A Consensus of Three: Venture Capital Still Looking to Grab Rebound

6/21/10Follow @bvbigelow

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venture sector has been a game of trying to pick the right deal for the past 15 years. But now it faces even greater challenges in terms of sorting the wheat from the chaff. In health IT, for example, Roberts said the healthcare industry is projected to spend only about one-fourth as much as the financial services industry on new IT infrastructure. With those odds, VC partners might be wiser to place their bets elsewhere.

Roberts later said venture capital “doesn’t look great” as an investment category these days, but a lot of other investment categories don’t look good either.

The VCs also offered their perspectives on a variety of other topics:

—When asked about emerging opportunities they see in their respective areas of expertise, Dodd said, “We’re going through a secular trend that we really haven’t seen since the PC era, and that is in mobile computing…and we’re only in the second inning. It’s going to be big, and it’s going to be interesting, and it’s going to potentially be as big as the PC.”

—The “smart grid” (in which utilities use advanced IT to collect data on consumer energy usage and to manage the power grid) does not represent an opportunity to deploy IT equipment and specialized appliances on a scale comparable to the Internet boom, Dreesen said.

—Asked how an entrepreneur could arrange a meeting, Roberts said, “Get someone who knows me pretty well to introduce you. It’s not like I or Venrock just showed up yesterday, and if you can’t find that, and you have to go through the website, then the question is ‘why?’ I mean, entrepreneurs are supposed to be pretty resourceful, right? I do look at the stuff [i.e. business plans] that comes through the website—usually on the flights from Boston to the West Coast—and the quality is not the same.” Dodd agreed, saying, “I don’t think I’ve seen one deal in two years that came through the website.”

—Asked for the one factor that can make a deal happen, Dreesen said, “For me, it’s hard to pick one thing because there are a lot of different elements that need to come together. In the cleantech arena, though, I would say one thing is economics. If you’re a biofuel company and you can produce a fuel that’s way cheaper than gasoline, [that can make a deal happen.]“

Dodd added that an entrepreneur “definitely needs to be able to see around the corner a little bit… and to show an ability to continually make the right decision.” In digital media startups, Dodd added that in addition to hiring an entrepreneur who understands consumers, “We look for somebody who is a really good artist.” In this age of iPhone apps, Dodd said, having an artistic ability “to intuit an interface to a consumer is a critical talent.” He said his firm spends a lot of time looking for recruits at art schools to put into companies. “Before, being an art student, you were kind of relegated to making $8 to $10 bucks an hour, even if you were really talented,” Dodd said. “Now, you’re actually highly sought after—if you can pull all those pieces together.”

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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