Apologies for not posting the last few days. I’ve been on a working vacation in Beaver Creek, CO attending the Venture Capital in the Rockies Conference.
Despite the recession, the VCIR conference pulled in about 300 attendees, only 30 fewer people than last year, says conference co-chair Seth Levine, who is a partner with the Colorado venture capital firm Foundry Group.
A few thoughts on the event:
* The Rocky Mountain region is emerging as a hub of clean technology innovation. I attended several interesting company presentations with startups working on various clean technologies.
Among the more promising:
SkyFuel: a startup based in Albuquerque, NM, which is making solar thermal power technology. They are doing a commercial demonstration with a utility this year, with plans to go into commercial production in 2010.
InfoUtility: a Boulder-based company making software to manage the smart electricity grid. Pacific Gas & Electric and Con Edison are doing test pilots of its software.
ION Engineering: another Boulder-based company making a technology that captures carbon from coal-fired plants. The company’s CEO Alfred Brown says, however, that there is no viable economic model yet for this technology.
* Although there are many promising technologies, most of them are still not yet ready for prime-time commercial deployments.
* Several entrepreneurs I spoke with were complaining that the VCs are reluctant to make new investments. One reason is that many area VC firms are having a tough time raising money.
* I was on a panel with Rebecca Buckman from Forbes, Mark Ververka of Barron’s and peHub’s Dan Primack. Foundry Group partner Brad Feld did a great job moderating the session. We all agreed that the venture capital industry was ripe for reinvention and that it was most likely the limited partners that were going to drive that change.
With venture capital returns down or non-existent for many firms, one likely area of change is the industry’s management fee structure in which firms get paid fees worth 1% to 2% of capital under management.
* Despite the tough environment, some new VC firms are getting funded: I bumped into Dave Moll, the former CEO of Webroot Software. He told me that last year he started a new Boulder-based firm called Infield Capital. The firm has raised a $50 million fund and is focused on investment in early-stage clean technologies for the transportation industry, with an emphasis on future powertrain technologies, and has already made three investments. Congrats Dave and good luck!
Tags: Brad Feld, Dan Primack, DAvid Moll, Infield Capital, Mark Ververka, Rebecca Buckman, Seth Levine, Venture Capital in the Rockies
Creative Capital 
March 5, 2009 at 7:26 pm |
I would be surprised to see VCs themselves drive real change because despite the problems they are at the heart of a system that works well for them. Change can only come from outside of the system, maybe VCs that fall off the system, or maybe entrepreneurs will finally get organized to have more collective bargain power in front of investors.
But the VCs inside the system can only do minor changes rather than real fix.
March 7, 2009 at 3:49 pm |
Thanks for posting your comment Marc. I sort of agree with you that VCs have little incentive to change the system–especially the fee management structures.
How would you change it? What needs to be reformed?
March 7, 2009 at 4:27 pm |
Spencer,
I have created Entrepreneur Commons (www.entrepreneurcommons.org) to address specifically the issue of early stage funding, by removing the key barriers that exist in the VC model:
– collaborative process for mentoring and selection of the projects. This resolve the issue of scalability. Instead of having so many partners tracking so many projects, with a limitation that creates the famous funding gap, you can have as many projects as you want. Each entrepreneur works in a self-help team or 5 to 10 entrepreneurs, so more entrepreneurs just means more self-help teams. It works for microfinance, and it will work for early stage entrepreneurs in developed countries.
– loans instead of equity for early stage. Valuations are anybody’s guess when the company is just started and there is no real track record, maybe not even revenue. So loans make more sense at that stage, and you can still maintain an equity kicker through warrants to allow investors to benefit from real successes when they happen. The other benefit of loans is that it removes the need for an exit, so that you do not have to try to inflate the business as much as possible and as fast as possible to make your money. Success becomes paying off the loan, which is a much healthier proposition.
And the beauty of all this is that the returns would not be that bad, specially in the light of the latest returns from VCs.
I have talked to many investors and entrepreneurs and they like the idea. Reid Hoffman recently was talking along similar lines. So I think it is not a question of whether it makes sense, but rather when we can make this happen. Hopefully sooner rather than later…
February 12, 2010 at 11:23 pm |
Nice blog, keep up the good work and thank you for sharing. 🙂