National Venture Capital Association

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National Venture Capital Association

  1. 1. National Venture Capital Association 2009 Prediction Quotes "It is likely that venture capital fundraising will decline in 2009, but the irony is that venture funds launched in the first or second years following a recession have been among the best vintages. Since the variance between the top quartile funds and the mean tends to be the largest for those vintages, the logical conclusion is that now could be an opportune time for investors attempting to access those top tier venture funds." --Dixon Doll, Co-Founder and General Partner, DCM and NVCA Chairman Want to hear more from Dixon? Email: Katja Gehrt “While we may see a significant decrease in the total dollars invested, the number of deals being done will only decrease slightly. I believe we will see smaller round sizes that are more milestone-driven, along with more discipline by the venture community to not over fund certain categories. Ultimately, backing passionate talented people will generate superior returns. In five years from now, some of the best returns will be from companies that were founded and funded in 2009 which puts a premium on creativity and resourcefulness in the near term.” -- Michael Greeley, General Partner, Flybridge Capital Partners Want to hear more from Michael? Email: Kate Castle “2008 feels like 1974 to me. Naysayers in 1974 were saying entrepreneurs and venture capitalists were obsolete and small company IPOs were a thing of the past. They were obviously wrong. The only good news I can offer today is that the forecasters don’t have any better insight into the future than the rest of us.” -- Bob Pavey, General Partner, Morgenthaler Ventures Want to hear more from Bob? Email: Ching Wu “Personalized medicine, based on advances in genetics, will be a central tenet of President–elect Obama’s health-care reform proposals. By translating scientific innovation to clinical practice improved patient outcomes and reduced system costs can become a reality. This is good news for all involved.” -- Michael Goldberg. General Partner, Mohr Davidow Ventures Want to hear more from Michael? Email: Pamela Mahoney
  2. 2. “In 2009, there will be pockets of vibrancy in the economy where early adopter consumers and visionary investors will advance new paradigms based on prevention, prediction and personalization to grow science-based health and sustainable living companies. These ‘sector anomalies’ will continue to be small, under the radar markets—and their quiet emergence will be overwhelmed by the pain and suffering in the mass market. Nonetheless, there will be a meaningful shift in consumer-patient behavior that will provide impetus for investors to back entrepreneurs who bring credible innovations to market in an otherwise discouraging economy.” -- William Rosenzweig, Managing Director, Physic Ventures Want to hear more from William? Email: Binay Curtis “Predicting trends for 2009 is extremely daunting but we can look to certain investment strategies that are attractive during challenging economies. For years firms have talked about writing smaller checks, but we’ve seen few venture investments under $1,000,000. This will see a huge shift. Cash efficient, early stage companies with solid business plans which require modest financing to reach viability will be compelling targets. The trick for VCs will be to manage an expanded portfolio with appropriate levels of involvement. If done well, the upside for both the start-up and investors will be tremendous.” -- Steve Fredrick, General Partner, Grotech Ventures Want to hear more from Steve? Email: Robin Bectel “Clean tech investing is going to come on strong in 2009 despite lower energy prices because there will be so much attention paid by governments around the world. By 2010, clean tech will be the largest dollar segment for investing in the venture industry.” -- Ray Leach, CEO, JumpStart, Inc. Want to hear more from Ray? Email: Cathy Belk “To paraphrase Dickens, it’s the worst of times and the best of times for venture capital. On one hand, the burst of the credit bubble and the resulting recession from it is going to be long and tough. On the other hand, this could be the inflection point for venture capital where marginal venture backed companies and venture firms give way to the strong ones. The best firms and the best venture capital backed portfolio companies will not only survive in 2009 but will thrive in 2010 and this will create very strong liquidity events in 2011. We will need to take the strong medicine now and if we do, I am very optimistic for the future for I am sure we will come out of this stronger and better.” --Venky Ganesan, General Partner, Globespan Capital Want to hear more from Venky? Email: Davina Magargal
  3. 3. “Despite the short term dislocations, venture capital will be one of the best places to put money in the next few years. The key is to absorb the mark to market quickly, and invest today based on where 2010 will be, not where 2007 was. IT, Life Science, and Clean Tech companies can be purchased at all time lows. Unlike 2001, these are companies with viable and efficient business models that are cheap - not because they are broken but because the world is. Once the world heals, they will bounce back strongly. When the path to consistent performance is clear, the IPO window will reopen as public investors who have been hoarding cash will be hungry for growth. At that point, venture capitalists with companies ready to go public will make a killing.” --Rory O’Driscoll, Managing Director, Scale Venture Partners Want to hear more from Rory? Email: Carol Sacks “There is little doubt that we are facing unprecedented economic times, and the global financial markets have constricted dramatically. Because of this ongoing turmoil, businesses— and especially smaller businesses—are finding it difficult to raise capital from either banks or the stock market. However, entrepreneurs of growing, conservatively capitalized companies will continue to have access to growth equity capital. For these well-managed companies, uncertain times can in fact present opportunities to capitalize on the dislocation in markets. After the downturn runs its course, these companies can emerge as stronger competitors better-equipped to benefit from the ensuing period of economic recovery.” --Joe Trustey, Managing Director, Summit Partners Want to hear more from Joe? Email: Joan Miller “NewSpring anticipates that some of the best private equity investments will be made in this downturn for those that are confident enough in their judgments. It’s critical that the financial system stabilizes to restore both confidence and liquidity. If that happens, second half 2009 and 2010 could be very opportunistic years for established VC funds with the flexibility and resources to capitalize on contracted valuations and wait-and-see investment strategies. Looking back, NewSpring took advantage of some great opportunities in 2001 and 2002 and our investors have reaped the benefits with some very successful exits and a strong record of distributions.” -- Mike DiPiano, Managing Partner, NewSpring Capital Want to hear more from Mike? Email: Veronica Rosa “A deep recession and a new administration headed by a fit, tech-savvy President could combine to create transformative opportunity for new health information services. The nation’s public health is collapsing almost as fast as the economy, as diet and lack of exercise fuel the obesity epidemic and its attendant cost and misery. This is not good news – but it will demand innovative response, and thus create opportunities. We expect increasing recognition that hospitals and doctors can, by themselves, do little to improve the nation’s failing health. At the same time, as examples pile up of the effectiveness of automated health and wellness coaching and incentive-driven consumer benefit design, we expect great interest in the application of communications and IT solutions to health maintenance and medical care delivery.” -- David Jones, Jr., Chairman and Managing Director, Chrysalis Ventures Want to hear more from David? Email: Ceci Conway
  4. 4. "We are going to see companies with “incremental” value propositions struggle to get funding and commercial traction in this challenging environment. Hospitals are freezing all but the most critical new technology acquisitions, payers are scrutinizing new innovations to ensure cost avoidance arguments hold water and supporting clinical arguments are compelling, and investors are seeking category defining companies that are more likely to achieve liquidity. Also, the storm clouds hovering over the FDA will mean that more ballast is required to tip the risk v. benefit scales in favor of a new technology. However, disruptive companies with strong associated clinical and economic value propositions led by strong teams will still attract capital, success and acquisition interest." -- Tom Rodgers, General Partners, Advanced Technology Ventures Want to hear more from Tom? Email: Donna von Halle “2009 will be the year in which the world’s capital markets begin rewarding ‘real engineering’ instead of ‘financial engineering’ again. Entrepreneurs building companies based on innovations in materials science, chemistry, and other physical sciences will see the most growth, as their solutions to the world’s key problems of energy, water, infrastructure, and health will offer the most promising long-term returns to venture investors.” -- Trevor Loy, General Partner, Flywheel Ventures Want to hear more from Trevor? Email: Yasine Armstrong "This economic climate is creating far more significant challenges for our industry than those we saw in 1999-2000. Today's issues are systemic, with broader, deeper reach and a longer duration. However, the net result will be a smaller, stronger venture capital industry that can once again deliver outstanding returns to our limited partners." -- Roger Novak, General Partner, Novak Biddle Venture Partners Want to hear more from Roger? Email: Channa Luma "We are optimistic, by nature however, with the last downturn still fresh in our memory, we won't know the scope of the economic challenge until possibly as late as next summer. As with all real challenges, it will take some time for things to settle and for the industry to pick up the pieces. I think any prediction around timing of a recovery right now (short term, long term, v shaped, etc.) is complete speculation. Clearly, the global economic foundation has been rocked thus planning for a very difficult 2009 and beyond is the only prudent thing to do. Opportunities exist; great ideas continue to present themselves and we'll fund them. Great companies are created in both good and bad economic times.” -- Ryan Floyd, Partner, Storm Ventures Want to hear more from Ryan? Email: Lisa Kelaita "We expect an impact of the financial crises on the venture capital business. We are very much helping our portfolio companies to prepare for the changed economic environment. The big advantage is currently the strong demand for innovation on the clean tech as well as on the healthcare side and good opportunities will show up here. In the current environment we see that specifically a corporate investor will be able to add a lot of value." -- Ralf Schnell, CEO & President of Siemens Venture Capital
  5. 5. Want to hear more from Ralf? Email: Oanh Le “I don’t think the economic environment will begin to brighten until late next year. It would be naive to think there won’t be any more surprises. Hopefully there won’t be too many more. On the deal side there’s a great aspect and a cautious one. The great aspect is there will be much more attractive valuations on companies. At the same time we don’t know how long this financial crisis is going to last so I don’t think anybody wants to rush out and invest too quickly in this environment. We’re letting any exits be a positive surprise.” – Sandy Miller, General Partner, Institutional Venture Partners (IVP) Want to hear more from Sandy? Email: Gina Bauman “While the global economy is going to challenge venture-backed companies in 2009, it is equally clear that the need and opportunity for technology-driven innovation that reduces costs or materially improves customer ROIs will remain high. Security technologies will continue to be a leading area of innovation and investment interest –the bad guys are not affected by a global recession.” -- Bob Ackerman, Co-Founder and Managing Director, Allegis Capital Want to hear more from Bob? Email: Jennifer Jones “Global innovation does not stop during economic downturns. Great products and technologies will continue to attract customers. Despite the economic slowdown, we remain committed to investing around the globe and working closely with our portfolio companies to refine their strategies and build their customer bases to help make them more successful.” -- Arvind Sodhani, President of Intel Capital and Executive Vice-President of Intel Corporation Want to hear more from Arvind? Email: Mark Adams “The demand for healthcare solutions is growing, and with it, venture investing opportunities. As the country moves towards universal healthcare insurance, the need for products and services that deliver quality care at a reduced cost to the system is paramount. There are high quality companies seeking to meet this challenge, which is essential to address as healthcare commands a greater and greater share of our GDP. The opportunity for us is to ensure we continue to identify the highest quality companies that have effective business models and management teams to deliver the kinds of returns we want for our investors while contributing positively to the healthcare economy as a whole.” -- Stephen Krupa, Managing Member, Psilos Group Want to hear more from Stephen? Email: Jennifer Jones “History has demonstrated that a down economy can foster the foundation for innovation. In 2009, revolutionary ideas will continue being developed, along with solid opportunities for growth in sectors such as personalized medicine, regenerative medicine, healthcare IT and e-Commerce technology. There will be many investors with capital available for deployment in businesses with truly differentiated products, strong management, a solid vision and tangible value proposition. It will be critical for growth- stage companies to demonstrate momentum, communicate real ROI to their customers and investors and focus on executing their game plan in order to weather the storm and attract capital.” -- Peter Boni, President and CEO of Safeguard Scientifics
  6. 6. Want to hear more from Peter? Email: Kristy DelMuto “This is going to be a 6-12 month period when the VC industry is going to be pretty quiet. With no IPO’s and fewer liquidations, VCs will be returning less to their LPs. As a result, LPs may have trouble making new commitments. There will always be exceptions, such as a governmental unit that wants to foster the economic / venture capital community as a way to create jobs and economic growth. And this is going to be one of the best ways to help us return to a prosperous market.” -- Don Caldwell, CEO, Cross Atlantic Capital Partners Want to hear more from Don? Email: Carter Caldwell As VC firms look to balance risk and return, the next several years will see a return to balanced, stage- appropriate investing. While early stage investing will continue, it will be primarily in areas like energy technology and cloud computing where the long term fundamentals are economically attractive, or even necessary. The best-performing venture funds have historically been raised in recession years, with those funds being able to capitalize on lower current equity prices in long-term growth sectors. - Michael Stark, General Partner, Crosslink Capital Want to hear more from Michael? Email: June Parina "The capital shortage in the United States will escalate in 2009, leading to increased pressure on funding- driven energy start-ups and an advantage for established, capital-rich petroleum companies to make inroads among policy makers. Despite an overall optimism for Clean Tech among the incoming administration, because traditional energy companies have larger, secured capital stores, they will further use their influence to expand drilling measures. Likewise, because young Clean Tech companies lack the same financial resources, they will see their energy policy hijacked, leading to overall frustration among their numbers as well as with the Obama cabinet and policy leaders." -- Alan Salzman, Chief Executive Officer and Managing Partner, VantagePoint Venture Partners Want to hear more from Alan? Email: Christine Hinton

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