This morning, the NVCA released the Q4 2010 venture capital performance numbers from our partner Cambridge Associates and the news continues to be encouraging. As you can see in the press release, venture returns improved at the end of the year in nearly every time horizon, marking the second consecutive quarter in which we saw meaningful increases.
Based on current exit market activity, we feel that the venture industry is on a steady, upwards trajectory rather than experiencing a quarterly blip. In other words, barring any unforeseen market dynamics, returns hit bottom last year and are headed back up. Still, we do have a ways to go before the venture industry can boast the type of performance that compels limited partners to expand their venture capital allocation beyond what it is today.
While we typically discourage analysts from reading too much into the one year numbers, the figure is a good measure for recent exit activity. At the end of 2010, an opening of the IPO market and quality acquisitions brought the pooled industry 1-year performance number into positive, double digit territory. The first quarter of 2011 is showing a similar pace.
More detailed information is available and we encourage those interested to review the full Cambridge report which details performance by vintage year and industry.
This month's Monday meeting is with Jason Matlof of Battery Ventures. Jason joined Battery in January 2005 and focuses on investments in the clean technology sector. He is currently a board member at Redwood Systems, SolarBridge Technologies, Qteros, and Ideal Power Converters (Observer). Before joining Battery, Jason spent more than a decade in management roles at leading technology companies. Most recently, he served as Vice President of Marketing and Business Development for Neoteris, which was acquired by NetScreen and then subsequently acquired by Juniper Networks. At Neoteris, Jason was responsible for developing and executing the company’s product strategy and establishing leadership within the emerging SSL VPN product category.
Prior to Neoteris, Jason spent five years at Cisco Systems, where he led the product management team for the company’s multi-billion dollar family of fixed-configuration Catalyst switches. Jason has also held positions with Ford Motor Company, Ericsson Raynet Corporation and MPR Associates. Jason received a BA with honors in Political Science from the University of California, Los Angeles and an MBA from Harvard Business School.
Jason co-authors www.cleanmakesgreen.com, a blog focused on cleantech.
Jason Matlof, Partner, Battery Ventures
Q. From which industry sector do you think we will see the most innovation in the next 2 years?
A. Cleantech, for sure. The first generation of Cleantech investing has been challenging. Capital intensity, scale up, science risk, and other things are just a few of the big learnings of “Cleantech 1.0.” But, the opportunity to generate great venture returns is still significant. These are the biggest product markets in the world; they suffer from acute economic and political challenges; and, technology is the answer in most cases. Those are challenges where technology entrepreneurs and venture investors do well.
Q. 2011 is the year of the ...
A. The Solar Microinverter. Enphase has done a great job building this new product category and is growing wildly fast. But, this is the just the beginning. There are a number of great solutions coming to market that will only accelerate the value proposition and growth potential. Keep your eyes open in 2H11.
Q. The biggest threat to the US venture capital industry is ....
A. Returns! The venture industry’s mean average returns have been poor for over a decade. If the industry intends to maintain size or even grow, the industry mean returns need to start growing dramatically. That means we need new product categories, driving new value propositions, and that drive new categories of strategic buyers to create exit opportunities for our portfolios. Can you say “Cleantech”?
Q. What is your favorite book of the last year?
A: The Big Short. I was already skeptical of the ethics of some bankers and asset managers. Now…I’m scared to death.
Q. Name a venture-backed company you are are not invested in but wish you were.
A. Solar City.
Q. Name a practicing VC from another firm who you admire and why?
A. There are a number of them, but they all share the same character traits – intelligent, successful, yet humble and enjoyable to hang out with.
As promised at the NVCA meeting in April, last Friday we held a webinar for venture capital firms and their portfolio companies on issues related to secondary market sales. Led by Frank Currie a partner at Davis Polk & Wardell, the webinar featured guidance and commentary from Josh Green, general partner of Mohr Davidow Ventures and Delida Costin, general counsel of Pandora Media.
The webinar focused on issues for portfolio companies considering secondary sales of their privately held stock as well as guidance for how to mitigate corresponding regulatory and market risks and liabilities. Many companies are facing pressure from their long time employees to offer various degrees of liquidity. However, with that strategy comes a host of issues that must be adequately addressed so as not to run afoul of regulations or create a situation in which the company loses its flexibility to make strategic decisions. Frank, Josh and Delida each shared ways in which companies can pursue secondary market transactions most effectively.
Due to the significant interest in this topic, the NVCA is making the archive of this webinar available to the public free of charge. You can download the full presentation here. We remain committed to educating our members and their companies about this rapidly evolving area.
For the last decade, IHS Global Insight has regularly measured the impact of venture-backed companies on the U.S. economy. The latest data is now available and demonstrates that even during difficult economic times, these companies outperform their peers.
Using end of year 2010 data, IHS Global Insight used commercial corporate databases to determine headcount and revenues for companies that were once venture-backed. For those venture-backed companies that were acquired, the employee count was either pro-rated or removed from the data base depending on the size of the acquired company, making the final headcount estimate a conservative one. By the end of 2010, the direct counts from these databases showed venture-backed companies employed 12 million people and had revenues of $3.1 trillion. During one of the most difficult recessions in modern history, venture-backed company revenues grew and, while employee headcount declined, it was less so than the U.S private sector and now comprises a higher percentage of jobs in our country.
Consider the following:
- Venture-backed companies employed 11 percent of private sector workforce
- Venture-backed company revenues corresponded to 21 percent of U.S. GDP
- Venture capital investment is typically 0.1 - 0.2 percent of GDP in a given year
From 2008 - 2010...
- Total US private sector employment fell 3.1 percent while venture-backed employment fell 2.0 percent.
- Total US company sales fell 1.4 percent while venture-backed company sales increased 1.5 percent.
While many of the companies left the venture capital "nest" after going public or being acquired, often years ago, something in the early years of these companies set them on a positive trajectory that serves the U.S. economy well today. Just as universities track the success of their alumni after graduation, in some cases decades after leaving the institution, so too does the venture capital industry. We can say unequivocally, that these companies continue to create tremendous and increasing value for our country.
Previous editions of this study were done for 2000, 2003, 2005, 2006, 2008 year end metrics and can be found on the NVCA website. A full report will be available by the end of this quarter.
Last Updated on Wednesday, 04 May 2011 09:36
Those of you who follow the NVCA surely have noticed something different in the past few weeks. After more than two decades of employing our dark green logo, we unveiled a new look for the Association at this year’s annual meeting in Boston. While the switch may have seemed quick to the general public, the process of developing our refreshed brand identity and designing our new logo took nearly a year.
Spearheaded by immediate past chairman Kate Mitchell and driven by the NVCA Board Communications Committee, our new brand initiative began with a series of NVCA member interviews as we sought to understand, from various perspectives, the essence of the venture capital industry and the stakeholders we represent. From these interviews we came to understand that the NVCA brand must convey a number of truths:
- Venture capital does not stand alone. Without entrepreneurs, there would be no venture capital.
- Venture capitalists are passionate about funding innovation and bringing new technologies to the marketplace.
- Venture capital remains a small and unique asset class. We have indeed professionalized in the last twenty years, but we are far from institutionalized.
- The value of membership in the NVCA is driven largely by the collective voice it has achieved in the market and on Capitol Hill.
With these guiding principles, we developed a tag line that embodies these facts: “Funding Innovation. Empowering Entrepreneurs.” The new logo, with the words "national" and "association" surrounding "venture capital", is a visual representation of NVCA’s mission to support and protect the industry - all in a color scheme consistent with the technology VC’s fund and the collective strength we bring to bear.
A special thanks to the NVCA Communications Committee comprised of Michael Greeley, Flybridge Capital Partners; Josh Green, Mohr Davidow Ventures, Jim Hale, FTV Capital; Jason Mendelson, Foundry Group; and Theresia Ranzetta, Accel Partners who provided strategic counsel along the way -- as well as our design firm Frost Miller who created the new look.
It is now up to us to carry this brand forward in our attitudes and actions, conveying the commitment of the venture industry to the public. You will see this brand manifested in many ways over the next year - especially on our website and here at NVCAccess. We look forward to conveying all that venture capital stands for and all the NVCA supports.
Last Updated on Monday, 25 April 2011 13:32