listed items (which require Preferred consent) are entered into without the requisite consent of the Preferred, they shall be null and void ab initio, and of no force or effect.  In the Fletcher case, defendant company had issued a promissory Note without seeking the Preferred consent required under the charter protective provisions.  Rather than simply declaring the issuance void and ordering the transaction to be rescinded, the court applied an injunction standard and concluded that, although the Preferred holder had proven the likelihood that its consent right had been contravened, compensatory damages were calculable (or another equitable remedy might be available), and, in balancing the potential harms to the parties, held that the corporation would suffer the greater harm were it forced to return the borrowed funds.

  • Revised the language in the redemption section in response to SV Investment Partners, LLC v. Thoughtworks, Inc., Case No. C.A. 2724  (Del. Ch. Ct. 11/10/10), in which the Chancery Court construed the words “funds legally available” in a manner unhelpful to investors.  The Court described a number of “additional protections” that the investors could have included to give their redemption rights more teeth, and (citing the NVCA Model Legal documents!) stated that “sophisticated investors understand that mandatory redemption rights provide limited protection and function imperfectly, particularly when a corporation is struggling financially.”  (The Thoughtworks case is currently on appeal.) 

 

MODEL INVESTOR RIGHTS AGREEMENT:

  • added a portfolio company obligation to have any Insider Trading Policy permit so-called 10b5-1 trading plans
  • Added a provision in the preemptive rights section that allows an investor to apportion its rights not just among Affiliates, but also among its LPs
  • Added new (optional) provision to cause company to reimburse separate investor counsel in event of a sale of the company

 

RIGHT OF FIRST REFUSAL/CO-SALE AGREEMENT

  • Added provision that permits investors to receive their liquidation preference, in the event the majority stockholder(s) sell directly to a third party.

 

 

 

 

 

 

11

Apr

2011

NVCA Publishes Recommendation on Personal Trading Practices PDF Print E-mail

Mark Heesen

Written by Mark Heesen   
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Today the NVCA posted a formal recommendation to all venture capital firms regarding personal investment activity by firm partners and employees. In recent months, there has been an increase in secondary private market trading activity by both funds and individuals. The NVCA recommendation is focused specifically on individual trading practices – not fund practices.

The essence of our recommendation is that every venture capital firm should have a policy in place regarding the investment activity by its partners and employees.  We offer a range of options to consider but do not recommend a specific policy.  Instituting a standard that meets the needs of the general partnership, the limited partners and the firm’s portfolio companies should be at the discretion of each individual firm.  However, we strongly encourage each firm to confer with its partnership and general counsels to ensure a transparent and relevant policy is in place.

 

11

Apr

2011

Q1 Sees Bigger, Fewer VC Funds Raising $$ PDF Print E-mail

John Taylor

Written by John Taylor   
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At first glance today's venture capital fundraising data release appears to be good news.  The venture industry raised $7.1 billion from institutional investors, representing the highest quarter since 2008 and the strongest start since the first quarter of 2001.  While we won't dismiss the importance of more dollars being place with venture capital firms, we can't overlook the fact that only 36 funds received commitments in the first quarter.  This number of funds is the second lowest since 2003.  So while the dollars are encouraging, the number of funds successfully raising has significant room for improvement.

This quarter's high levels were driven by three funds, each which raised more than a billion dollars.  The venture industry needs to see a doubling in the number of firms successfully raising each quarter if we want to maintain the diversity and breadth of investment in the coming years.  Fortunately, the exit market has continued to show signs of improvement, particularly on the M&A side.  With more distributions going out to LPs this year, firms will be better positioned to raise follow on funds and keep the capital pipeline full.

Last Updated on Monday, 11 April 2011 10:06
 
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