Schumpeter
Fish out of water
Oct 29th 2009
From The Economist print edition
Policymakers are turning their minds to the tricky subject of promoting
entrepreneurship
UNEMPLOYMENT is creeping ever higher. In the United States it will soon
exceed 10%. In parts of Europe it is closer to 20%. Around the world young
people are finding it all but impossible to get a job.
So far policymakers have focused on rescuing the economy from free fall,
boosting demand, however indiscriminately, and rescuing failing companies,
however expensively (AIG received $180 billion-worth of government
support). But policymakers are beginning to turn their minds to the
potentially more rewarding question of creating tomorrow's jobs, rather
than trying to save yesterday's. The buzzwords in government circles are
entrepreneurship, innovation and venture capital.
This makes perfect sense, in theory. Innovative start-ups are efficient
engines of job creation and long-term economic growth. In America start-ups
have accounted for almost all the net job creation in the past couple of
decades. In the developing world, new technologies are helping to break the
cycle of poverty. An extra ten mobile phones per 100 people in a typical
developing country boosts GDP growth by 0.8 percentage points, according to
the World Bank, by helping small entrepreneurs flourish.
Governments have also played an important role in igniting
entrepreneurship. As well as creating some of the vital infrastructure of
innovation by investing in higher education, they have also had a direct
hand in driving entrepreneurship itself. Governments helped bring into
being the venture-capital industry: witness the work of American Research
and Development (ARD) after the second world war or the Yozma Fund in
Israel in the 1990s. They have also supercharged high-tech clusters:
Silicon Valley was created as much by the Pentagon's demand for new kit as
by freewheeling entrepreneurs. Most of the world's other great
entrepreneurial hubs, from Bangalore to Guangdong, bear the stamp of
government intervention.
But replicating these successes is difficult. The road to the
entrepreneurial future is littered with failed government schemes.
Malaysia's massive BioValley complex, which opened in 2005 at a cost of
$150m, is now known as the "Valley of the BioGhosts". Dubai's
entrepreneurial hub is awash in a sea of red ink. Australia has little to
show for its ambitious BITS (Building on Information Technology Strengths)
programme. The European Union's European Investment Fund, which was started
in 2001 with an endowment of more than €2 billion ($1.8 billion at the
time), has failed in its mission to burnish the sorry record of the
European venture-capital industry.
How can governments do a better job? Two well-timed new books provide some
clues: "Boulevard of Broken Dreams: Why Public Efforts to Boost
Entrepreneurship and Venture Capital Have Failed—and What to Do About it",
by Josh Lerner, and "Start-Up Nation: The Story of Israel's Economic
Miracle", by Dan Senor and Saul Singer.
Mr Lerner, a professor at Harvard Business School, outlines some common
failures. Too many countries are seized by ambitions that bear no relation
to their particular comparative advantages. Although Malaysia had few
skilled biologists, its politicians decided to build BioValley on the ruins
of Entertainment Village, an attempt to create a Malaysian Hollywood that
failed for lack of media nous.
Too many politicians treat entrepreneurship as yet another gravy train.
Norway squandered much of its oil wealth investing in new businesses that
were founded by the relatives of politicians and bureaucrats. Policymakers
are also lax when it comes to designing venture funds. They try to insulate
them from risk or allow public investments to crowd out private ones. The
Canadian government's experiment with venture capital failed because the
Canadian Labor Fund Program had so much money that it frightened off
private venture capitalists, while earning mediocre returns itself. New
Zealand's government, in contrast, did much better because it invested
public money in private funds.
Mr Lerner points out that two foolish tendencies are particularly hard to
resist when politicians are struggling with high unemployment. The first is
the temptation to spread the wealth around to every region and interest
group. France's attempt to transform Brittany from one of its more backward
regions into a hive of high-tech activity failed dismally for an obvious
reason: entrepreneurial firms cluster in particular places. The second is a
suspicion of foreign investors. The Japanese government lavished money on
start-ups in the 1990s but was reluctant to embrace foreign venture
capitalists. Japan now has one of the rich world's weakest venture-capital
markets.
Levantine wiles
The country that has led the world in promoting entrepreneurship has also
done the most to plug itself into global markets. The Israeli government's
venture-capital fund, which was founded in 1992 with $100m of public money,
was designed to attract foreign venture capital and, just as importantly,
expertise. The government let foreigners decide what to invest in, and then
stumped up a hefty share of the money required. Foreign venture capital
poured into the country, high-tech companies boomed, domestic venture
capitalists learned from their foreign counterparts and the government felt
able to sell off the fund after just five years.
Last year Israel, a country of just over 7m people, attracted as much
venture capital as France and Germany combined. Israel has more start-ups
per head than any other country (a total of 3,850, or one for every 1,844
Israelis), and more companies listed on the NASDAQ exchange, a hub for
fledgling technology firms, than China and India combined. It may not have
the same comforting ring as "the Swedish model" or "the polder model", but
when it comes to promoting entrepreneurship, "the Israeli model" is the one
to emulate.
Thursday, October 29, 2009
Sequoia Capital Charges Hard Through Recession
I think Sequoia has found a winning formula
Sent to you by Tan Yinglan via Google Reader:
via WSJ.com: Venture Capital Dispatch on 10/25/09
While many venture firms have dialed back their investments amid a punishing economy, Sequoia Capital has made about 20 seed or Series A investments in the past 12 months, more than in the prior two years.
- Reuters
That's according to Greg McAdoo, partner at Sequoia capital, who spoke Saturday at Startup School, an event for entrepreneurs organized by Y Combinator at University of California, Berkeley. In front of a standing-room-only crowd, he repeated a common refrain among venture capitalists that recessions are great times to start companies and to invest in them.
Sequoia, considered one of the highest-caliber venture firms, is putting its money where its mouth is, unlike some firms, who meet with entrepreneurs and go through due diligence without telling them that they don't plan to invest. Entrepreneurs should research which firms didn't invest during the last dot-com downturn and be wary, McAdoo said.
McAdoo pointed out prior periods of bad economic news, such as the 1970s, early '80s and early 2000s, when Sequoia invested in prominent companies, such as Atari, Apple, Oracle, and Zappos.
"Recessions reward much more discipline," he said. "Companies tend to be more focused. They tend not to bite off more than they can chew. Start up businesses start small and build incrementally. In a recession you have no choice."
McAdoo also said that many people misinterpreted the firm's "R.I.P. Good Times" presentation to portfolio companies a year ago, mistakenly thinking that Sequoia demanded its companies shut down or pull back their businesses drastically.
"The point there was you need to run your business cognizant of the times we're in… It was a tricky time last year," McAdoo said. "A lot of start-ups got going in good times and frankly fell in to bad habits you would not get into in a bad economy but can kill you now. The message was not to fold up your tents but to reevaluate…and re-engineer your business."
Earlier this year, Sequoia backed a $2 million seed fund started by Y Combinator. Recent investments made by Sequoia include AirBnB.com, which lets private residents and commercial properties rent out their extra space; Justdial, an Indian search engine; and VisualTao, which sells software that lets engineering and utility companies mark up and edit visualizations from their Web browser.
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Sunday, October 25, 2009
BANSEA Network@Lunch
Dear BANSEA friends,
Join us at the BANSEA Network@Lunch on this Friday 30th October 2009- Get an insight into managing multiple social networks to analyze relevant traffic data, how opinion mining and sentiment analysis can provide for business research, innovative tools available to companies facing information explosion, and the making of Chapati in a flash with the invention of Rotimatic! Check out the 4 companies' exciting profiles appended below. If you would like to join us, please register soon to avoid disappointment. Do Hurry!
--
- Tan Yinglan
The Way of the VC: Having Top Venture Capitalists on Your Board (On Amazon)
http://tinyurl.com/wayofthevc
Inhibitex Raises $23 Million PIPE
As the IPO window is thawing, alternative financing instruments to keep an eye on.
Sent to you by Tan Yinglan via Google Reader:
via PE Hub News: All News by admin on 10/25/09
Inhibitex Inc. (Nasdaq: INHX), an Alpharetta, Ga.-based, has agreed to sell approximately $23 million
in common stock and warrants. QVT is leading the PIPE, and is being joined by existing shareholders like OrbiMed Advisors, New Enterprise Associates and Great Point Partners.
PRESS RELEASE
Inhibitex, Inc. (Nasdaq: INHX) today announced that it has entered into definitive purchase agreements with institutional investors for the sale of approximately $23 million of its common stock, and warrants to purchase common stock, in a private placement. The private placement was led by QVT funds, and co-investors include OrbiMed Advisors, New Enterprise Associates (NEA) and Great Point Partners, as well as several other existing investors. Each unit, consisting of one share of common stock and a warrant to purchase 0.45 of a share of common stock, will be sold at a purchase price of $1.28, which is equal to the consolidated closing bid price of the Company's common stock as reported on the Nasdaq Capital Market on October 22, 2009, plus $0.06. Accordingly, the Company anticipates issuing approximately 18 million shares of common stock and warrants to purchase approximately 8.1 million shares of common stock pursuant to the private placement.
The warrants will have a four-year term and an exercise price equal to $1.46 per share. The Company intends to use the proceeds for research and development, working capital and general corporate purposes. MTS Securities, LLC, an affiliate of MTS Health Partners, served as the placement agent in the private placement.
The Company expects that the private placement will close on October 28, 2009, subject to customary closing conditions. The Company anticipates filing a Registration Statement on Form S-3 with the Securities Exchange Commission ("SEC") for the resale of the shares offered in the private placement, and the shares issuable upon the exercise of the related warrants, within thirty days of closing.
The shares and warrants offered in the private placement, and the shares issuable upon the exercise of the related warrants, have not been registered under the Securities Act of 1933, as amended, or state securities laws, and may not be offered or sold in the United States without being registered with the SEC or through an applicable exemption from SEC registration requirements. The shares and warrants were offered only to accredited investors. This news release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of any of the securities referred to in this news release in any state in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state. Any offering of the Company's shares under the resale registration statements referred to in this news release will be made only by means of a prospectus.
About Inhibitex
Inhibitex, Inc., headquartered in Alpharetta, Georgia, is a biopharmaceutical company focused on developing products to treat serious infectious diseases. The Company's pipeline includes FV-100, its clinical-stage nucleoside analogue in Phase II development for the treatment of herpes zoster (shingles), as well as INX-189, an HCV nucleotide polymerase inhibitor in preclinical development. The Company has also licensed the use of its proprietary MSCRAMM(®) protein technology to Wyeth for the development of staphylococcal vaccines.
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Friday, October 23, 2009
On ASEANpreneurs: ASEANpreneurs Youth Leaders Exchange 2009 is here!
ASEANpreneurs Youth Leaders Network is proud to present all aspiring and passionate youths an exciting opportunity to explore and immerse in entrepreneurship as it is done and experienced in the ASEAN region. We are organizing a week long ASEANpreneurs Youth Leaders Exchange Programme (http://aseanpreneurs.org/exchange.html) from December 7th to 13th which will be hosted by BINUS University, Jakarta, Indonesia and we would like to invite you to apply for the Exchange Programme. Please refer to our website for more details. Please feel free to drop us an e-mail should you have any queries.
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- Tan Yinglan
The Way of the VC: Having Top Venture Capitalists on Your Board (On Amazon)
http://tinyurl.com/wayofthevc
Way Of The VC (Oct 25th - Oct 31th)
Here we bring you some of our highlights this week.
We have moved to revamped website at http://www.wayofthevc.com.
(Please update your bookmarks. )
Our Facebook Fan Page (http://www.tinyurl.com/wayofvc)
Twitter (http://www.twitter.com/yinglantan)
Amazon (http://www.tinyurl.com/wayofthevc)
Funding Opportunity: Sports entrepreneurs looking for funding / strategic partners
http://www.wayofthevc.com/2009/10/is-looking-for-interesting-sports.html
Travel: Will be in the following countries:
http://www.wayofthevc.com/2009/10/28-start-ups-to-debut-on-chinext-board.html
Amazon)
http://tinyurl.com/wayofthevc
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We have moved to revamped website at http://www.wayofthevc.com.
(Please update your bookmarks. )
Our Facebook Fan Page (http://www.tinyurl.com/wayofvc)
Twitter (http://www.twitter.com/yinglantan)
Amazon (http://www.tinyurl.com/wayofthevc)
Funding Opportunity: Sports entrepreneurs looking for funding / strategic partners
http://www.wayofthevc.com/2009/10/is-looking-for-interesting-sports.html
Travel: Will be in the following countries:
Taiwan: Nov 11~ Nov 22
China: Dec 7 ~ Dec 13
Entrepreneurs / VCs / LPs who would like to catch up, please sign up
here: http://www.wayofthevc.com/2009/10/travel-china-and-taiwan.html
Posts
VC Seed funding is dead
http://www.wayofthevc.com/2009/10/vc-seed-funding-is-dead-long-live-vc.html
Wall Street: Too many smart people
http://www.wayofthevc.com/2009/10/wall-street-too-many-smart-people.html
http://www.wayofthevc.com/2009/10/28-start-ups-to-debut-on-chinext-board.html
The World in 2010
http://www.wayofthevc.com/2009/10/world-in-2010-gala-dinner-and-luminary.html
TedxTaipei
http://www.wayofthevc.com/2009/10/tedxtaipei-tickets-are-here-tedcom....
BANSEA (30th Oct)
http://www.wayofthevc.com/2009/10/bansea-networklunch-on-30th-october.html
Globalisation Of Technology
http://www.wayofthevc.com/2009/10/globalisation-of-technology.html
Tie Event 23th Oct
http://www.wayofthevc.com/2009/10/tie-event-23-oct-09-future-thinking-for.html
Jobs
Career Advice for Engineers
http://www.wayofthevc.com/2009/07/sure-happy-to-help.html
VC/PE Jobs Newsletter
http://www.wayofthevc.com/2009/06/pre-mba-vc-newsletter-06232009.html
Videos:
Joi Ito in Singapore (Thanks James for sharing this)
http://www.wayofthevc.com/2009/10/joi-ito-in-singapore.html
Tan Yinglan Guest Lecture at SPRING-SMU Advanced Management Program
http://www.wayofthevc.com/2009/07/guest-lecture-at-smu-spring-amp.html
Deal Of the Week: Juniper Group
Exit of the Week: Dole Food Company www.renaissancecapital.com/ipohome/news/pick.aspx
Quote of the week: The number one thing that VCs look for is self-igniting fire
Yinglan
Way Of The VC
--
- Tan Yinglan
Amazon)
http://tinyurl.com/wayofthevc
--
BANSEA Network@Lunch on 30th October 2009 Friday at The PINES, 10.30am to 1.30pm
Dear BANSEA friends, - Tan Yinglan
The Way of the VC: Having Top Venture Capitalists on Your Board (On Amazon)
http://tinyurl.com/wayofthevc
Another week to go!
Join us at the BANSEA Network@Lunch on 30th October 2009 - Get an insight into managing multiple social networks to analyze relevant traffic data, how opinion mining and sentiment analysis can provide for business research, innovative tools available to companies facing information explosion, and the making of Chapati in a flash with the invention of Rotimatic! Check out the 4 companies' exciting profiles appended below. If you would like to join us, please register soon to avoid disappointment. Do Hurry!
Please kindly register via online link at http://www.apesnap.com/event/bansealunchoct30
The Way of the VC: Having Top Venture Capitalists on Your Board (On Amazon)
http://tinyurl.com/wayofthevc
Thursday, October 22, 2009
is looking for interesting sports ventures to invest in.
--
- Tan Yinglan
The Way of the VC: Having Top Venture Capitalists on Your Board (On Amazon)
http://tinyurl.com/wayofthevc
Tuesday, October 20, 2009
VC/PE的投资风格：先选赛道还是选手
Sent to you by Tan Yinglan via Google Reader:
via ReachVC Venture Capital 风险投资专家 by RVC@ReachVC.com (reachvc) on 10/18/09
VC/PE投资时往往注重项目企业的商业模式和管理风格，反之，VC/PE本身的商业模式和投资风格对其能否顺利募资、投资也极为重要。如今，VC/PE募资的时候，越来越多LP关注GP的投资风格和优势；投资的时候，更多的项目企业在问"VC/VC/PE除了钱还能带来什么价值"。良好的投资风格有助于VC/VC/PE避开弯道，获得持续的成长。随着创业板、券商直投业务的推进和A股一二级市场价差缩窄等市场环境的变化，成长中的本土VC/PE也到了重新反思既有投资风格的时刻。
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Monday, October 19, 2009
The World in 2010 Gala Dinner and Luminary Panel Discussion
Message Classification: Restricted
Anyone keen on this The Economist event - The World in 2010 Gala Dinner and
Luminary Panel Discussion?
It will be held in Hong Kong on 2 Dec 09.
URL for more info - http://www.economistasia.com/WI2010/
Sunday, October 18, 2009
Some Complexities of Venture Capital Seed Investing
I argue that seed investing is one of the toughest and also one of the most interesting.
Sent to you by Tan Yinglan via Google Reader:
via Feld Thoughts by Brad Feld on 10/18/09
Mark Suster, a partner at GRP Partners, has an outstanding post up this morning titled VC Seed Funding is Dead, Long Live VC Seed Funding. Mark started blogging recently and has quickly turned into my second favorite VC blogger (after Fred Wilson) – if you don't subscribe to his feed, you should.
Mark just did his first seed deal, a $500k investment in a company called Ad.ly, and his post is a long essay on how he's thinking about seed investing these days. He makes the appropriate warning (and differentiation) between VC investors who view seed investments as "options" on future rounds (e.g. they toss a little money in and then generally ignore the company until the next financing) and "active seed investors" (like First Round Capital, SoftTechVC, True Ventures, Union Square Ventures, and O'Reilly AlphaTech) who view the seed investment as their first round of several as they help get a company up and running.
I've been making seed investments since 1994. I don't know the actual number that I've done, but as a VC (starting in 1996) it's probably more than 25. In our most recent fund (Foundry Group) that we raised in 2007, we've made six seed investments (AdMeld, Gnip, Lijit, Next Big Sound, Standing Cloud, and Trada ) out of 17 investments in the fund to date and have one more that we expect to close this week. Interestingly, we did only two of these by ourselves; the other four included co-investors such as First Round Capital, Spark, SoftTechVC, Boulder Ventures, and Alsop Louie.
In my world, there is no real difference between a seed investment and a "Series A investment." Ironically, when I started doing this, seed investments were the Series A investment; at some point in the last decade a bunch of VCs started saying "we only do Series A investments" so the seed investment became "less than the Series A" investment, although it never got relabeled so you see a lot of Series A (seed) and Series A-2 (the next round after the seed) investment rounds these days. Regardless, in my world, a seed investment is the first round – when I make a seed investment I'm committed.
VC's keep reinventing seed programs. In 1994 when I was first making angel investments with my own money that I got from selling my first company I encountered several VC firms that had "seed programs." These firms had an accelerated way to invest $250k in an entrepreneur to help him get up and running quickly. These investments were always convertible debt that converted into the Series A round at a discount. The entrepreneur quickly got $250k, the VC got a seat (usually a controlling seat) at the table for the next round, and off they went. I participated in a few of these – some that worked (e.g. a new VC came in and led the next round) and a few that didn't (no new VC showed up, the entrepreneurs and the seed VC watched tensions escalate, and eventually there was an unhappy ending.)
Over time, I soured on the "convertible note seed funding" approach. I've written about this in the past, but at the minimum I think it misaligns the entrepreneurs and the early stage VC. More importantly, in my experience, it's a signaling device – the seed VC isn't as committed in a convertible note round as they are when they price a seed round and do it as a typical VC preferred financing, albeit with lighter terms.
One key thing for an entrepreneur to test with a potential seed round VC is whether or not the VC will invest in the next round by themselves. The specific question is "Do I need an outside lead for the next round, or will you do it yourself?" While either case is fine, this sets the ground rules clearly for financings going forward. In our case, we are perfectly happy to do the first few rounds of financing ourselves. Some other great seed investors, especially those with smaller funds need a new investor to lead the next round. Then there are traditional early stage VCs who have specialized seed programs where the rules of engagement are that there needs to be a new investor to lead the next round. Knowing where you stand and what the ground rules are before you consummate the seed round is important.
With the emergence of pre-seed programs like TechStars I've had more visibility into VC seed investing activity from other VCs. In Boulder, we just finished year three of TechStars and while plenty of the TechStars companies have their first round of financing include angel investors, I think six of the ten companies this year have (or will) close VC-led seed rounds. I haven't decided if there is actually more seed activity in 2009, or if VCs are focused on hunting for seed deals in more qualified places. Regardless, being a great VC seed investor isn't a no brainer and I encourage entrepreneurs to make sure they know how their VC investor is going to behave when it comes time to raise the next round.
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28 start-ups to debut on ChiNext Board
Oct. 19, 2009 (China Knowledge) - China will launch its Nasdaq-style ChiNext board in Shenzhen on Oct. 23, and the first batch of 28 companies will start trading on Oct. 30, according to sources with the Shenzhen Stock Exchange.
An opening ceremony will be held for the long-awaited ChiNext board on Friday, said Shang Fulin, chairman of the China Securities Regulatory Commission, at a forum in Beijing.
The 28 new stocks will start trading on the Shenzhen Stock Exchange on Oct. 30 after obtaining approval from the listing committee of SZSE.
The 28 start-up firms, mainly engaged in the fields of pharmacy, software, new energy, culture and electronics, has raised a combined RMB 15.48 billion from the initial public offerings.
Another 121 companies have also submitted their application to list on the ChiNext board as of today.
The new board will help fuel the development of start-ups and other companies with a focus on innovation. It will also help establish a multi-level capital market in the country to provide new financing channel for the start-up firms, according to the chairman.
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- Tan Yinglan
The Way of the VC: Having Top Venture Capitalists on Your Board (On Amazon)
http://tinyurl.com/wayofthevc
TiE Event 23 Oct '09: Future Thinking For Professionals & Entrepreneurs
"Future Thinking For Professionals & Entrepreneurs"
About the Speaker
Dr. Mike Jackson
Co-founder and Chairman
Shaping Tomorrow Limited, London
Mike is a Founder Member and Chairman of Shaping Tomorrow. He also advises businesses on dramatically improving their competitiveness through pioneering work on practical Sustainable Business Strategies. Clients include a number of blue-chip, international and national companies and small to medium sized UK businesses. He is known on conference platforms speaking on business subjects including futures, sustainability, customer loyalty and retention, business process re-engineering, change management, building strategic visions and values and people motivation and communications, ethics, alliances and corporate governance: he has many published articles on these subjects. With over 30 years' experience in Business Management in the UK, North America and Europe, he has significant exposure to corporate banking and consumer finance and, latterly, futuring.
Mike was Chief Executive of Birmingham Midshires Building Society between 1990 and 1998, then the UK's 4th largest. As Chief Executive of Birmingham Midshires he achieved a dramatic change for the better in the Society's fortunes moving from near oblivion to a highly profitable, customer led and multiple-award winning business in just eight years. He was previously a Senior Vice President with Bank of America who he joined in 1986. He held several positions at the Bank which included Head of Europe, Middle East and Africa operations, based in London, Head of Consumer Loans Services and Chief Financial Officer for consumer markets, based in North America (San Francisco). After spells with Hawker Siddeley, the Electricity Boards and the Post Office he began his financial services career in 1973 with Citibank NA as its first overseas process engineer, based in London. He then transferred to Italy, with subsidiary Citifin Finanziara as Chief Financial Officer and Vice President, later moving back to the UK with Citibank Savings as Vice President and Customer Services Director, and subsequently Consumer Banking Director.
He studied at Salford University, Manchester, and holds a Bachelor of Science in Electronics and a U.S. accredited MBA in Operations Research. He was conferred an Honorary Doctorate in Business Administration by the University of Wolverhampton in 1997. He is a Fellow of the Institutes of Directors and a full member of the Strategic Planning Society, the Association of Professional Futurists and the World Future Society.
He is a member of the advisory board of European Futurists and a strategic board member of the Customer Service Network in the UK.
Mike also provides risk assessment and future scanning services to the Singapore Government and is now engaged in a 6-nation speaking and business tour of South Asia, covering Singapore, Malaysia, Maldives, Sri Lanka Vietnam and Indonesia.
--
- Tan Yinglan
The Way of the VC: Having Top Venture Capitalists on Your Board (On Amazon)
http://tinyurl.com/wayofthevc
About the Speaker
Dr. Mike Jackson
Co-founder and Chairman
Shaping Tomorrow Limited, London
Mike is a Founder Member and Chairman of Shaping Tomorrow. He also advises businesses on dramatically improving their competitiveness through pioneering work on practical Sustainable Business Strategies. Clients include a number of blue-chip, international and national companies and small to medium sized UK businesses. He is known on conference platforms speaking on business subjects including futures, sustainability, customer loyalty and retention, business process re-engineering, change management, building strategic visions and values and people motivation and communications, ethics, alliances and corporate governance: he has many published articles on these subjects. With over 30 years' experience in Business Management in the UK, North America and Europe, he has significant exposure to corporate banking and consumer finance and, latterly, futuring.
Mike was Chief Executive of Birmingham Midshires Building Society between 1990 and 1998, then the UK's 4th largest. As Chief Executive of Birmingham Midshires he achieved a dramatic change for the better in the Society's fortunes moving from near oblivion to a highly profitable, customer led and multiple-award winning business in just eight years. He was previously a Senior Vice President with Bank of America who he joined in 1986. He held several positions at the Bank which included Head of Europe, Middle East and Africa operations, based in London, Head of Consumer Loans Services and Chief Financial Officer for consumer markets, based in North America (San Francisco). After spells with Hawker Siddeley, the Electricity Boards and the Post Office he began his financial services career in 1973 with Citibank NA as its first overseas process engineer, based in London. He then transferred to Italy, with subsidiary Citifin Finanziara as Chief Financial Officer and Vice President, later moving back to the UK with Citibank Savings as Vice President and Customer Services Director, and subsequently Consumer Banking Director.
He studied at Salford University, Manchester, and holds a Bachelor of Science in Electronics and a U.S. accredited MBA in Operations Research. He was conferred an Honorary Doctorate in Business Administration by the University of Wolverhampton in 1997. He is a Fellow of the Institutes of Directors and a full member of the Strategic Planning Society, the Association of Professional Futurists and the World Future Society.
He is a member of the advisory board of European Futurists and a strategic board member of the Customer Service Network in the UK.
Mike also provides risk assessment and future scanning services to the Singapore Government and is now engaged in a 6-nation speaking and business tour of South Asia, covering Singapore, Malaysia, Maldives, Sri Lanka Vietnam and Indonesia.
--
- Tan Yinglan
The Way of the VC: Having Top Venture Capitalists on Your Board (On Amazon)
http://tinyurl.com/wayofthevc
Wall Street: Too many smart people
+++
--
- Tan Yinglan
The Way of the VC: Having Top Venture Capitalists on Your Board (On Amazon)
http://tinyurl.com/wayofthevc
Wall Street Smarts
By CALVIN TRILLIN
"IF you really want to know why the financial system nearly collapsed in
the fall of 2008, I can tell you in one simple sentence."
The statement came from a man sitting three or four stools away from me in
a sparsely populated Midtown bar, where I was waiting for a friend. "But I
have to buy you a drink to hear it?" I asked.
"Absolutely not," he said. "I can buy my own drinks. My 401(k) is intact. I
got out of the market 8 or 10 years ago, when I saw what was happening."
He did indeed look capable of buying his own drinks — one of which, a dry
martini, straight up, was on the bar in front of him. He was a
well-preserved, gray-haired man of about retirement age, dressed in the
same sort of clothes he must have worn on some Ivy League campus in the
late '50s or early '60s — a tweed jacket, gray pants, a blue button-down
shirt and a club tie that, seen from a distance, seemed adorned with tiny
brussels sprouts.
"O.K.," I said. "Let's hear it."
"The financial system nearly collapsed," he said, "because smart guys had
started working on Wall Street." He took a sip of his martini, and stared
straight at the row of bottles behind the bar, as if the conversation was
now over.
"But weren't there smart guys on Wall Street in the first place?" I asked.
He looked at me the way a mathematics teacher might look at a child who,
despite heroic efforts by the teacher, seemed incapable of learning the
most rudimentary principles of long division. "You are either a lot younger
than you look or you don't have much of a memory," he said. "One of the
speakers at my 25th reunion said that, according to a survey he had done of
those attending, income was now precisely in inverse proportion to academic
standing in the class, and that was partly because everyone in the lower
third of the class had become a Wall Street millionaire."
I reflected on my own college class, of roughly the same era. The top
student had been appointed a federal appeals court judge — earning, by Wall
Street standards, tip money. A lot of the people with similarly impressive
academic records became professors. I could picture the future titans of
Wall Street dozing in the back rows of some gut course like Geology 101,
popularly known as Rocks for Jocks.
"That actually sounds more or less accurate," I said.
"Of course it's accurate," he said. "Don't get me wrong: the guys from the
lower third of the class who went to Wall Street had a lot of nice
qualities. Most of them were pleasant enough. They made a good impression.
And now we realize that by the standards that came later, they weren't
really greedy. They just wanted a nice house in Greenwich and maybe a
sailboat. A lot of them were from families that had always been on Wall
Street, so they were accustomed to nice houses in Greenwich. They didn't
feel the need to leverage the entire business so they could make the sort
of money that easily supports the second oceangoing yacht."
"So what happened?"
"I told you what happened. Smart guys started going to Wall Street."
"Why?"
"I thought you'd never ask," he said, making a practiced gesture with his
eyebrows that caused the bartender to get started mixing another martini.
"Two things happened. One is that the amount of money that could be made on
Wall Street with hedge fund and private equity operations became just
mind-blowing. At the same time, college was getting so expensive that
people from reasonably prosperous families were graduating with huge debts.
So even the smart guys went to Wall Street, maybe telling themselves that
in a few years they'd have so much money they could then become professors
or legal-services lawyers or whatever they'd wanted to be in the first
place. That's when you started reading stories about the percentage of the
graduating class of Harvard College who planned to go into the financial
industry or go to business school so they could then go into the financial
industry. That's when you started reading about these geniuses from M.I.T.
and Caltech who instead of going to graduate school in physics went to Wall
Street to calculate arbitrage odds."
"But you still haven't told me how that brought on the financial crisis."
"Did you ever hear the word 'derivatives'?" he said. "Do you think our guys
could have invented, say, credit default swaps? Give me a break! They
couldn't have done the math."
"Why do I get the feeling that there's one more step in this scenario?" I
said.
"Because there is," he said. "When the smart guys started this business of
securitizing things that didn't even exist in the first place, who was
running the firms they worked for? Our guys! The lower third of the class!
Guys who didn't have the foggiest notion of what a credit default swap was.
All our guys knew was that they were getting disgustingly rich, and they
had gotten to like that. All of that easy money had eaten away at their
sense of enoughness."
"So having smart guys there almost caused Wall Street to collapse."
"You got it," he said. "It took you awhile, but you got it."
The theory sounded too simple to be true, but right offhand I couldn't find
any flaws in it. I found myself contemplating the sort of havoc a horde of
smart guys could wreak in other industries. I saw those industries falling
one by one, done in by superior intelligence. "I think I need a drink," I
said.
He nodded at my glass and made another one of those eyebrow gestures to the
bartender. "Please," he said. "Allow me."
Calvin Trillin is the author, most recently, of "Deciding the Next Decider:
The 2008 Presidential Race in Rhyme." This piece appeared in the NY Times.
DOMINIC SOON • Economist • Economics & Strategy Division • Ministry of
Trade & Industry • DID: +65 6332 7490 • fax: +65 6334 4189
Privileged/Confidential information may be contained in this message. If
you are not the intended recipient, please notify the sender immediately
and you must not use the message for any purpose nor disclose it to anyone.
By CALVIN TRILLIN
"IF you really want to know why the financial system nearly collapsed in
the fall of 2008, I can tell you in one simple sentence."
The statement came from a man sitting three or four stools away from me in
a sparsely populated Midtown bar, where I was waiting for a friend. "But I
have to buy you a drink to hear it?" I asked.
"Absolutely not," he said. "I can buy my own drinks. My 401(k) is intact. I
got out of the market 8 or 10 years ago, when I saw what was happening."
He did indeed look capable of buying his own drinks — one of which, a dry
martini, straight up, was on the bar in front of him. He was a
well-preserved, gray-haired man of about retirement age, dressed in the
same sort of clothes he must have worn on some Ivy League campus in the
late '50s or early '60s — a tweed jacket, gray pants, a blue button-down
shirt and a club tie that, seen from a distance, seemed adorned with tiny
brussels sprouts.
"O.K.," I said. "Let's hear it."
"The financial system nearly collapsed," he said, "because smart guys had
started working on Wall Street." He took a sip of his martini, and stared
straight at the row of bottles behind the bar, as if the conversation was
now over.
"But weren't there smart guys on Wall Street in the first place?" I asked.
He looked at me the way a mathematics teacher might look at a child who,
despite heroic efforts by the teacher, seemed incapable of learning the
most rudimentary principles of long division. "You are either a lot younger
than you look or you don't have much of a memory," he said. "One of the
speakers at my 25th reunion said that, according to a survey he had done of
those attending, income was now precisely in inverse proportion to academic
standing in the class, and that was partly because everyone in the lower
third of the class had become a Wall Street millionaire."
I reflected on my own college class, of roughly the same era. The top
student had been appointed a federal appeals court judge — earning, by Wall
Street standards, tip money. A lot of the people with similarly impressive
academic records became professors. I could picture the future titans of
Wall Street dozing in the back rows of some gut course like Geology 101,
popularly known as Rocks for Jocks.
"That actually sounds more or less accurate," I said.
"Of course it's accurate," he said. "Don't get me wrong: the guys from the
lower third of the class who went to Wall Street had a lot of nice
qualities. Most of them were pleasant enough. They made a good impression.
And now we realize that by the standards that came later, they weren't
really greedy. They just wanted a nice house in Greenwich and maybe a
sailboat. A lot of them were from families that had always been on Wall
Street, so they were accustomed to nice houses in Greenwich. They didn't
feel the need to leverage the entire business so they could make the sort
of money that easily supports the second oceangoing yacht."
"So what happened?"
"I told you what happened. Smart guys started going to Wall Street."
"Why?"
"I thought you'd never ask," he said, making a practiced gesture with his
eyebrows that caused the bartender to get started mixing another martini.
"Two things happened. One is that the amount of money that could be made on
Wall Street with hedge fund and private equity operations became just
mind-blowing. At the same time, college was getting so expensive that
people from reasonably prosperous families were graduating with huge debts.
So even the smart guys went to Wall Street, maybe telling themselves that
in a few years they'd have so much money they could then become professors
or legal-services lawyers or whatever they'd wanted to be in the first
place. That's when you started reading stories about the percentage of the
graduating class of Harvard College who planned to go into the financial
industry or go to business school so they could then go into the financial
industry. That's when you started reading about these geniuses from M.I.T.
and Caltech who instead of going to graduate school in physics went to Wall
Street to calculate arbitrage odds."
"But you still haven't told me how that brought on the financial crisis."
"Did you ever hear the word 'derivatives'?" he said. "Do you think our guys
could have invented, say, credit default swaps? Give me a break! They
couldn't have done the math."
"Why do I get the feeling that there's one more step in this scenario?" I
said.
"Because there is," he said. "When the smart guys started this business of
securitizing things that didn't even exist in the first place, who was
running the firms they worked for? Our guys! The lower third of the class!
Guys who didn't have the foggiest notion of what a credit default swap was.
All our guys knew was that they were getting disgustingly rich, and they
had gotten to like that. All of that easy money had eaten away at their
sense of enoughness."
"So having smart guys there almost caused Wall Street to collapse."
"You got it," he said. "It took you awhile, but you got it."
The theory sounded too simple to be true, but right offhand I couldn't find
any flaws in it. I found myself contemplating the sort of havoc a horde of
smart guys could wreak in other industries. I saw those industries falling
one by one, done in by superior intelligence. "I think I need a drink," I
said.
He nodded at my glass and made another one of those eyebrow gestures to the
bartender. "Please," he said. "Allow me."
Calvin Trillin is the author, most recently, of "Deciding the Next Decider:
The 2008 Presidential Race in Rhyme." This piece appeared in the NY Times.
DOMINIC SOON • Economist • Economics & Strategy Division • Ministry of
Trade & Industry • DID: +65 6332 7490 • fax: +65 6334 4189
Privileged/Confidential information may be contained in this message. If
you are not the intended recipient, please notify the sender immediately
and you must not use the message for any purpose nor disclose it to anyone.
--
- Tan Yinglan
The Way of the VC: Having Top Venture Capitalists on Your Board (On Amazon)
http://tinyurl.com/wayofthevc
Dow 10,000 and economic reflexivity
Does the Dow 10,000 mean that we are out of the woods. I don't think so.
Sent to you by Tan Yinglan via Google Reader:
via cdixon.org - chris dixon's blog by chris on 10/17/09
People who criticize Obama's economic policies forget that, around the beginning of this year, a lot of serious people thought we were entering a second Great Depression. Here are the Google News mentions of the words "Great Depression" (in blue) and "economic recovery" (in red) over the last three years:
Moreover, most experts thought we were being led into a Great Depression not by "fundamentals" but by the collapse of the financial system.
Back around when Obama proposed his bank bailout plan (which was mostly an extension of Bush and Bernanke's plan) he was widely criticized. The consensus criticism was succinctly summarized by Nobel Laureate Joseph Steiglitz:
Paying fair market values for the assets will not work. Only by overpaying for the assets will the banks be adequately recapitalized. But overpaying for the assets simply shifts the losses to the government. In other words, the Geithner plan works only if and when the taxpayer loses big time.
Around this time, I happened to bump into an old friend who was working at a hedge fund where his full-time job was trading these so-called toxic assets (CDSs, CDOs, etc). I asked him the trillion dollar question: what did he think the "fair market value" for these assets was? Were they worth, say, 80 cents on the dollar as the banks were claiming, or 20 cents on the dollar as the bidders in the market were offering.
His answer: These assets are essentially bets on home mortgages, which in turn are dependent on housing prices, which in turn are dependent on the economy, which in turn is highly dependent on whether the banks stay solvent, which is dependent on what these assets are worth.
This circularity is not unique to these particular assets. As George Soros has argued for decades, all economic systems are profoundly circular, a property that he calls reflexivity.
The bank bailouts were extremely distasteful in many ways. Lots of underserving people got rich. Institutions that should have failed didn't. Dangerous "moral hazard" precedents were set. But the fact remains: by altering perceptions, the Bush/Obama/Bernanke plan seems to have turned the second Great Depression into "merely" a bad recession.
The Dow passed the symbolic milestone of 10,000 recently. People who say it's an illusion and doesn't reflect economic fundamentals don't understand that in economics, perception and fundamentals are inextricably linked.
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VC Seed Funding is Dead, Long Live VC Seed Funding!
Sent to you by Tan Yinglan via Google Reader:
via Both Sides of the Table by Mark Suster on 10/17/09
A few years ago it became fashionable for large VC's to do seed funding. With open source software (LAMP stack) and cloud computing infrastructure it just wasn't that expensive to get your company going and founders just wanted to raise less money. Some larger VCs felt they were being "scooped" by some younger, nimbler and smaller VCs. So they set up seed programs that allowed for rapid decisions for $500k or less, often done as convertible debt for both speed and cost reasons. There are multiple firms that did this.
I was an early cynic. I told entrepreneurs that it was a bit of a Faustian bargain. If the large VC doesn't agree to do your A round then you're in a bit of trouble. Why? Because as a potential A round investor I'm thinking to myself, "if the large VC seed investor has been in the company for 9 months and isn't leading the round then something must be wrong. Surely they have more information than I do." And I think this line of thinking has started to become conventional wisdom as outlined in Chris Dixon's excellent blog post saying that you need to be careful raising seed money from a large VC fund.
But I'm no longer an entrepreneur – I'm a VC at a $200 million fund called GRP Ventures, the largest active fund in Southern California. And I've just completed my first seed deal of Ad.ly ($500k) with another exciting deal I hope to announce within 30 days. What gives? Am I a hypocrite?
1. I do think you need to be careful with funds that have done 20-30 seeds deals in fairly rapid succession. Talk to companies that have taken this money and see if they've gotten support. I have spoken at length to one such entrepreneur who tells me that he hardly hears from his VC. He was told informally that they view him as an "option" whereby they can wait and see if another VC makes an offer. If a VC term sheet comes in they begin their due diligence process. I recommend you do your own due diligence before deciding whether to take this money.
2. The contra is also true. Many VCs who do lots of seed stage deals are very supportive and active. Look at Josh Kopelman over at First Round Capital. I think they definitely qualify as a VC and not a seed fund. They do many early-stage deals. Yet talk to virtually any FRC company and they'll tell you that these guys are some of the most active board members and offer some of the best advice in the industry. I sit on a board with Howard Morgan of FRC and I can tell you this guy works harder than most and has a punishing travel schedule. I would say the same thing about True Ventures. I haven't met a single founder has hasn't raved about their experience working with Jon Callaghan, Phil Black or Tony Conrad. They have a large-ish fund. But they do small, seed like investments when they like the entrepreneurs. They're active, helpful and wise. And how about Andreessen Horowitz? I know the jury is still out since they're so new but I know many entrepreneurs eager to work with them.
3. What exactly is seed funding anymore? Entrepreneurs want less cash because they want to control dilution and preserve exit options at lower prices. One of the hotter companies lately in the mobile social networking is FourSquare, which raised $1.35 million from Albert Wenger and Fred Wilson at Union Square Ventures and O'Reilly AlphaTech Ventures. Is an average of $675k each a seed deal? Anyone doubt that Union Square and Bryce Roberts will be active?
4. You also need to ask yourself the reverse question. Are there inherent risks in taking angel money? If you have a VC that's bought into you and your business then it's far easier to put together a bridge round with a VC if you need that $1-2 million to get to your next milestone. I know raising new VC in the past year has sucked. But if you already had a VC chances are they tried to find a way to help you preserve your business in the down market.
Many angels were forced to fold given their tremendous losses in real estate and the stock market. I'm a big fan of having angel investors, don't get me wrong. In SoCal we have great operators like Klaus Schauser, John Greathouse, Matt Coffin, Kamran Pourzanjani and others. In NorCal there are legends like Ron Conway, Jeff Clavier, Mike Maples and the Energizer Bunny, Dave McClure (and I'm CERTAINLY never going to say anything bad about my friend Dave after reading this awesome blog post)- But unless you get top-tier angels who have deep pockets don't assume that angels are necessarilyly a better option than VCs. Might be, but not a given.
5. I'd also say that I'm not quite as negative about funding someone else's seed deal anymore. I now know that the mega funds that did too many seed deals aren't paying enough attention to them. So I'm not put off by the fact that I'll be used as a stalking horse or that there is something wrong with the company provided I've spent quality time with management and can make my own assessment about the team and business.
6. Chris talks in his blog post about your A round pricing being lower if you have a VC seed investor. His argument is that when you find a new VC to invest there will be some kind of collusion between the A round investor and the inside seed investor. I could definitely see that happening. But I'm not really sure it is necessarily so. Pricing a new round is always a function of how competitive the deal is so just because a VC seeded the deal doesn't drive down price if 3 VCs are competing for the deal.
I told Sean Rad at Ad.ly when I invested that I'd like to do his next round but as a VC I can never guarantee that I will (nor would an angel). I told him he's free to shop around the deal and see what price the market will pay. I also said we'd like to co-lead the next round if an external investor is so inclined. I can't see how Sean is any worse off with me than he would be with angels? In many ways I feel he's better off. As a decent size fund we've validated the team and concept. And if he's performing well (he is) and wants to do a quick round to avoid a lengthy funding raising process he has the option of talking with us about doing his A. As I always tell entrepreneurs – it's far easier to talk with VCs when they're already partially pregnant.
So how can I justify doing seed investments?
Simple. I plan to do a few but not so many I can't manage them. I have 3 total companies I've invested in this year (2 A's, 1 seed) – soon to be four. All of these are referenceable. I think all of the founders would tell you that I'm active, supportive and engaged in their businesses, customer interactions and talking about future fund raising requirements. If you talk with the founders of the 3 businesses where I wrote personal angel checks for I think they'll tell you that I've actively helped with their fund raising processes.
When we funded our two seed deals we used the Y Combinator Open Source Term Sheet and were highly entrepreneur friendly. I offered a WAY cleaner term sheet than any angel "club" deal that I've seen in SoCal or even from the seed fund investors themselves.
See, I don't think it's a question of To VC Seed or Not to VC Seed, I think it's the age old question of who you're working with and how well they reference. I'm surprised at how little referencing some founders do on their VCs. I'll save that for another post.
You're never going to have a gaurantee with ANY investor that they'll commit to the next round. But great companies who choose great investors invariably have an easier time.
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Saturday, October 17, 2009
Handpicked shoes by monthly subscription
Nice model that have been done on Toys and DVDs. I wonder whether it will work for shoes.
Sent to you by Tan Yinglan via Google Reader:
via Springwise by Springwise on 10/16/09
Hard on the heels—so to speak—of our story about Hipstery comes news of a like-minded contender in the world of shoes. Where Hipstery relieves consumers of the burden of choice and picks its t-shirts for them, ShoeDazzle does much the same for shoes, but on a recurring, monthly basis.
Users of Los Angeles-based ShoeDazzle begin by taking a fashion survey, the results of which are used to guide the company's personalized shoe selections. Each month, ShoeDazzle's personal stylists then send the user an email with five new shoe choices, handpicked to suit her personality and fashion preferences. The user simply logs into the site to select the pair she wants, and it gets shipped out for free. Monthly membership costs USD 39, which covers the shoes and shipping. Members can skip a month's selections, in which case they won't be charged; they can also return or exchange shoes they don't like.
ShoeDazzle currently ships only within the United States and Canada, but it's a safe bet that fashion-minded consumers in other parts of the world would also appreciate some monthly shopping guidance, for shoes, clothes or accessories. (Related: Clothes swapping meets Netflix — T-shirt subscription based on news stories.)
Website: www.shoedazzle.com
Contact: customersupport@shoedazzle.com
Spotted by: Judy McRae
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Friday, October 16, 2009
VC Funding On Pace For First Sub-$20B Year Since 1998
VC industry looks glum
Sent to you by Tan Yinglan via Google Reader:
via WSJ.com: Venture Capital Dispatch on 10/16/09
Venture investors are still keeping a tight grip on their capital in the wake of the world's financial meltdown, making the third quarter of 2009 look about as anemic as the first two quarters of the year.
According to data from industry tracker Dow Jones VentureSource, VCs put $5.07 billion into 616 deals in the third quarter, which marks a 6% drop from the $5.42 billion put into 595 deals in the second quarter of the year.
If this investment pace continues, the year's total could fall below $20 billion for the first time since 1998. The first nine months of 2009 have seen a total of $14.59 billion invested.
The third quarter of 2009 looks especially paltry when compared to the same period last year when investment totaled $8.17 billion.
While some VCs were pleased that investments held fairly steady instead of falling off a cliff over the first three quarters of this year, none were willing to toss out the word "recovery."
"One quarter is a data point. Two quarters is hope. Three quarters is a trend," said Carl Stjernfeldt, a general partner at Waltham, Mass.-based Castile Ventures. "I think we are entering hope."
Castile, investing from its $100 million third fund raised about three years ago, has several early-stage investments in hardware and software companies, Stjernfeldt said.
Other investors — including several panelists at the Dow Jones VentureWire Technology Showcase in Redwood City, Calif. last week — say they expect to see a downward slide through at least next year as limited partners scale back their commitment to venture capital.
Perhaps adding to the gloomy outlook: Venture capitalists have been cautious about making new investments - or bringing in new investors to a syndicate - in an uncertain economy. As VentureWire reported recently, the rate of insider rounds jumped to 57% in the first quarter, the latest data available from VentureSource. Insider rounds climbed in the fourth quarter of 2008 as the financial crisis worsened, involving 54% of all deals versus 41% in the third period.
Within the information technology sector, the number of deals rose for the second straight quarter to 270, though that is still down from 305 in the year-ago period. Investment, meanwhile, fell back down to $1.87 billion after recovering somewhat in the second quarter when investors bet $1.94 billion. IT investment through the first three quarters is still down 45% from last year.
There was a first during the quarter within the IT sector: Information-services companies – which include a wide range of Web 2.0 start-ups – raised more capital than software companies despite fewer deals. Whereas software companies raised $581 million in 106 deals, information-services companies raised $627 million in 86 deals.
Sharon Wienbar, managing director at Scale Venture Partners, which has a large number of IT companies in its portfolio, said the news indicates that Web-based businesses are coming into their own.
"You can build a big, profitable company on the Internet now," she said. "It doesn't have to be a paradigm shift, you can value a company on revenues and profitability. Some Web companies have both."
But like Stjernfeldt at Castile Ventures, Wienbar cautioned against reading too much into a single fiscal quarter's figures. "Sometimes one large deal can make an anomaly look like a trend," she said, pointing out that the third quarter of 2009 featured the $100 million funding round for information-services powerhouse Twitter Inc., possibly making the whole sector appear stronger.
On the health care side, investment didn't surpass IT like it did for the first time in the second quarter. Instead, third-quarter totals dropped 22% from the second quarter to $2.2 billion, meaning the surge surge experienced from the first-quarter's four-year low appears to be more of a dead-cat bounce than the beginning of a recovery.
Health care deals, however, continue to climb. In the third quarter, investors participated in 184 deals, the same number reached in the second quarter of 2008 before a three-quarter slide. The latest total is up from 178 in the second quarter and 166 in the year-ago third period.
The lift in deals coupled with the slide in capital suggests that VCs may be shying away from more capital-intensive projects. Firms remain concerned about financing risk and as a result, they are still wary of placing new bets on companies that will need a great deal of capital, even if their valuations have dropped.
That theme can be seen in the capital-intensive biopharmaceutical market. These companies raised $810.9 million in 83 third-quarter financings, down from the $1.18 billion raised in 67 deals in the second quarter.
That industry, the largest health-care venture market, can't stay down forever, and some say confidence has been rising as the economy has begun to recover. "I'd say the mood is improving among biotech investors these days," said David Collier, managing director of CMEA Capital.
One sector where many have expected to see explosive growth – and have been disappointed – is in the energy sector, where a lot of small companies are working on the hot-button issue of the day: renewable energy.
Overall, the energy and utility sector raised $415 million in 23 deals in the third quarter of 2009, which is a 70% drop from the same period last year. But the sector is showing signs of life, as the second quarter of this year saw just $310 million put into 27 deals.
Renewable energy companies — which make up most of the sector — raised $343 in 14 deals, representing a 37% dropoff from the third quarter of 2008.
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Way Of The VC (Oct 11th - Oct 24th)
Apologies for the hiatus. Had been involved in APEC Ministerial Meeting.
We have moved to revamped website at http://www.wayofthevc.com. (Please update your bookmarks. )
Our Facebook Fan Page (http://www.tinyurl.com/wayofvc)
Twitter (http://www.twitter.com/yinglantan)
Amazon (http://www.tinyurl.com/wayofthevc)
I am happy to let you know that my book - "The Way Of The VC - Having Top VCs on Your Board" has received quite good feedback from readers. This is what readers have said (see more at http://www.wayofthevc.com).
Praise for Way Of The VC - Top Venture Capitalists on Your Board
"Yinglan gives valuable accounts coupled with insightful observations about the past, present and future of an industry that is still in its infancy-but growing up fast. It will also help entrepreneurs who need venture capital financing by showing them how VCs value-add to their companies. This book belongs in the library of anyone who has ever taken a serious interest in venture capital. "
Neil Shen, Founding Managing Director, Sequoia Capital China
"The Way of the VC" is the best book I have read on Venture Capital with thoughtful advice for the entrepreneur. Yinglan Tan captures the wisdom of the ages, with the vision of an oracle in this book that captures how a venture capitalist thinks, and how the best ones act.
Tim Draper, Managing Partner, Draper Fisher Jurvetson
This book is a practical guide to the interplay between VCs and entrepreneurs that often contributes to the meteoric rise or utter failure of a startup venture. As entrepreneurship and venture capital are slowly transitioning from ad hoc activities into professions, the common principals applied by experienced professionals are emerging as foundations. Yinglan Tan's book provides a solid account of these emerging foundations.
Noubar Afeyan, Managing Partner & CEO, Flagship Ventures
With the emergence of venture capital investment as a professional practice, understanding the way in which this industry works is critically important for practitioners and would-be practitioners, whether they are (or aspire to be) working for entrepreneurial ventures, venture firms, or large institutional capital pools. I applaud Yinglan Tan, who has distilled many interesting "war stories" and experiences of venture capitalists into a useful and effective framework in The Way of the VC.
Professor Josh Lerner, Jacob H. Schiff Professor of Investment Banking, Harvard Business School
"Yinglan gets into the minds of venture capitalists to show us how they think. There is much in common between VCs from the West and those from the East, but also much that is importantly different."
Tarun Khanna, Jorge Paulo Lemann Professor at the Harvard Business School and Best-Selling Author, Billions of Entrepreneurs: How China and India are Reshaping Their Futures and Yours
I have taught private equity courses for MBA's and executives for fifteen years, and I have seldom run across such insight. Based on painstaking research, Yinglan Tan has demystified the venture capital investment process. If you want to know how venture capitalists think, what they are looking for, and how to choose one, read this book. Venture investors looking to grow in Asia will find penetrating observations and valuable advice. I highly recommend this book to anyone interested in building high-growth companies.
Professor Philip Anderson, INSEAD Alumni Fund Chaired Professor of Entrepreneurship & Academic Director, The Abu Dhabi Centre
Top-flight entrepreneurs are blessed with terrific ideas and boundless energy. But they usually lack capital; hence they must join together with venture capitalists (VCs). The prescription is easy, the implementation tough. Entrepreneurs and VCs differ in orientation, background, and interests. In this lively volume, Yinglan Tan tells how entrepreneurs should handle the relationship from early-stage conception through to a thriving company. The pages bristle with insights gained from in depth discussions with successful VCs and entrepreneurs. It then imparts lessons distilled from intense study of the field and careful analysis. Entrepreneurs should take this volume to heart, and thus avoid missteps and grief.
Richard Zeckhauser, Frank P. Ramsey Professor of Political Economy, Harvard University.
"The Way of the VC" is a must-read book for entrepreneurs and venture capital professionals. Yinglan achieved a harmonious balance between the theory – the Commandments – and the practice – first-hand accounts by VC. The delightful stories clearly and effectively illustrate important lessons for all players in this industry.
Koh Soo Boon, Managing Partner, IGlobe Partners
Venture Capitalists rely heavily on personal judgment and experience. This extensive collection of shared wisdom and viewpoints is therefore a valuable addition to the growing number of VC textbooks and war stories. Yinglan has skillfully captured the Tao of VC practitioners and entrepreneurs in a lively and enlightening book.
Lin Hong Wong, author of "Venture Capital Fund Management: A Comprehensive Approach to Investment Practices & the Entire Operations of a VC Firm".
"Friendly, thorough, and helpful. Yinglan has shown how VC's can help an entrepreneur's business and how to attract their attention."
Dan Schwartz, former Chairman, Asian Venture Capital Journal and author, The Future of Finance: How Private Equity and Venture Capital Will Shape the Global Economy
The book looks at Venture Capital funds which is simultaneously one of the asset classes in the financial industry which has delivered the highest returns, and possibly the least understood. This book provides a primer on what some of the world's best venture capitalists have in common. The book is about how the top one percent think differently, what got them there? How do the world's top venture capitalists consistently obtain supernormal returns? How do they add value to entrepreneurs they have backed? How have they spawned industries and created millions of jobs? The book is based on over 30 interviews with industry leaders as well as my own research and experience.
More press about book
Way Of The VC on Tim Draper's recommended Reading List
My book is available in India as well
Travel: Will be in the following countries:
Taiwan: Nov 11~ Nov 22
China: Dec 7 ~ Dec 13
Entrepreneurs / VCs / LPs who would like to catch up, please sign up here: http://www.wayofthevc.com/2009/10/travel-china-and-taiwan.html
Posts
Twitter Goes to Japan
http://www.wayofthevc.com/2009/10/twitter-goes-to-japan.html
Worst is over in PE
Google Wave vs Facebook
5 qualities VCs look for in startups
How Innovators Think
Why I Love Venture Capital
Events
TedxTaipei
IJam
Globalisation Of Technology
VC/PE Jobs Newsletter
http://www.wayofthevc.com/2009/06/pre-mba-vc-newsletter-06232009.html
Videos:
Joi Ito in Singapore (Thanks James for sharing this)
Tan Yinglan Guest Lecture at SPRING-SMU Advanced Management Program
http://www.wayofthevc.com/2009/07/guest-lecture-at-smu-spring-amp.html
http://www.wayofthevc.com/2009/07/guest-lecture-at-smu-spring-amp.html
Deal Of the Week: Twitter raises $100m www.nytimes.com/2009/09/25/technology/internet/25twitter.html
Exit of the Week: Verisk Analytics (VRSK)
Quote of the week: I just heard a urinal pitch.
Good Day,
Yinglan
Way Of The VC
--
- Tan Yinglan
The Way of the VC: Having Top Venture Capitalists on Your Board (On Amazon)
http://tinyurl.com/wayofthevc
Twitter Goes to Japan
Is the trend of micro-blogging catching on in Asia?
This would be correlated to the level of addition to tweeting.
This would be correlated to the level of addition to tweeting.
Sent to you by Tan Yinglan via Google Reader:
via GigaOM by Jennifer Martinez on 10/16/09
It looks like Japan will be the guinea pig for Twitter's foray into advertising as well. Twitter is using the Japanese mobile version as a testing ground for money-making features that it may incorporate into its service down the road, such as banner ads. Although the company modified its terms of service last month to open the door for advertising, Twitter co-founder Biz Stone said a few weeks ago that it wouldn't put any ads on the site this year. Lucky Japan, not only is it the first to get a local language version of the site, but it's also the first to see Twitter with ads.
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