If yesterday's angel investing
panel was cautiously optimistic about the future of growth investment in startups, this morning's
AlwaysOn Venture Summit discussion was more dramatic, forecasting deep lows that will lead to stellar highs once the public markets recover and exit windows reopen. But the panelists' long-term bullishness was also balanced with considerable hostility toward what they perceived as a politically correct, hyper-regulatory environment that will strain exits and drive new listings overseas, slowing firms' returns and crippling venture capital as an asset class.
Maybe. The conflicted sentiment did lend credence to the idea expressed in the panel's title: "Is Venture Capital at an Inflection Point? Are International Markets a Savior?" But their long views most frequently compared the future to past boom-bust scenarios, pointing more to a cyclical environment than a true inflection point. "When the next bull market comes, and I believe it will be the bull market to end all bull markets, the beneficiaries will be the VCs of 2001 to 2004 who held on and were patient," said Accel Partners' Joe Schoendorf.
In between, though, the VCs seemed to agree that a shakeout is inevitable, not just among portfolio companies but among VC firms as well. "We'll probably lose half of them before we reach a bottom," Schoendorf said, after noting that half the firms existing in 2000 have already gone under. Adams Street Partners' David Welsh added that he expects LPs to scale back their commitments to venture capital firms, and the panelists further agreed that the situation will continue to produce secondary investment opportunities, although not every firm is suited to secondary deals.
Tim Draper suggested that returns will be "outrageous" in the post-2012 time frame, with wide-open liquidity windows. But Schoendorf speculated that the markets may be warmer for newer, more innovative companies than for older companies that have waited longer in the pipeline during less frothy times. In the short term, according to Venrock Israel's Ohad Finklestein, once corporate stock prices recover somewhat, the M&A window will be those companies' best bet rather than holding out for IPOs a few years later.
True globalization, according to the panelists, is a two-way street: Atlas Venture's Christopher Spray stressed the wisdom of knowing both the source of innovation and the early adopters who will first use new technologies. Schoendorf, meanwhile, noted that innovators in some countries, including Israel, have benefited from being in such a small home market, thereby eyeing global markets instantly rather than focusing on their home countries. "Breakthroughs," he said, "create brands that we can talk about in Shanghai, and everybody will know about them."
That sentiment echoed Draper's early prognosis: "Liquidity will come. The pendulum will swing back. Maybe it'll be in Shanghai, but we'll get it." Maybe.
-- Paul BonanosSee yesterday's post from Tech Confidential concerning the AlwaysOn Venture Summit panel about angel investment
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