Things I Learned at the National Venture Capital Association Meeting

5/4/09Follow @greels1

I am at the annual meeting of the National Venture Capital Association being held in Boston lastthis week. The tone was remarkably upbeat—but only for those firms with either a new fund or who somehow avoided making a lot of overvalued investments during the last few years. There was a lot of rhetoric about how/when/whether the world will improve, whether VC’s will make money in cleantech, and when LPs will begin to wade back into the asset class.

But I did learn a number of things I did not know when I woke up…

* Revenues at VC-backed companies accounted for 20.5% of the nation’s GDP

* VC-backed companies represented 8.6% of all employment

* There are 12 million jobs at public companies which were once VC-backed

* Once companies went public, headcount grew 92% (94% in the 1980′s, 76% in the 2000′s – not a great trajectory admittedly)

* There were 1,171 new VC-backed companies in 2008

* Unfortunately there were only 6 IPO’s in 2008 and 341 M&A transactions that same year

* It now takes on average 9.6 years to get VC-backed companies public (or 6.5 years for an M&A transaction)

* $4.5 billion is being spent now from the stimulus package on “smart grid” technologies

* One in three people have been meaningfully helped by VC-backed biotech companies (staggering)

* WalMart recently lowered the cost of generic drugs to $4 which they believe served to take more costs out of the healthcare system than any single act of healthcare legislation

* Shockingly this year the 65,000 annual H-1B visa cap was not hit in the first week of being available (not happened before) which speaks to the limitations instituted that foreigners are not able to displace US workers

* There is now great anxiety that the federal government will regulate the VC industry given the “concerns” that the VC industry may create something called “systemic risk”

The industry I work in has certainly been an engine of innovation and job growth; to hear some of the specific statistics only reconfirms that understanding. It also underscores the need to get the VC ecosystem back on track and should provide caution to the government to be careful on how it feels it needs to regulate the industry.

Michael Greeley is a General Partner at Foundation Medical Partners. Follow @greels1

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  • worldprivateid

    Despite the fact that statistics of the past does not speak for the future. I admire your optimistically painted view about the VC industry.

    Two articles below from WSJ and SFGate said otherwise -

    WSJ, Venture Capital Hits a Cash-Call Crunch
    http://online.wsj.com/article/SB122869480476586689.html

    SFGate, VC investment in startups keeps falling
    Deborah Gage, SF Chronicle Staff Writer
    http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/04/18/BU22174C98.DTL

    Arguably, the consensus about 50% – 75% of VC firms in 2008 will be out of business within 2-3 years is remained to be seen.

    Likely than not, the VC industry will revert to a handful of brand name founders and a few scrappy but capable newcomers, and no one is going to see a “100 bagger” (returns 100 times the money invested) ever again.

    According to a recent report by AGC, explains –

    Venture funds raised an average of $25B per year in the last 5 years, but new capital raised in 2009 will be down 60% from 2008; VC industry is dying due to lack of liquidity and financial market stability and 2009 will be the worst year for VC liquidity since the early ‘90s; VCs have far less dry powder for new investments due to the recession and longer path to liquidity. On the bright side, buyouts and VCs with cash, empowered to invest, will encounter less competition than they’ve seen in years and capture far better opportunities.

  • http://www,robotiksinvest.com Ti Kao, Robotikis founder

    Thanks for let me rigister from your web.

  • intrepid_one

    Michael, you take the self-important VC voice – on “engine of innovation”. VCs aren’t an engine at all, gasoline or electricity yes, but engine no. Entrepreneurs, technologists and leaders are the engine of innovation.