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10

Jun

2013

A Changing Landscape in Minnesota PDF Print E-mail

Mark Heesen

Written by Mark Heesen   
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For decades, NVCA has championed venture investing as a national phenomenon – not just a quixotic activity confined to the coasts. Vibrant VC ecosystems dot the country – from the Research Triangle to Austin to Boulder and beyond. Last week, I had the opportunity to visit one my favorite hubs: Minnesota.

There, I served as keynote speaker for the 18th annual Entrepreneur& Investor Luncheon. The event was hosted by long-time colleagues Ed Spencer, president of the Minnesota Venture Capital Association, and Dan Carr, president of The Collaborative, which for 25 years has served as a vital source of information, guidance and networking for growing companies in Minnesota. Working together, The Collaborative, the MVCA and other local organizations have built a robust culture of innovation and business development in the Land of 10,000 lakes.

On this day, I wished I had an abundance of good news for them, but the outlook was tempered. Driven by the presence of medical industry giants like Medtronic and the Mayo Clinic, the lion’s share of Minnesota’s VC activity has focused on the life sciences sector. And as we all know, investments in this sector have been waning for some time, thanks largely to the increasing time, cost and uncertainty involved in navigating the processes at the FDA and CMS.  Many VCs who expect to remain active in the sector have told us they will likely focus on later-stage deals. While we are hoping that tides will turn and progress has been made on the policy front in the last year, the consequences for innovation – in Minnesota and in our country – if this trend persists would be grave.

But, in researching my presentation, I did find a curious anomaly in the Minnesota investment numbers that could bode very well for the future. The bulk of first-time fundings in Minnesota have shifted to the software sector. While this nascent trend probably won’t immediately erase all of the challenges that the life sciences climate has created for veteran Minnesota VCs, it is a first step toward balance for the larger scene. This adaptability is a testament to the ecosystem that The Collaborative, the MVCA and Minnesota VCs have built, and I look forward to watching it evolve even further.

 

28

May

2013

NVCA Endorses IPEV Guidelines: Q &A PDF Print E-mail

John Taylor

Written by John Taylor   
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Today we announced that the NVCA Board of Directors unanimously endorsed  the International Private Equity and Venture Capital (IPEV) Valuation Guidelines.  These guidelines, developed by U.S. and international industry participants, were written for practitioner use in developing and implementing valuation reporting processes and were finalized by the IPEV board in December 2012.

"The IPEV Valuation Guidelines are the result of industry stakeholders across a number of countries coming together to develop appropriate valuation guidance for venture capital, growth capital, and private equity firms,” said Mark Heesen, president of NVCA. “These guidelines are consistent with U.S. GAAP which specifies that fair value be determined using market participant assumptions.  The collaborative process that took place reflects a strong understanding of the nascent companies in which our industry invests.”

Three members of  the NVCA CFO Task Force served on the IPEV Committee: William Hupp of Adams Street Partners (Vice Chair of IPEV), Mike Maher of US Venture Partners and Stephen Holmes of InterWest Partners. In addition, veteran industry valuation expert David Larsen of Duff & Phelps was heavily involved in the drafting.

By endorsing these guidelines, NVCA joins the US Private Equity and Growth Capital (PEGCC) Association, and many venture capital, private equity, and limited partner associations in North America, Europe, Asia, Africa, and Australia.

NVCA members have asked a number of questions on these guidelines. Here are some answers:

Q: How can these be international guidelines if there are two different sets of accounting rules (US GAAP and non-US IFRS) and the US SEC hasn’t yet decided which system will ultimately prevail?

A:  Several years ago, US FASB (Financial Accounting Standard Board) and international IASB embarked on a program to converge a number of accounting rules. Among the rules converged were fair value measurement and investment company accounting. Happily, many of the topics that affect venture firm reporting were converged. These guidelines are based on the converged rules. For more detail, refer to Appendix H of the NVCA 2013 Yearbook. 

Q: Several years ago, many US venture and private equity firms were using PEIGG guidelines. Are those obsolete? How do those relate to IPEV valuation guidelines?

A:  The PEIGG guidelines were US-focused only and were created as the 2008 implementation of broadened fair value measurement effective date approached. Many of the same experts and practitioners who created PEIGG for the US in the 2006-2008 timeframe, later joined forces with international peers developing to develop global IPEV guidelines. While the fair value constructs in the US have not changed materially, the IPEV guidelines are completely up to date. We recommend those firms still referring to PEIGG now start referring to IPEV. Appendix I of the NVCA 2013 Yearbook has more color on this.

Q: Is this guidance considered “authoritative”?

A:  No. The only authoritative guidance for those reporting under US GAAP is from FASB. The SEC has delegated the creation of authoritative accounting policy to FASB. That said, much help is needed to apply the accounting theory in the standards to the venture capital, growth equity, and private equity reporting. IPEV rules were developed in the open by a number of practitioners, service providers,  and experts from the LP, GP, and accounting policy worlds. We are aware of other efforts being considered and underway to create additional non-authoritative guidance and we are very comfortable endorsing the IPEV guidelines to our members.

Last Updated on Wednesday, 05 June 2013 18:32
 

22

May

2013

Senate Judiciary Moves Immigration Reform PDF Print E-mail

Jennifer Dowling

Written by Jennifer Connell Dowling   
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The Senate Judiciary Committee yesterday approved S. 744, the comprehensive immigration reform bill introduced last month by Sens. Schumer, McCain, Durbin, Graham, Rubio, Bennet and Flake.  Under the leadership of Chairman Patrick Leahy and Ranking Member Chuck Grassley, the committee slogged its way through over 212 amendments before voting 13-5 to approve the measure as amended.

Two important amendments to note for our industry and entrepreneurs:  First, Sen. Sheldon Whitehouse introduced an amendment, accepted by the committee, that adds qualified startup accelerators as entities that can also sponsor entrepreneurs for an INVEST visa.  His amendment also clarifies that the level of investment an entrepreneur must raise in order to qualify for an INVEST visa can be met from a combination of qualified investors rather than having to be raised from only one investor.  Additional details on the INVEST visa can be found here.

Second, the amended bill eased some of the restrictions on H-1B visas, particularly around the issue of a company proving that it had attempted to hire American workers before being allowed to hire someone on an H-1B.  The tech community had expressed serious concerns that the provisions as originally written could have proved unworkable.

The bill still has a long way to go – supporters will have to stave off another round of attempts to change the bill when the full Senate considers it in early June.  And, the House of Representatives is still mulling its own version of reform.  Despite those obstacle, the strong Judiciary Committee vote has pushed the bill through one of the most difficult gates.  We’ll continue to add our voice supporting those efforts.

Last Updated on Wednesday, 22 May 2013 14:41
 

16

May

2013

VentureScape Keynotes Inspire and Inform PDF Print E-mail

Emily Mendell

Written by Emily Mendell   
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As the California sun set last evening on the first-ever VentureScape here in San Francisco, I couldn't help but reflect on the themes of leadership, innovation, individual empowerment, human connection and trust that ran through our programming on Day 2. It was inspiring, thought provoking, and an opportunity to hear from some amazing leaders.

IBM Chairman and CEO Ginni Rometty kicked off our lineup of speakers with a prediction that we are on the verge of a golden era of technological transformation to be driven by how we use information to improve our decision-making, create value, and deliver that value to others. She described how this process will push forward in a series of three parallel waves: enterprise mobility, improved management of big data through dynamic, open, software-defined environments, and the rise of cognitive infrastructure, which learns and restructures itself in real time.

General Colin Powell (ret.) followed Rometty by stressing the importance of empowering the members of an organization by giving them a moral purpose to serve. Using insightful and often humorous anecdotes from his 51-year career, he described how leaders can do this by example and by forming personal connections with member of a team – which builds the trust that companies and organizations need to thrive. His closing remarks around immigration and what makes our country great brought many of us to tears.

Expanding on the theme of empowering employees to succeed, Twitter CEO Dick Costolo provided insights into his management style and how he trains his employees to adopt it. In doing so, he shared two of the day’s pithiest distictions: A manager’s job is to improve the team, not defend it, and a manager’s job is not to be omniscient, but rather to ensure that the right decisions get made – whether he makes them himself or not. Echoing Gen. Powell, Costolo described how communicating these expectations clearly builds crucial trust among employees.

23andMe CEO and Co-founder Ann Wojcicki also seized on the empowerment theme – this time on behalf of consumers. She explained how people can empower themselves in a health context by obtaining access to the information contained in their own DNA. Using information such as the presence of genetic markers for diseases and resistance to drugs, all of us can make more informed decisions about our lifestyles and our healthcare options. She also presented a revealing composite genetic profile of a venture capitalist – based on saliva swabs submitted by VCs. Perhaps the most astonishing finding was that 67 percent of those who submitted DNA were directly related. Talk about a close knit VC community.

Finally, social entrepreneur Craig Kielburger challenged the audience to share their energies and expertise in building and scaling enterprises that aim to change the socio-economic circumstances of those in need – on a global scale. The co-founder of Free the Children and Me to We, Kielburger described how empowering children to make a difference in the world by providing them with the tools to do so – and the belief that they can – can create a new generation of innovative, self-sustaining social enterprises and a culture of difference-making.

Of course, these themes dovetail with venture capital’s mission and purpose: funding innovation and empowering entrepreneurs. It was a privilege to have these impressive figures deepen our insights into these themes renew our commitments to them. And we look forward to assembling another exceptional lineup next year at VentureScape 2014.

 

16

May

2013

The Future of Clean Energy Investing @ VentureScape PDF Print E-mail

Emily Baker

Written by Emily Baker   
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To adapt a phrase from Mark Twain, “Rumors of the demise of clean energy investing have been greatly exaggerated.” This truth came through loud clear during a spirited conversation about the sector’s future on Tuesday at NVCA’s first annual VentureScape meeting. Moderated by Andew Shapiro of Broadscale Group, the discussion was originally structured as a duo of panel discussions featuring Mitch Lowe, founder and managing partner of Greenstart, Pulakesh Mukherjee, principal at BASF, Peter Grubstein, managing director at NGEN Partners, and Rob Day, Partner at Black Coral Capital. However, from the outset it unfolded a free flowing discussion between the panelists and a vocal gallery of VCs.

While opinions diverged on the precise roles that venture investment will play in the sector’s future, predictions coalesced around some key trends. First, the fundamental promise and opportunities that clean energy and technology offers remains. It aims to address a challenge – resource scarcity – that we as a society must solve. It’s a global endeavor with a market to match. And it extends into just about every human activity. Second, this breadth of impact will drive the creation of innovative new approaches and business models among entrepreneurs and startups. Third, these innovations will change the nature of how VCs categorize, evaluate and participate in clean energy and technology investments will likely change. At the very least, we’ll see a split between energy and industrial innovation and IT and social media innovations geared toward managing and interpreting data streams to improve efficiency, as well as those aimed at revolutionizing the end-user experience and driving adoption. Fourth, the value of tightly integrated partnerships between VCs, corporate VCs and other investors will increase. Rather than having sequential conversations with investors who join in each round, potential investors across all stages will likely need to join the discussion from the beginning.

Of course, much will depend on whether LPs embrace these new clean energy and technology models and capitalization structures. But with a trillion-dollar opportunity to participate in the evolution of so much of our economy still on the table, it’s hard to believe LPs will stay on the sidelines for long

 

16

May

2013

Josh Green of MDV Assumes Chairmanship of NVCA PDF Print E-mail

Mark Heesen

Written by Mark Heesen   
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In sync with the spring season’s rites of passage and renewal, each May NVCA elects a new chairman and appoints new directors to our board. This year we are proud to welcome Josh Green of Mohr Davidow Ventures as our new NVCA chair. In our conversations, he has expressed his excitement for leading NVCA at a time when we can have a significant impact on a truly dynamic startup ecosystem. I am certain that Josh will renew commitment to the long-term global competiveness of our country and to working with venture firms and entrepreneurs to change the world. His expertise and vision will serve NVCA very well as we enter this year of change.

Of course, as we welcome Josh, we must say thank you to Ray Rothrock for his service and accomplishments as chair for the 2012-2013 term. Ray’s energy, acumen, and drive have been a tremendous asset to the venture capital industry. His nuanced leadership has been instrumental in skillfully navigating the legislative and regulatory landscape, while simultaneously looking out on the horizon to the future of the industry and the association.

We also welcome six new members to our board: Scott Kupor, Andreessen Horowitz; Sue Siegel, GE healthymagination; John Backus, New Atlantic Ventures; Art Pappas, Pappas Ventures; Mark Leschly, Rho Capital Partners; and Jim Healy, Sofinnova Ventures.  Each director will serve a four-year term.

Again, these additions mean that we must say goodbye to some board members whose terms are expiring. They include: Jason Mendelson, Foundry Group; Michael Greeley, Flybridge Capital Partners; Michael Elliot, Noro-Moseley Partners; Sherrill Neff, Quaker Partners; Jim Marver, Vantage Point Capital Partners; and Ray Rothrock, Venrock. I want to thank each of them for their outstanding service and wish them the best in all of their future endeavors.

 
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