As Startup Considers IPO, Mission Ventures’ Leo Spiegel Sees End to San Diego’s VC Lockdown

9/2/09Follow @bvbigelow

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some of his newfound optimism to the stock market’s rebound, as well as the federal government’s economic stimulus package.

“If you think about what the government has done, in terms of pumping ginormous amounts of money into the economy, it seems to be working,” Spiegel tells me. “You’re starting to see some new deals get done. You’re definitely seeing follow-on rounds.”

He also cites a few other recent encouraging developments:

—Without providing many details, Spiegel says one of Mission Venture’s portfolio companies has been interviewing investment banking firms in anticipation of selling its stock through an initial public offering.

—Spiegel says Mission Venture’s limited partners seem to be feeling better. Limited partners, which are the pension funds, university endowments, and other institutional investors who provide VCs with their investment capital, have had to re-examine their investments and relationships with VC firms, but they seem heartened by the rising stock market.

—Mission Ventures had to increase its reserves for Mission Ventures III, a $210 million investment pool that closed in 2005. “Things are taking longer, so we have to hold onto our companies longer. Some of our syndicate partners are not participating in follow-up rounds,” Spiegel says. “We’re very fortunate that we have plenty of reserves in our third fund, and we’re still making investments out of that fund.”

—The time is now for venture investors to begin considering investments in the moribund semiconductor sector. Mission Ventures was not an investor in San Diego’s Sequoia Communications, a fabless semiconductor design company that ceased operations in July. But Spiegel says it is crucial for VCs to continue to place bets on big [system-on-a-chip] deals, even though such startups now often require 6 to 8 years and $75 million in VC funding to come to fruition. “The big challenge with those [startups] is that you have to fund them to go public,” Spiegel says, “It may take another couple of quarters for VCs to get the courage.”

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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