What Financial Crisis? Highland’s 20th Hearkens to Days of the Bubble

10/3/08Follow @bbuderi

A basketball hoop in the Museum of Science lobby, teams of entrepreneurs playing 3 on 3. Boston Celtics cheerleaders rooting them on. A rockin’ band. Shots of blueberry martinis doled out in test tubes. A contortionist—yes, a female contortionist in a skin-tight body suit.

Did I just go through a time warp, I wondered? This was 2008, not 1998, wasn’t it? Bill Bulkeley of the Wall Street Journal was standing next to me and put it best: “A pre-bubble party in a post-bubble economic environment.”

Welcome to Highland Capital Partners’ 20th anniversary bash. It was held last night—pre-debate—and it truly would have impressed even Silicon Valley firms. Scores of representatives from Highland’s past and present portfolio companies were on hand—some taking part in the 3 on 3 tourney (owater edged City Sports in the championship). To inspire them perhaps, Highland venture partner Wyc Grousbeck, who’s also managing partner, governor (yes, governor), and CEO of the Celtics, even brought over the C’s championship trophy and put it on display next to the court.

But whether you like hoops or not, it was a wild, impressive, crazy, head-shaking affair. And the crowd clearly loved it. “I heard this is the greatest concentration of Boston entrepreneurs ever,” one person told me. There was no way, of course, to verify this. But hats off to Highland for shaking us, at least for an evening, out of our economic doldrums.
Highland party contortionistThe only pall over the bash might have been the fact the vice presidential debate was closing fast, causing me, for one, to forego the blueberry martini shots and head home early. But I spoke to a lot of great people, including Highland general partner Paul Maeder and Tom Stemberg, founder of Staples and managing general partner of Highland’s consumer fund. Another great new face for me was Sallie Shuping Russell, now of BlackRock in Durham, NC, and previously the superstar head of the private investment portfolio for Duke University, which invested in one of Highland’s funds. She said she could get me tickets to a Duke or North Carolina basketball game—but that might have been after I mentioned Xconomy might some day open in Research Triangle Park (in any case, I think I’ll have to go down and evaluate our expansion soon). [Editor's note: Bob is of course joking here, and would never accept an extravagant freebie from a source or potential source. Right Bob?]

Here are notes from some of my conversations, most of them having to do with the current financial muck:

—From John Landry, CEO of Lead Dog Ventures, an Xconomist, and former CTO of Lotus Development: “The venture business is potentially turning into not that great a business, because there aren’t that many places to sell their businesses.” (Well, that was the amended version of what he said, crafted once I told him it would go in print.) M&A activity has been in the doldrums for a couple years, and the IPO market is dead, Landry observed. Private equity firms used to be the last resort for selling portfolio companies, he said. “That’s over. God help us all.” Then, looking around at the party, he added, “But Highland seems to be doing quite well.”

—Howard Anderson, another Xconomist, was ruing the day he turned down the chance to invest in the Celtics’ syndicate when Grousbeck took over—a decision that cost him, he said, a 30 percent annual return and a championship ring. On the economic front, Anderson told me he had informed his class at MIT’s Sloan School of Management that they should forget Wall Street this year when looking for jobs. But he was pretty optimistic about their chances elsewhere. “You guys are like stem cells,” he told them. “You can be anything. [But] Wall Street doesn’t need you.”
Bob with Celtics cheerleader
—John Chory, a partner at WilmerHale and chair of the firm’s venture group, was even less downbeat—especially when it comes to the crisis’ effect on the entrepreneurs who are his clients. “My clients don’t have 401Ks,” he quipped. Chory noted that many startups these days, especially in IT, don’t need much capital by historic standards—so even if venture firms are forced to put more resources into their existing portfolio companies, there should still be enough funding for good startups. “A lot of these companies, I’ve got to force them to go get VC money,” he said. The startups often do not think they need investment dollars, and they don’t want to give up equity to a VC. But Chory tells them that having the cachet of a top venture firm investing in them gives both potential customers and potential hires confidence in the startup and can help the business in myriad ways.

To illustrate his points, he took me over and introduced me to Bill Clerico, CEO of WePay, an interesting startup trying to create online ways for people to pool and track money for collective purposes—from roommates sharing grocery funds to sports pools, I gather. No 401K investments, Clerico confirmed. But he was a bit more cautious about the economic climate than his lawyer.

Chory also forced me to pose for a picture with one of the Boston Celtics cheerleaders.

Bob is Xconomy's founder and editor in chief. You can e-mail him at bbuderi@xconomy.com, call him at 617.500.5926. Follow @bbuderi

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