Why the Line for the Women’s Bathroom Is Significant, and Other Observations from the NVCA’s Annual Meeting
Venture capitalists are characteristically an upbeat bunch. It’s sort of a requirement for anyone who makes a living funneling millions of dollars to money-losing companies in the hopes of making enormous profits from the few that succeed.
This year, however — with the industry coming out of a multi-year period of sluggish fundraising and under-performing returns in the wake of the financial crisis — optimism seems to be on overdrive.
As I made the rounds at this year’s National Venture Capital Association Conference in Boston, virtually every venture industry person I spoke with said he or she sees see current conditions as more favorable than a year ago. IPOs are back. M&A is picking up. And the closing of several outsized follow-on funds indicates that LPs are dipping their toes back in venture waters.
Contrarians might take that as a risky sign. After all, there’s a lot more upside from the bottom of a cycle than near the top. But for now, judging by the vibe at the NVCA conference, VCs are feeling pretty good. Following are some snippets from the panels, events, conversations, and bathroom lines:
Bathroom Line Analytics
So, admittedly it’s not the stuff of scientific surveys. But a 5-minute study of the line outside the women’s bathroom following a venture capital panel boded positively for the role of women in the industry.
In an eight-stall restroom at MIT’s Kresge Auditorium, at least four women were waiting in line. The line began forming at around 4:45 p.m., after more than an hour of continuous presentations on topics including a new documentary on venture industry pioneers, the funding history of Skype, venture-biotech research partnerships and evolving VC firm staffing models.
That line, I was told, was nothing compared to the one for the men’s restroom, which was extended enough to elicit at least one frustrated tweet from a conference attendee who presumably would have preferred to be somewhere with more important things to tweet.
But while the women’s wait line may have been shorter, the fact that it was there at all marks an event of reportable significance. Having attended venture capital events for several years, it was my recollection the only documentable instance of a line with the exception of events such as the Women’s Private Equity Summit and the ASTIA awards ceremony, which are specifically geared to a female audience.
What do successful entrepreneurs and investors have in common? Seems that a great number have applied to and been rejected by Harvard Business School.
“I’ve never been on a panel in which that hasn’t come up,” said Bill Sahlman, a Harvard Business School professor who moderated a panel Wednesday featuring CEOs of three venture-backed companies that have carried out public offerings in the last few years.
His comment followed an admission by Tim Healy, co-founder and CEO of energy management system provider EnerNoc, that he had been turned down twice by Harvard Business School. Healy went on to credit his eventual alma mater, Dartmouth’s Tuck School of Business, with inspiring his entrepreneurial approach.
But EnerNoc, currently valued at $475 million, is far from the largest enterprise whose founder-CEO received a rejection letter from HBS. Sahlman recalled a speech that Warren Buffet gave at the famed business school in which he, too, spoke of getting turned down. As someone who is also active in fundraising for the school, Sahlman said, such news saddens him.
Credibility-Repair Time Estimated at One Year
IPOs are considered exits in the venture business. But for many VCs and limited partners, it isn’t until years after an initial stock offering that they actually trade in their shares for cash.
In the last few years, the wait has lengthened due to the fact that by the time VCs are eligible to sell shares six months after the IPO, the stock has already gone down in price. In many cases, that’s because the company missed earnings estimates.
That was true for two founder-CEOs of venture-backed companies speaking at the NVCA conference. The two companies, Acme Packet and Netezza, both took a hit after missing estimates in 2008, not long after going public.
“It took us a year to get that credibility back,” said Tim Healy of EnerNoc, which saw its share price hit a low of about $7 in late 2008. The stock is currently just below $20.
Andy Ory of Acme says it took a similar amount of time for his company, which saw its share price dip below $4 in late 2008. Currently, the stock is up tremendously, at $72, giving Acme a market cap of $4.69 billion.
We Love Super Angels (But Are Sick of Talking About Them)
Super angels are not so bad. They’re not changing the venture ecosystem. And they’re not all that interesting to talk about.
That was the takeaway from Foundry Group’s Jason Mendelson, who told an audience of mostly VCs and a few angels that he’s exasperated by the topic.
“I’m sick of hearing about super angels,” he said.
Mendelson quickly added that some of his best friends are so-called super angels. Nonetheless, he said, their role in the broader venture economy is not clearly good or bad. They serve a role by “de-risking” companies. But overall, he said, “I don’t think they’re changing anything.”
Accel Partners’ Theresa Gouw Ranzetta added that she remains unclear about the difference between a super angel and a VC fund that does seed deals (a category that includes Accel as well as most other early and multistage funds). Also unclear, Gouw Ranzetta said, is the distinction between a super angel and a sub-$100 million venture fund that does early stage deals.
Maeder in Charge
Paul Maeder, co-founder and general partner at Highland Capital Partners, has taken the reins as the new chairman of the NVCA, and he’s already thinking about how the industry ought to be defined.
It’s not a trivial issue, at least not in coming months. After legislators agreed to carve out an exemption for the venture capital industry from SEC registration under the Dodd Frank Act of 2010, venture capitalists breathed a sigh of relief last year. But it turns out the matter is far from resolved.
A key issue for VCs to watch this year, Maeder says, is how the SEC will define venture capital for purposes of the exemption. Currently, there are worries that a VC firm may lose its exempt status if it engages in deals involving debt.
Maeder’s appointment follows that of outgoing chair Kate Mitchell of Scale Venture Partners. Next year, the NVCA says, it plans to appoint Ray Rothrock of Venrock as chair.
In addition to the change in chairmanship, the NVCA added six new members to its board of directors. Those beginning new four-year terms are Jon Callaghan of True Ventures, David Douglass of Delphi Ventures, Bob Goodman of Bessemer Venture Partners, Ray Leach of JumpStart, Jonathan Leff of Warburg Pincus, and David Lincoln of Element Partners.