A Consensus of Three: Venture Capital Still Looking to Grab Rebound
Have we turned the corner on the recession? That was the big question for the out-of-town venture capital partners—including two from the San Francisco Bay Area—who came to San Diego last week to offer their perspective on the post-collapse generation of venture capital and technology innovation.
“One thing that’s clear is that the other side of that corner is not going to be the same,” said Emily Mendell, vice president of strategic affairs with the National Venture Capital Association in Washington, DC. Mendell also came to town to moderate the breakfast discussion organized by the San Diego Venture Group, also featured Bryan Roberts, a Venrock partner in San Francisco; David Dreesen, a Battery Ventures partner in Menlo Park, CA; and Mike Dodd, a venture partner at Austin Ventures in Austin, TX.
So what did these VCs say about a rebound? Dreesen and Dodd said “yes” when they thought the question was whether the overall economy had turned the corner. But all three VCs said “no” when Mendell clarified her question to ask whether the venture capital industry itself is rebounding.
“The Valley [Silicon Valley] is red-hot for early stage deals,” said Dodd, who oversees mostly Web-enabled consumer and online media deals at Austin Ventures. VC investing also has developed some interesting themes in certain sectors, such as Internet startups, which have become much cheaper to develop and much easier to bootstrap. But the fundamental problems remain: There is still little exit activity among venture-funded startups, “and just too much money running around,” Dodd said.
Cleantech also has been a robust sector for VC investing, accounting for over 30 percent—or about $1.7 billion—of the venture capital that was invested nationwide during the first quarter, according to Dreesen, who oversees much of Battery Ventures’ cleantech deals. But Dreesen added, “There really hasn’t been a shakeout in cleantech,” where he estimates $30 billion has been invested since 2005.
So does he see a bubble in cleantech?
“Well, when you’ve got $30 billion going in, you’d like to see at least $30 billion coming out,” Dreesen said. He estimated an investment like that would have to generate something like $120 billion in total return on investments to justify the risks, which seems unlikely. “I think cleantech as a sector is not going to do well,” Dreesen said, “although we think there are opportunities that are going to do well.”
Roberts, who oversees investments in life sciences and health IT at Venrock, said the … Next Page »