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Archive for July, 2010

Here is a piece from WSJ´s Venture Capital Dispatch blog by Scott Austin.

“How confident are venture capitalists about the industry right now? It depends on whom you ask, and how you ask it.

A small quarterly survey that checks the confidence meter of venture capitalists in Silicon Valley shows these investors lost some of their enthusiasm in the second quarter due to concerns over macroeconomic trends, unpredictable liquidity opportunities, and regulatory uncertainty specific to the venture industry.

As he does each quarter, Professor Mark Cannice of the University of San Francisco emailed Silicon Valley VCs in June and asked them to estimate their confidence in the San Francisco Bay Area entrepreneurial environment over the next six to 18 months. On a five-point scale, with five being the most confident, 32 VCs registered an average of 3.28. That’s lower than the first-quarter reading of 3.65 and ending five consecutive quarters of improvement.

So much for VCs getting their swagger back.

But wait, there’s another survey. This one, from executive-recruiting firm Polachi Inc., is much larger, polling more than 1,000 VCs nationwide. Among the survey’s six questions is, “Are you more confident about the state of the VC industry today than you were one year ago?” Fifty-six percent said yes.

As Polachi notes, that’s considerably better than in last year’s survey when 60% said no, even if that was during one of the worst years for venture investors on record.

No matter whether confidence is rising or not, venture capitalists have plenty to be worried about. According to the Polachi survey, the exit market is the top concern, followed by investor syndicate risk and their portfolios.

Cannice compiled comments from most of the VCs in the survey, asking them to clarify their confidence rating. One of the weightiest comments came from an anonymous investor who seems to have lost his confidence in everything: “Structural shifts in the venture business will constrain the availability of capital at a time when funds need cash. Several firms will collapse in the next 18 months. Add a bit of carry tax and corporate income tax rate increases and a soft Euro and US economy and you have a more difficult situation developing.”

Here are some select venture capitalist comments from Cannice’s survey (you’ll see a common theme):

Bob Ackerman, Allegis Capital: “While entrepreneurial activity continues apace, uncertainty around the broader funding and exit environments continue to place an on-going damper on new investment activity…Until either or both of these factors are addressed, capital investment in new ventures is likely to be moderate.”

Igor Sill, Geneva Venture Management: “Key to investment timing in start-ups is visibility in public market liquidity, and though we’ve seen a few IPOs, there appears to be little appetite for IPOs over the next 6-9 month period. Having said that, there are several outstanding, profitable and high growth private companies well prepared to go public when the public market window prevails. Optimistic employment metrics will go a long way in opening up the public markets for new tech offerings.”

Brian Panoff, Granite Ventures: “I think the fundamental value of innovative technology companies remains strong. In this type of economic environment, productivity gains through technology are more important than ever. My optimism is only tempered by instability in the capital markets and regulatory environments.”

Bill Byun, Samsung Ventures: “General deal flow is strong but the next few quarters will determine the enthusiasm, based mainly on market performance.”

Dan Lankford, Wavepoint Ventures: “The large tech companies have cash and are looking to fill their product pipelines, so we are starting to see some acquisitions. It would be helpful if the public equity markets could show some positive movement.”

Read the original post here.

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Blue Fridays. – (sent to me by a Veteran)

Very soon, you will see a great many people wearing blue every Friday. The reason? Americans who support our troops used to be called the ‘silent majority’ We are no longer silent, and are voicing our love for God, country and home in record breaking numbers. We are not organized, boisterous or overbearing.

Many Americans, like you, me and all our friends, simply want to recognize that the vast majority of America supports our troops. Our idea of showing solidarity and support for our troops with dignity and respect starts this Friday — and continues each and every Friday until the troops all come home, sending a deafening message that every red-blooded American who supports our men and women afar, will wear something blue. By word of mouth, press, TV — let’s make the United States on every Friday a sea of blue much like a homecoming football game in the bleachers.

If everyone of us who loves this country will share this with acquaintances, coworkers, friends, and family, it will not be long before the USA is covered in BLUE and it will let our troops know the once ‘silent’ majority is on their side more than ever, certainly more than the media lets on. The first thing a soldier says when asked ‘What can we do to make things better for you?’ is .’We need your support and your prayers.’ Let’s get the word out and lead with class and dignity, by example, and wear something blue every Friday.

IF YOU AGREE — THEN SEND THIS ON.

IF YOU COULDN’T CARE LESS — THEN HIT THE DELETE BUTTON.  I’M BETTING YOU DON’T!

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Here is an article from WSJ`s venture blog.

“Venture capital is having a mid-life crisis, according to a post from the University Pennsylvania’s Wharton School. ”The venture community (in Silicon Valley) is showing signs of middle age — moving more slowly and cautiously than before, and hitting fewer home runs than it did in younger, leaner days,” the post says. Because venture’s performance is less robust, investors need to look at venture capital in a new way. The post has advice from David Wessels, an adjunct professor of finance at Wharton:  ”Go back to 1990s and venture capital was about starting a company, making it large enough to have an impact on its own and taking it public so it would be Wal-Mart or Procter & Gamble in 20 years,” he says. “Lately, it’s becoming a surrogate for internal R&D. Start-ups set out to build a product from scratch, prove it has legs with a small market and get swallowed by a larger company.” So why invest in these illiquid, high-risk funds? “For diversification,” he notes. “You’re betting on stable returns and the opportunity to already be in the game in case something develops that will be the next big thing.”

Middle age aside, VCs are optimistic about their business, according to a survey by executive search firm Polachi Inc. of Framingham, Mass. A year ago, respondents said the industry was broken, but this year finds them more upbeat. They’re still worrried about exits, though.

Venture capital term sheets continue to be a source of frustration for many entrepreneurs. Investor Mark Suster, a former entrepreneur, weighs in on the topic on his blog, Both Sides of the Table. While things have improved as more information about term sheets circulates, VCs and entrepreneurs continue to see company valuations differently, he says. “I don’t feel that as a VC sneaking in nefarious terms into a term sheet that the entrepreneur doesn’t understand is a good way to build a long-term relationship nor to build a long-term reputation but this does happen and more frequently than we all would like,” Suster writes.”

Read the full article here.

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Here is an article from SF Gate.

“Vinod Khosla has been called a “green kingpin,” a fitting honorific given that the Silicon Valley venture capitalist controls $1.3 billion worth of funds targeted at all manner of clean tech enterprises.

Which makes his latest investment seemingly counterintuitive.

Last week, Khosla‘s firm, Khosla Ventures, partnering with Bill Gates, put $23.5 million into a suburban Detroit company looking to manufacture oil-dependent internal combustion engines.

Ah, but not just any oil-driven internal combustion engines. The 2-year-old EcoMotors International says its “opoc” (opposed pistons, opposed cylinders) engines are 50 percent more efficient and emission-reducing than conventional engines, are half their weight and size, with substantially fewer parts, and therefore much cheaper to produce.

Announcing the investment, Khosla called the company’s technology the kind of “game-changing innovation that can provide not only payback in months but also economic and carbon benefits to large segments of the world’s population without the need for subsidies or massive infrastructure investments.”

Gates sees the engine as “an important step in providing affordable, low-emission transportation for the developing world.” One of EcoMotors’ investors is Zhongding Holding (Group) Co. Ltd., a Chinese auto parts company.

“Maintech” solutions: Elaborating in an e-mail he sent me this week, Khosla said he believes EcoMotors’ engines “will prove to be the least expensive way to increase mpg – or decrease grams of carbon/mile driven – at zero cost compared with current engines. Basically, efficiency could be 2x what you get with a hybrid like the Prius.”

The Troy, Mich., company fits with Khosla’s oft-stated preference for “maintech” solutions, like more efficient engines, that don’t require the “massive investments” needed for the current flavor of the month, electric vehicles – which Khosla has said “are probably not material climate change solutions with technology developments that are visible today.”

It should be noted, however, that EcoMotors ( www.ecomotors.com) has also applied for a $200 million U.S. Department of Energy loan, which the company said it would use to build its engines at an old GM plant in nearby Livonia.

Based on testing so far, EcoMotors says its engine, designed by the former head of Volkswagen‘s powertrain division, will certainly exceed the federally mandated 35.5 mpg mandated standard for light vehicles by 2016. By that time – the company is aiming for 2012 – they should be in commercial production. The real goal: A five-passenger car getting 100 mpg, running on gasoline, diesel or ethanol.

Mainstream revolution?: Whether EcoMotors succeeds, Khosla’s investment illustrates a growing interest in what the company’s CEO, former GM senior executive Donald Runkle, has called “a revolution going on right now in propulsion systems.”

“It shows that Silicon Valley’s interest in the auto industry can’t just be married to the electric vehicle,” said Thilo Koslowski, chief auto industry analyst at research and consulting firm Gartner Inc. in San Jose.”

Read more here.

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Here is an atricle from WSJ´s VC blog.

“Riding solid gains in life sciences, venture investors opened their wallets a bit wider in the second quarter, increasing their investment pace after a dismal first quarter.

Overall, venture capitalists invested in 744 companies in the second quarter, up from 656 in the year-ago period and 602 deals in the first quarter of 2010. That amounted to $7.75 billion in the second quarter, up from $6.11 billion in the year-ago period and $4.66 billion in the first quarter of 2010. The new data come from VentureSource, which like VentureWire and The Wall Street Journal is owned by Dow Jones & Co., a division of News Corp.

But the improvement was mostly relative – the $12.41 billion raised altogether in the first half was an improvement on the $10.43 billion raised in the first half a year ago but still less than the first-half figures posted in the years 2006-2008.

At the same time, the macro-economic climate has improved, providing more confidence for investors who last year were more concerned about their existing companies than finding new ones. The economic improvement also gives confidence that exits will eventually materialize.

“Things have loosened up substantially,” said Dave Hills, general partner at KPG Ventures. “When nobody was sure what would happen, people were very concerned about follow-on investments they had to make with companies in their portfolios. Those have stabilized and now it makes sense to look for newer deals to put more money to work.”

Continuing a trend begun in 2009, when health care outpaced information technology for the first time in a decade, medical investment topped IT for the second quarter and for the half.

VCs pumped $2.72 billion into 201 health-care financings last quarter, a 14.7% leap from the $2.37 billion deployed in 189 rounds in the same time last year. The second-quarter total more than doubled the $1.23 billion invested in 151 rounds in this year’s first quarter, which had been the worst period for investment since the first quarter of 2003, when firms committed $1.14 billion to 118 financings.

Meanwhile, information technology was up to 231 deals in the second quarter, from 208 in the year-ago period and 186 in the first quarter of 2010. That represented $1.92 billion invested in the second quarter, up from $1.55 billion in the year-ago period and $1.48 billion in the first quarter of 2010.

While almost one-third of second quarter financings were seed or first rounds, there has still been caution in later stage deals, because of volatility in the public markets that has made both large IPOs and M&A deals hard to come by.”

Read the full article here.

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Here is an article from WSJ´s VC blog.

“Let’s give it up for the IPO market. Just when we thought the market was signing the blues, it awakens with three tech IPOs that all priced well – and they’re backed by venture capital or private equity firms. Underwriters for Qlik Technologies, a business-intelligence software maker, priced the shares last night at $10 each, above the expected range of $8.50 to $9.50. Likewise, RealD Inc., which licenses 3-D systems to major cinema chains, priced above its expected range of $13 to $15, at $16. And Smart Technologies Inc., which makes interactive whiteboards for classrooms, sold more shares yesterday than it originally planned while pricing within range in a jumbo $660 million offering. As Dow Jones Newswires recently noted, companies owned by private-equity firms have outperformed the Standard & Poor’s 500 stock index by an average of 7%.”

Read the full post here.

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Steven R. Gerbsman, Principal of Gerbsman Partners, Kenneth Hardesty and Dennis Sholl, members of Gerbsman Partners Board of Intellectual Capital, announced today their success in maximizing stakeholder value for a venture capital backed, medical device company company focused on a unique stent delivery platform that has applications in treating coronary, neuro and peripheral artery disease.

Gerbsman Partners provided Crisis Management and Investment Banking leadership, facilitated the sale of the business unit’s assets and its associated Intellectual Property. Due to market conditions, the board of directors made the strategic decision to maximize the value of the business unit and Intellectual Property.

Gerbsman Partners provided leadership to the company with:

  • Crisis Management and medical device domain expertise in developing the strategic action plans for maximizing value of the business unit, Intellectual Property and assets;
  • Proven domain expertise in maximizing the value of the business unit and Intellectual Property through a Gerbsman Partners targeted and proprietary “Date Certain M&A Process”;
  • The ability to “Manage the Process” among potential Acquirers, Lawyers, Creditors Management and Advisors;
  • The proven ability to “Drive” toward successful closure for all parties at interest.

About Gerbsman Partners

Gerbsman Partners focuses on maximizing enterprise value for stakeholders and shareholders in under-performing, under-capitalized and under-valued companies and their Intellectual Property. Since 2001, Gerbsman Partners has been involved in maximizing value for 61 Technology, Life Science and Medical Device companies and their Intellectual Property and has restructured/terminated over $790 million of real estate executory contracts and equipment lease/sub-debt obligations. Since inception in 1980, Gerbsman Partners has been involved in over $2.3 billion of financings, restructurings and M&A transactions.

Gerbsman Partners has offices and strategic alliances in Boston, New York, Washington, DC, Alexandria, VA, San Francisco, Europe and Israel.

For additional information please visit www.gerbsmanpartners.com or
Gerbsman Partners blog.

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