Ascent Venture Partners Says Data Intelligence Is the Next Big Thing, Tech Startups Will Get Scooped Up Like Biotechs, and Bigger Isn’t Always Better

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Compete (another company now owned by Kantar), Lexalytics, and Crimson Hexagon. Fates says this market is already on its second-generation, measuring social media buzz, a fact that also illustrates Ascent’s aim of backing future market leaders.

3. Small funds and acquisitions aren’t necessarily a bad thing.

Many VC firms have been raising smaller funds than usual in recent years. But Ascent has consistently kept its fund sizes at around $150 million, and hasn’t had to react to the shrinking VC pool. The team says that the return to smaller funds on the part of other firms is the market correcting the excesses of too-large funds in recent years.

“Raising the big fund and trying to get that big return doesn’t work well,” Fates says. He says the firm is focused on making fewer, closely managed investments in younger companies, rather than spreading a big fund thin across a number of early-stage deals.

The smaller pool of VC money doesn’t necessarily preclude companies from getting funded, though, says Ascent principal Luke Burns, who noted that startups will be pushed to be more capital efficient and make do with less. “Even if the overall capital is shrinking, the number of companies funded will shrink by a lesser amount,” says Burns, who has written about venture health indicators for Xconomy before.

The Ascent team also dished on the ever-present debate of IPOs versus mergers and acquisitions as preferred VC exits from startups. “Public companies happen in a minority rather than a majority,” says Oblak. And, because existing tech giants like IBM have been setting aside cash for scooping up promising startups, the acquisition often derails companies on their way to IPOs, he says.

“Build strong companies [that are poised to go public] and make someone preempt you off that track,” he says.

Lastly, Oblak drew an interesting parallel across disciplines. “IT is becoming akin to what is happening in life sciences,” says Oblak of the trend of IT industry giants building their technology portfolios by acquiring startups. “Big pharma companies have great distribution networks, and they look to biotechs to innovate and incorporate drugs into their space.”

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