Southeast VC

Thoughts from Annual LP Meeting

We held our Annual LP Meeting last Monday in Raleigh and I thought I'd write a little about it here. This year we held it at one of our portfolio companies, which works well because it is a great way to put the spotlight on the company and the space is free too! :)

Our LP meetings are always pretty simple where all of our partners have an active role and we put a heavy emphasis on our portfolio companies and most of the CEOs of our companies get up and talk about where they've been in the last 12 months and where they're heading. We encourage lots of questions and interaction with everyone.

Something stood out in Mike Doernberg's talk on ReverbNation and I thought I'd share it here. Given that this is Mike's 4th company, it was really a lesson he was sharing with everyone in the room no matter what business they might be in. It went something this...

I'm sure everyone has seen the movie Forest Gump, right? Well, remember he bought a shrimp boat, but he couldn't catch any shrimp? Then along came that awful storm which he battled and both he and his boat ended up ok. Meanwhile, all the other shrimp boats in the region were completely destroyed. So, Forest was left with all his competition out of action and with that brought in tons of shrimp!

A good lesson for everyone in this economy.

Overall, I think our LPs felt really good about our companies and liked how transparent everyone was. Quick observations:

• Revenue continues to grow at all but one of our companies, but at a slower pace that we have been used to.

• Companies are well managed and expenses are really under control. For the seed stage companies in our portfolio, burns are sub 200k. For the companies with meaningful revenue, there is a greater focus on getting to profitability. And we're fortunate that we now have several companies that continue to stay very profitable. With the greater emphasis on expense control, we're now seeing some of our companies "trade up" for talent, rather than hire that extra person.

I think the other thing beyond existing portfolio companies that was good was that we continue to be active in the region. We continue to look to focus on the same industries, in the same geographies we promised.

North Carolina Venture Capital 2007 Highlights

CED did a nice job putting together a 4 page North Carolina Venture Report on 2007. I'll just point to it here, but I will point out some interesting facts:

• NC-based companies raised $909m in 2007. This positions NC as #7 when stacked up against other states and this is NC's highest ranking ever. It represents a 72% increase over 2006.
• Triangle-based companies raised 87.5% of the venture capital in NC.
• Our firm is part of 3 of the top 6 companies that secured VC in 2007 - Motricity, ChannelAdvisor and Batanga.

Also, this report contains a list of all the VCs that have invested in NC-based companies. This is a good "prospect list" for NC-based entrepreneurs that may want to raise money this year.

Q4 and 2007 National & Regional VC Highlights

I was in Charlotte yesterday and missed yesterday's PWC Shaking the MoneyTree quarterly breakfast, but thanks to Laura Troy at PWC, I attached the presentation Download pwc_q4_2007_highlights.ppt . I just went through it and here are some interesting stats:

• The amount of venture capital invested in the US in 2007 was the highest in 6 years
• Looking at the Southeast, $1.86 billion was invested in Southeast-based companies, that represents a 46.4% jump over 2006.
• North Carolina ranked #5 in Q4 and #7 for the year when looking at states that attracted the most venture capital.

Capital Connections Highlights Atlanta Trip

David & I will be in Atlanta over the next 2 days wrapping our trip around Capital Connections. If you haven't heard of it before, this is the regular free networking event that our friends Michael Blake and Scott Burkett put together. The goal is very simple: to put Southeast-based entrepreneurs together with active investors.

At last count, 175 entrepreneurs are attending representing 120 companies. Total count tomorrow should be closer to 250 which includes investors, volunteers and sponsors. Scott also shared with me that 60% of the entrepreneurs that are attending are attending Capital Connections for the first time, while 28% of the investors are also "new."

If you are attending and want to make sure we connect while we are there, feel free to email me. I'll have my blackberry with me.

Southeast Venture Conference - Discount Code for SoutheastVC Readers

I will continue with the '08 predictions next week. ....I just wanted to remind everyone that the Southeast Venture Conference is next month, which will be held Feb 27 & 28 at the Ritz in Tysons Corner, Virginia. Speakers include Jim Steele, president of Salesforce.com, Craig Newmark, founder of Craigslist and John Sculley, former CEO of Apple.

The folks at the SEVC just sent me a discount code to give out to SoutheastVC readers. Thanks Scott and Eric! Use this code SCV100 when you register and that will save you $100 off.

Hope to see you there!

What Entrepreneurs Should Know Before Approaching Investors

Here is an interview I did back in the spring and it appeared in The Park Guide. I had no idea it was out there until someone pointed it out to me today, but the material is still helpful and relevant for the most part.

I just re-read it. In the interview, I talk about:

• What VCs look for in an investment opportunity
• Common mistakes entrepreneurs make when pitching to a VC
• What entrepreneurs can do to "seal the deal"
• How to decide how much to raise
• State of the VC market nationally and locally

Let me know what you think.

Al Gore Joins Kleiner Perkins as a Partner

I just learned that Al Gore became a partner at Kleiner Perkins. KP expects that one third of their new investments will be clean tech related by 2009.

Gore said that he is going to donate 100% of his salary at KP to the Alliance for Climate Protection.

Southeast Venture Conference Announces Next Conference in Northern VA

TechJournal South announced plans today for the next Southeast Venture Conference which will be held in February at the Ritz-Carlton in Tysons Corner, VA.

The conference was held earlier this year in Cary, NC and had very strong attendance.

The SEVC will continue to be very focused on the entrepreneur. I heard from many of them that it was one of the best venture conferences they've ever attended with the amount of national VCs. I know several entrepreneurs that met the VC there that actually ended up investing in their company. Proof that this conference works!

Companies interested in presenting should check it out and apply here.

As a firm we want to be very supportive of anything that helps entrepreneurs connect with funding sources so we have gotten involved once again with the SEVC. As you see it come together and you have any input on how to make this better for you, please email me.

Evaluating an Exit in Today's Capital Markets

Revolution Partners put together a report on "Evaluating an Exit in Today's Capital Markets" Download revolution_partners___exit_presentation.pdf . The report benchmarks recent successful tech IPOs against the recent trends in the M&A market. In the presentation, they also provide commentary on the opportunity for recap transactions as a source of liquidity and the market for late stage financings to finance organic growth or acquisitions.

Their analysis provides interesting data about the tech companies that have recently executed successful IPOs:

• They averaged 8 years from founding to IPO
• They raised $73 million in equity in the private markets prior to IPO
• They had $78 million in trailing annual revenue prior to pricing and grew 190% over the prior year
• 63% of the companies that went public recently, had positive operating income

The report also contains some great M&A stats including data showing that investors are getting M&A multiples that are very similar to IPO returns.

Thanks to Will at RP for sharing this with me.

Alternatives to Venture Capital

BusinessFund.com published the Top 25 Alternatives to VC. Good reading. Thanks to Rich McIver for sending it to me early this morning.

Hope everyone is having a good day!