Controversial Companies Are Good, VCs Are Getting Active, and the Entrepreneurial Generation Is Rising: 10 Takeaways from Xconomy’s VC65

4/12/11Follow @gthuang

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credit card companies after having problems with fraudsters. Hartenbaum, who was a founding investor in Skype with Draper Richards, had a few takeaways. One, “controversial companies tend to be the most impactful.” (If all venture partners agree on a deal, it’ll probably fail.) Two, “just because a company is successful on the outside doesn’t mean it’s not having trouble on the inside.” (Skype “almost died along the way,” he said, but was bought for $2.6 billion in 2005 by eBay, which spun it out in 2009.)

7. “We’re seeing the professionalization of startups.” That was Noubar Afeyan of Flagship Ventures. He said he wants to see a higher rate of success with startups—perhaps five or seven out of 10 should be hits instead of 1 in 100, say. This invited a bit of debate with Bryan Roberts of Venrock, who thinks startup success will still be a “lottery” won by inventors in a garage. “We’re an industry of exceptions,” Roberts said. “The median doesn’t matter—the exceptions are wonderful.”

6. Millennial generation? Nope, those 20-somethings are the “entrepreneurial generation.” On the same panel, Theresia Gouw Ranzetta of Accel Partners said she sees “a whole new generation embracing entrepreneurship.” These young people “want to be entrepreneurial from the start,” she said, and they view building startups “as the pinnacle” of their careers. (This fits with a theme we’ve been following at Xconomy—how startups have gone mainstream as of late.)

5. VCs hate the super angel hype. Even Jason Mendelson of Foundry Group, hardly an entrenched, old-guard venture firm, said he’s “sick and tired” of the super angel discussion. “Some of my best friends are super angels,” he quipped. “They’re just other investors. I don’t think it’s changing anything.” Mendelson noted that investors of all types are shifting from a “passive model to an active model” of mentoring entrepreneurs and startups proactively—often before they invest in them.

4. Show me the money—and the lives. The aforementioned Bob Langer-Polaris partnership has yielded 17 companies so far, with an overall internal rate of return (IRR) of 53 percent, if I saw the figure correctly. Even more importantly, those biotech firms have the potential to touch more than one billion lives, McGuire said.

3. VC is getting all Hollywood on us. Scott Kupor of Andreessen Horowitz talked about his firm’s organizational approach, whereby it employs a team of specialists—in talent, market, research, business development, and deal flow—to help with each investment, instead of having the relationship rest on one general partner. This is modeled after the Hollywood agency approach that began in the 1970s (using a team of specialists instead of one agent per actor). It’s also based on something more mundane—the structure of a modern corporation. Kupor said his firm is taking a new approach for VC, but time will tell if it works.

2. Global innovation can be brought to the U.S. The last panel of the day was asked how they think about entrepreneurship around the world. Peter Brooke of Advent International stressed the importance of caring about the local culture. “When we went to a country, we made sure we understood the culture and built relationships,” he said. “The most important thing I understood is the patience it takes. If you’re going to create something that survives in the long run, you have to learn to be patient.” Meanwhile, Linda Rottenberg of Endeavor Global pointed out that people are increasingly saying, “Can you bottle up innovation elsewhere and bring it back here?” Tim Draper of Draper Fisher Jurvetson agreed that “we’re seeing a bit of transfer of innovation,” from the widespread notion that Asia copies U.S. inventions to some copying happening here. (Separately, see Desh Deshpande’s efforts to bring an Indian innovation model back to Massachusetts.)

1. Venture capital is alive and well…at least for now. Perhaps Peter Brooke summed things up best, near the end of his panel: “Is the venture capital model broken? There are so many stupid questions,” he said. “People still want to do things here [in the U.S.]. Sarbanes-Oxley [the public company accounting act] is just something to get around. I think the world looks pretty good, aside from Congress.”

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com. Follow @gthuang

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