Southeast VC

Summary of Venture 05

Got back from Venture 2005 yesterday. Attended by over 700 people, the two-day conference highlighted 33 NC-based technology and life science companies. This year, instead of holding it in Chapel Hill, it was held in Pinehurst, NC - home of this year's US Open. Some quick highlights:

- Having it down in Pinehurst this year was smart. 99% of the people that attended, stayed right there. That meant even when it was really late, all the VCs, entrepreneurs and service providers kept talking/socializing - which is important. In past years, some of the local people that attended (me included) would leave during the day, maybe return late in the afternoon for a little while and then go back home. This conference put an end to that and it worked.

- I continue to hear a lot of very positive feedback from the out of state investors that attended. One of the VCs from Boston said it was the best venture conference he has ever been to. By the way, there was definitely a significant uptick in the number of out of state partners from large VC funds attending.

- One company used the conference to announce they just raised some money and a lot more generated significant interest.

- Robert Johnson, the founder and CEO of BET was a fantastic speaker and offered solid advice. Among a lot of other topics, he told the entrepreneurs in the room to find investors that have the same level of passion for their business. Dead on. By the way, I think a lot of the investors in the room drooled when he told the story about the original investor in BET turning $150k into $850 million.

- It was formally announced that MCNC spun out their venture arm and NC IDEA was created. NC IDEA helps provide grants, loans and traditional venture funding to help NC-based companies between seed funding and Series A.

List of VC Blogs

If you're looking for some new VC blogs to read, check out Ventureblogs. Looks like it is getting updated pretty frequently.

Clearly, the number of VCs blogs continues to grow and I didn't even know some of the ones listed here even existed. More good stuff to read.

Microsoft's Linux Support

So, after Microsoft's big campaign on Get the Facts, they announced they will support Linux in Virtual Server 2005 Pack 1. In fact, as Steve Ballmer gave his speech announcing this, a Microsoft employee did a demonstration of Virtual Server running Red Hat.

But will people lean on Microsoft for Linux support?

A CEO Conversation 2005 with John Chambers

John Chambers is speaking at this year's 'CEO Conversation' in RTP on April 21. Good to see with Cisco's large presence here. I'll be there just for lunch and to hear Chambers speak about emerging technologies and also about improving K-12 education.

Looks like he is a big draw. The event is close to being sold out.

Mark Heesen's Talk at UNC this Morning

Mark Heesen, president of the NVCA was at UNC this morning addressing VCs on different trends in the market. The crowd was a mixture of regional VCs with some out of town VCs here for the VCIC. Here are some of the key points he made over breakfast. I thought it would be helpful to take some quick notes and list them here before I run off to a meeting.

Fund Raising, IPO and Acquisition Markets are Strong

• There is a very healthy IPO and acquisition market with good companies that have gone through bad times.
• 1/3 of the companies getting acquired now are resulting in at least a 4x return for investors compared to 2002 when there were no acquisitions resulting in a 4x.
• The fundraising market is extremely strong with LPs "coming out of the woodwork."
• Capital raised by VCs could go from $17B last year to $23B this year.
• Money is coming from overseas investors - especially Europe.
• In some cases, when LPs want to put more money in a firm's next fund, they are getting pushback to even lower levels - and in some cases LPs are getting rejected.

More Early Stage Deals Will Get Done

• Finding that with these newer funds, more early stage deals are getting done and that will continue throughout the year. However, the VCs involvement will be kept quiet until the company looks for the B round. So, the quarterly numbers presented each quarter may not reflect reality.
• There are more seasoned entrepreneurs in the market.
• Early stage valuations are good - not creeping up as much as later stage deals.
• Internet-related companies are hot.

New Smaller Funds are Getting Created and Some Have Greater Focus

• The number of VC firms was forecasted to be cut in half. But what is happening is that the firms formed around '99 and '00 in some cases are getting some returns. So, while it was forecasted that a lot of these firms were going to be wiped out, they are now getting a new life.
• There are new firms being formed by VCs that are leaving larger funds and these new funds they are creating are typically in the $120m to $180m range.
• More new funds are focusing - with specific geographies and technologies.
• And some of the larger institutions that invest with VCs are setting aside capital for new funds like this.
• LPs are also realizing that if they truely want diversification, they need to invest in firms all over the country - as opposed to investing in firms just in Silicon Valley.
• So, the number of firms will remain steady contrary to what a lot of people predicted.

CED's Venture 2005 -- Going to Be Big

If the feedback we have been hearing is any indication, this year's Venture 2005 conference held at the Pinehurst Resort on April 26 and 27 could be one of the best venture conferences in the Southeast ever. The event is put on by CED, which is the largest non-profit support organization for entrepreneurs in the country. Contributing to the buzz is the new Pinehurst location, the diversity of the companies presenting and the number of out of state investors planning to attend.

Over thirty companies are presenting making it one of the largest lineups ever. This year's unique crop of companies spans multiple industries, stages of development and represents different geographies in North Carolina. Also, three showcase companies are presenting including Motricity (SCV portfolio company), Biolex and LVL7 Systems.

"It is an honor to be chosen as one of the Showcase Companies for CED's Venture 2005 and sharing about the success we are experiencing," said Ryan Wuerch, Chairman and CEO of Motricity. "Turning an entrepreneurial vision into a business reality is a rewarding process that requires quality partnerships like CED in order to maximize success. We look forward to the conference this year and the opportunity to meet new and emerging company leaders as well as the high caliber investors that it attracts."

David Spitz's TxFS is one of the early-stage companies presenting. David is a serial entrepreneur (co-founder of both Netsation and WindWire) and his new company offers a direct-to-bill payment network that lets consumers charge purchases of digital content like music, movies and games to their ISP bill.

"I'm amazed at the current crop of high-quality companies who will be at Venture 2005," said Spitz. "I predict the months following the conference will yield a lot of deals."

The venture capitalists attending agree.

"Sevin Rosen Funds is looking forward to participating in Venture 2005," said David McLean, general partner with Sevin Rosen Funds. "This year should be an outstanding year for early-stage investing in the Triangle and Venture 2005 is a tremendous showcase for these new companies."

David will be at the conference scouting for new deals. In fact, one of their recent Fund IX investments, Metabolon, was featured at last year's conference.

"From the mountains to the coast, from the Triangle to Charlotte and the Triad - Venture 2005 will feature a strong group of high-growth presenting companies from a broad spectrum of industries, stages and regions in North Carolina," said CED president Monica Doss. "We were fortunate to have another strong pool of applicants this year making for a diverse and quality slate of companies selected to present at Pinehurst. This year's conference will continue a long-running tradition of highlighting this region's innovation potential -- attracting investors from across the country."

Sevin Rosen Funds will be joined by hundreds of other investors and a quick sample includes: NEA, Battery Ventures, H.I.G. Ventures, Charles River Ventures, Motorola Ventures, Polaris Ventures, Grotech Capital Group and Kodiak Venture Partners. Plus, all the North Carolina venture funds will be there.

The featured speaker is Robert Johnson, Founder and CEO of Black Entertainment Television (BET) and owner of the Charlotte Bobcats. In 2000, Johnson sold BET to Viacom for $3 billion making him the second largest shareholder in Viacom.

The two day conference also includes a panel discussion on "Success Stories from Out of Area Investors: Financing Research Triangle Companies." Moderating the panel will be Dennis Dougherty, General Partner from Intersouth Partners and panelists include Brenda Gavin, Managing Partner from Quaker BioVentures and Terry McGuire, Co-Founder and Managing General Partner from Polaris Venture Partners.

For more information: Venture 2005.