Venture capitalists take stock in wake of terrorists' attacks - Wall Street Journal (sub req)
Venture capitalists are re-assessing investment prospects in light of recent events, leading to increased uncertainty and lack of visibility for the VC industry. While many are pessimistic about the short-term future, others note that there may not be a significant impact: “Our climate is so bad it's not going to derail anything. Venture firms are doing a couple of deals a quarter and you can't get much slower than that.” With the difficulties in U.S. air travel, many VC investors believe that there may be a greater concentration on regional VC deals that require less travel and time commitment. Included is a review of technologies (such as distributed storage) that may receive increased VC attention.

Also see: Market seen even tougher for venture capital - Mercury News
As investors seek to reduce their risk profile in the aftermath of last week’s terrorist attacks, capital will likely exit alternative asset classes such as private equity. Combined with a lackluster 2Q2001 for IPOs, some VCs are now bracing for more turmoil in both the private and public equity markets. Notes one VC, “People are quite concerned about the financial markets because they were not in good shape to start with.”

For NY, a harsh VC market made tougher - TheDeal.com
While New York venture capitalists have attempted to restore their business to some semblance of normalcy, logistical problems and a change in market psychology will likely mean reduced deal flow for the near term. A VC from Draper Fisher Jurvetson’s New York office commented on the extraordinary events of last week: “We all know people who have lost someone but we are continuing to answer e-mail, schedule conference calls and attend board meetings.” As displaced start-ups deal with more immediate issues such as renting new office space, signs of a sustained turnaround in the New York VC industry are limited at best. Investors note, however, that niche areas such as data storage, emergency back-up, security and user authentication technologies may find a more receptive VC investor base.

Also see: Two Alta losses taking toll on venture world - Boston Globe
A profile of two venture capitalists from Boston-based Alta Communications Partners, both of whom perished in the World Trade Center tragedy. A number of professionals from the VC industry share their sympathy and grief for the loss of the two men.

Telecom software - bright spot in a gloomy Silicon Valley - IPO.com
Despite prevailing negative sentiment in the VC industry, telecom software remains an area of interest to VC investors. Overall, analysts report a migration in capital from telecom hardware to telecom software companies. In fact, the billion-dollar VC fund Crescendo Ventures notes in a recent report that “carriers around the globe desperately need to invest in a new generation of software that can create, deploy, manage, and maintain new packet based services inexpensively and efficiently.” Included is a review of the telecom software market, estimates of future market size and growth, and a list of new start-ups in the telecom software space.

Biotech balancing act - TheDeal.com
An interview with Robert Zegelaar, principal at Boston-based VC firm Atlas Venture. Zegelaar characterizes biotech as a possible growth area now that the Internet and wireless sectors have lost their former luster and comments on the short-term investment prospects for the sector. Other topics discussed: the differences between early-stage and late-stage life sciences deals, appropriate valuation levels for privately-held European start-ups, countries within Europe that have the best prospects for biotech deals (the U.K, Germany), and the most attractive niche areas for investors (proteomics, bioinformatics).

Special report: international venture capital - Upside Today
A special five-part summary of international venture capital efforts in Asia (India, China, Singapore) and the U.K. (Ireland, Scotland). The country-specific reviews outline the role of government in stimulating the domestic VC industry, the different strategic approaches and ultimate goals of the respective VC efforts, and the key factors impacting the future growth of the international VC industry.

Triad's new spin: debt for equity trades - TheDeal.com
A profile of New York-based Triad Media Ventures which has switched from equity-based to debt-based transactions after being unable to raise a second VC fund. Triad, which was formed two years ago in order to exchange media advice and advertising-related capital for equity, now offers loans to small- and mid-sized businesses in order to support advertising campaigns. Triad comments on the new focus: “Many companies have trimmed their advertising budgets due to the economic slowdown. Our program is designed to restore or grow that ad budget, which in turn will help the company to continue to grow revenues.” Also included is a summary of how typical deals at the “new Triad” are structured.

Best cities for entrepreneurs - Entrepreneur.com
According to a recent survey by Entrepreneur magazine and Dun & Bradstreet, Dallas and Orlando tied for the title of top large city for entrepreneurs. Included are a number of rankings according to size of city, region, and parameters such as economic growth and entrepreneurial activity. Four of the top five large-sized cities were in Texas and Florida.

Calculating the loss and blame in Silicon Valley - New York Times Magazine
An apology for the excesses of the Internet era by Po Bronson, well-known New Economy guru and author of “The Nudist on the Late Shift.” After reviewing the mea culpas of other prominent New Economy thinkers and investors (e.g. VC John Doerr of Kleiner Perkins), Bronson concludes, “I cannot help noticing that what has prompted this round of apologies is simply that the money has evaporated.” Bronson attempts to find humor in the dot-com decline (see his Apology Engine at www.pobronson.com), but realizes that, in the pursuit of easy money and an accelerated career, he (like everyone else) contributed to the illusion of a new age where ideals and vision somehow trumped common sense and historical experience.

Posted Tuesday, September 11, 2001

CalPERS yanks IRR postings - TheDeal.com
Facing a firestorm of protest from private equity firms, the California Public Employees' Retirement System (CalPERS) will no longer publicly make venture capital and buyout fund performance data available. While the data has been posted since October 2000, recent media attention over the past two months has led private equity firms to scuttle attempts to make IRR results more transparent. Typically, private equity firms jealously guard their recent fund performance data. One investment banker lamented the decision to accede to the wishes of prominent private equity firms: “I think it's a shame that CalPERS backed down. I thought it was a breath of fresh air and offered real interesting revelations. I would've liked to have seen other state pensions emulate them.”

After Net adventure, dealmaker comes home again - Boston Globe
A profile of Bruce Johnston, managing director at Boston-based VC firm TA Associates. After departing his position at TA Associates in mid-1999 for a chance to run the Boston office of incubator Idealab, Johnston has returned to the VC firm as the “prodigal son.” Unlike other executives who are facing difficulties when returning to their former organization, Johnston has actually been able to leverage his deal-making experience at a New Economy dot-com to enhance his current role. Notes Johnston of the current VC climate: “Everything that's going on favors TA. The biggest challenge will be distinguishing between great companies that are just having a tough year - and bad companies.”

Outside chance - ZDNet Smart Business Magazine
A satirical look at the decision to become an outside director at a hot new high-tech start-up. In the hypothetical example, a “hot shot entrepreneur” e-mails a potential board member, setting up a meeting with “Kleiner Greylock Markbench,” but visions of the “trophy yacht and trophy wife” soon begin to evaporate. Comments the would-be outside director, “So why do it? For the only reasons an executive does anything: Stock. Pay. Glory.”

Other people’s money - TheDeal.com
With the continued pullback in the technology sector, deep-pocketed investors such as VC firms are increasingly finding themselves the object of lawsuits. For example, Eco Associates (a Texas-based fund formed to invest in distressed dot-com properties) has been sued by portfolio companies for not providing additional funding and by investors for “misapplying” investment funds in an Internet B2C company and for alleged “securities fraud.” Overall, a full description and background of the charges (and counter-charges) “paint a damaging picture of what venture capitalists do with other people’s money.”

Breaking up with venture capitalists is hard to do - Washington Post
Given the deflated environment for technology start-ups, entrepreneurs are finding that skittish venture capitalists are suddenly less accessible, and more importantly, less willing to contribute additional funding. Notes one chagrined Washington-area entrepreneur: “They’re capitalists… [and] capital is the key word in venture capitalists…They pull the plug because in their mind it’s not working- whether or not that’s what’s actually happening.” Included is a summary of how both entrepreneurs and VCs handle the warning signs of a failing business; analysis of how the overall health of a VC’s portfolio can influence the financing decision; and an explication of the importance of good communication channels between start-up and VC.

Heaven can wait for the Nasdaq's fallen angels - TheStreet.com
Nasdaq may be relaxing its stance vis-à-vis its “fallen angels” – companies whose stock price have fallen below the $1 level. Typically, companies with share prices that trade below $1 for more than 30 consecutive days face the unpleasant prospect of delisting. In fact, through the first six months of 2001, 279 companies have been delisted from the Nasdaq. High-profile companies such as Jupiter Media Metrix, iXL Enterprises and Telescan currently have share prices below the all-important $1 level. One technology lawyer, though, notes the changing approach of Nasdaq: “Now that every company other than IBM has crashed and burned, the appeal process is more open and Nasdaq has been more than willing to look at companies and hear their stories.” Some industry analysts speculate that Nasdaq’s plans for an IPO in 2002 may be influencing the delisting procedures.

Stock focus: it's the sales, stupid - Forbes
According to some investors, technology companies with current share prices reflecting short-term profitability trends rather than long-term growth forecasts may be currently undervalued. While trends such as slowing PC sales and declining corporate IT spending are important, the immediate impact on earnings may be far outweighed by rising revenues in 2002 and beyond. The best investment prospects are companies with share prices currently trading at least 50% below a five-year high, at least a 3% gain in actual or expected 2001 revenue and at least a 9% year-over-year increase in expected 2002 revenue. Among these companies: Dell Computer, Adobe Systems and Openwave.

Posted Monday, September 10, 2001

Corante is updated by 9:30 a.m. EST every morning.

VC People News
From VC Watch comes this daily digest of the comings and goings and other activities of individuals in the Venture Capital industry.

IPOResources.org
This site from Ivo Welch, a professor at Yale's SOM and an expert on IPOs, is an excellent starting point for better understanding IPOs and their history. With numerous links to additional readings, resources, a database of specialists, and more.

Directory of Venture Capital Links
The Open Directory Project hosts an up to date listing of Venture Capital firms in the U.S. and abroad as well as links to related resources.

Manias, Panics, and Crashes : A History of Financial Crashes
By Charles Kindleberger
The classic economic analysis of market crises, in which speculative manias ranging from the Dutch tulipmania of 1636 to the U.S. market crash of 1987 trace remarkably similar paths - a market displacement creates euphoria, which gives way to market distress, panic, and an eventual crash. An accessible book for those viewing the recent Internet bubble as a historical anomaly.

e-Business 2.0: Roadmap for Success
By Ravi Kalakota, Marcia Robinson, Don Tapscott
The recently published second edition of this popular book. Provides an overview of the changes wrought by a connected market in recent years and tries to chart the path for the years ahead with discussion of enterprise software, supply chain management, e-procurement, CRM software, selling chain management and more. A practical guide for corporate managers looking to fully incorporate e-business into the core design of their businesses.

Developing E-Business Systems and Architectures: A Manager's Guide
By Paul Harmon, Michael Rosen, Michael Guttman
Less a technical guide and more a manager's strategic manual, this book is a useful one for decision makers looking to better grasp the challenges and benefits of the transition to e-business. It also provides a good overview of technologies, applications and organizational issues to keep in mind.

Telecommunications Convergence: How to Profit from the Convergence of Technologies, Services, and Companies
By Steven Shepard
"A profit-making blueprint for getting ahead in the convergence market, this is the first book to addresses all the issues telecom providers must confront to meet the challenges of the new marketplace. "

The Billion-Dollar Molecule : One Company's Quest for the Perfect Drug
By Barry Werth
Though it was published in 1995, this book remains a riveting and instructive read on a start-up pharmaceutical company and its efforts to raise capital, find a drug candidate, weather the trials, and roll out its product.

Living on the Fault Line : Managing for Shareholder Value in the Age of the Internet
By Geoffrey A. Moore
"If you've enjoyed Moore's previous work, you'll find Living on the Fault Line a must. If you've never read Moore before, get this on your bookshelf before your competition does. Engaging and highly readable, this one's a keeper."

Information Rules : A Strategic Guide to the Network Economy
By Carl Shapiro and Hal R. Varian
"In all this stack of books on managing knowledge, intellectual capital, the ecology of information and the like, the single volume most worth reading--and, for many persons having, is INFORMATION RULES." David Warsh, The Boston Globe.

Marketing High Technology : An Insider's View
By William H. Davidow
"Marketing is civilized warfare. And as high-tech products become increasingly standardized -- practically identical, from the customer's point of view -- it is marketing that spells life or death for new devices or entire firms. In a book that is as fascinating as it is pragmatic, William H. Davidow, a legend in Silicon Valley, where he was described as 'the driving force behind the micro processor explosion,' tells how to fight the marketing battle in the intensely competitive world of high-tech companies -- and win."

The Innovator's Dilemma
By Clayton M. Christensen
"What do the Honda Supercub, Intel's 8088 processor, and hydraulic excavators have in common? They are all examples of disruptive technologies that helped to redefine the competitive landscape of their respective markets. These products did not come about as the result of successful companies carrying out sound business practices in established markets. In The Innovator's Dilemma, author Clayton M. Christensen shows how these and other products cut into the low end of the marketplace and eventually evolved to displace high-end competitors and their reigning technologies."

OTHER TITLES:

Angel Investing: Matching Startup Funds with Startup Companies -- A Guide for Entrepreneurs, Individual Investors, and Venture Capitalists
By Robert J. Robinson, Mark Van Osnabrugge

Fundamentals of Venture Capital
By Joseph W. Bartlett

Why We Buy : The Science of Shopping
By Paco Underhill

Venture Capital Handbook
By David J. Gladstone

Done Deals: Venture Capitalists Tell Their Stories
By Udayan Gupta

Evolve! : Succeeding in the Digital Culture of Tomorrow
By Rosabeth Moss Kanter

Clicks and Mortar
By David S. Pottruck, Terry Pearce

Web Rules How the Internet is Changing the Way Consumers Make Choices
By Tom Murphy

Why We Buy : The Science of Shopping
By Paco Underhill

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