Posts Tagged ‘Allegis Capital’

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.”

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Here is some interresting news from Bloomberg.

“Silicon Valley companies looking to put their cash to work may drive a wave of mergers this year, bankers and venture capitalists say.

Companies are eager to make acquisitions because many of them have cut research budgets, says Robert Ackerman, founder and managing director of Allegis Capital in Palo Alto, California. That means they’re not as able to fall back on their own ingenuity to fuel growth. More businesses are relying on acquisitions to find their next new product or service, he says.

“The product cabinet is bare, but the market continues to move forward,” Ackerman said. “Wherever you see innovation sprint ahead, companies will have a product deficit, and will look to fill it.”

Google Inc., based in Mountain View, is currently one of California’s most acquisitive companies, buying at least five businesses in 2010. It agreed to buy Picnik Inc. last month, acquiring online photo-editing tools. Its purchase of DocVerse provided it with software that lets people share documents over the Internet. The value of the deals wasn’t disclosed.

The state’s largest single deal this year was Shiseido Co.’s purchase of San Francisco-based Bare Escentuals Inc. for about $1.7 billion.

California deal-making plummeted after 2007, when more than 2,670 transactions totaled almost $254 billion. So far this year, there have been about 530, worth $16.7 billion. That’s a higher number than in the first three months of 2009, although the value was greater in that year-ago period, at about $30 billion.

McAfee, Tibco

Local acquisition targets include Santa Clara’s McAfee Inc., Tibco Software Inc. in Palo Alto and Cupertino-based ArcSight Inc., according to Brent Thill, an analyst at UBS AG in San Francisco. McAfee and ArcSight both make programs that protect data, which could be more valuable as cyber threats mount. Tibco’s software helps programs of all kinds share information.

Goldman Sachs Group Inc. also cited San Francisco’s Salesforce.com Inc. and Palo Alto-based VMware Inc. as possibilities — though those companies aren’t the most likely targets, the firm says. Salesforce.com makes online customer- relationship software, while VMware sells so-called virtualization programs, which help computers run more than one operating system. Representatives from all the targets declined to comment or didn’t respond to messages.

Deal Volume

In Northern California, there were 45 deals involving venture-backed startups during the first three months of 2010, according to the National Venture Capital Association. That was the highest number in any quarter in at least five years.

More than 50 companies in California have at least $1 billion in cash and equivalents, which they could use for acquisitions. They’re led by a Bay area trio: San Francisco’s Wells Fargo & Co., with $68 billion; Cisco Systems Inc. in San Jose, with $39.6 billion; and Cupertino-based Apple Inc., with $24.8 billion, according to Bloomberg data.

“There’s a lot of cash on people’s balance sheets, so I think it’s a great time for startups,” said Kate Mitchell, managing director at Scale Venture Partners in Foster City, California. “They see that the faster, better, cheaper venture- backed companies are still growing, and they’re not spending on R&D, so they can be accretive.”

The value of deals in California topped out at $378.1 billion in 2000 during the Internet bubble, when there were more than 2,200 transactions. It took five years for the number of deals to surpass that earlier peak, and the dollar amount has never come close to recapturing the dot-com era’s glory.

Internet Bust

While the latest recession was the worst economic slump since the Great Depression, it actually wasn’t as devastating to California deal-making as the dot-com collapse. After having easy access to venture money and initial public offerings in the late-1990s and 2000, money dried up. The M&A industry hit bottom in 2002, when just 1,505 transactions accounted for $95.3 billion.

The deals crept back up over the next four years, peaking again in 2006 and early 2007. There were 665 in the first quarter of 2007, valued at $59.8 billion. That’s more than three times the number reported last quarter.

Tor Braham, head of technology mergers and acquisitions for Deutsche Bank AG in San Francisco, says mergers are ready to surge again for two reasons.

Pressure’s On?

“Private-equity funds have raised a lot of money before the financial crisis and there’s pressure on them to spend it before those commitments expire,” he said. Also: “Sellers want to get their deals done this year, before the expected increase in capital gains tax rate.”

Private-equity firms raised $538 billion in 2006 and $587 billion in 2007, just before the recession, according to the Private Equity Council in Washington. Capital-gains taxes, meanwhile, could rise above 20 percent for people earning more than $250,000 under budget proposals before Congress.

In the first quarter, Deutsche Bank advised Techwell Inc. in its $370 million takeover by Intersil Corp. The bank also worked with Nimsoft Inc. in its $350 million acquisition by CA Inc., and Francisco Partners on its sale of Numonyx BV to Micron Technology Inc. for about $1.3 billion.”

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