Nothing Ventured

Live blogging …..I am sitting in on an interesting (and brutally honest) panel discussion among venture capitalists at DEMO which is being moderated by Matt Marshall, Editor & CEO of Venture Beat called The Changing Venture Model: Making VC Work for Investors and Entrepreneurs. Matt is joined by Chris Greendale, General Partner, Kodiak Venture Partners, Krishna ‘Kittu’ Kolluri, General Partner, New Enterprise Associates, Eric Tilenius, Partner, Maveron.

Matt kicks things off by stating the pretty obvious – we are in the worst IPO draught in 32 years and then proceeds to grill the group about everything from rising salaries for VCs (16.6 percent this year) to whether the “built to flip” mantra is an anathema to long term growth strategies for entrepreneurs.
Kodiak’s Greendale is doing the best job at telling entrepreneurs how they can ride out the current storm and giving really honest, practical advice that many of them need. He acknowledges that valuations “are down a half to two times…. that VC firms’ reserves are in trouble and that entrepreneurs have to be patient.” He goes on to say that while it is a tough time to raise money and concurs that exits are down, he gives some hope. “The time required to raise money will be double what you expect. You will have to jump through hoops much more so than even a year or two ago. But you will get funded if you have the right team, the right idea and the right approach.”

He urges entrepreneurs to take their time when evaluating VCs. VCs can be “god like” and they don’t like to answer questions, he jokes. “But this is like getting married. The term sheet process can be painful, but that pain will go away. If a VC is ornery or defensive, get up and leave.”

What should you ask them? – where are they in the lifecycle of the fund? Are they fund raising? What kind of returns are they getting?

Greendale points to SaaS and digital media as two of the most promising sectors and identifies Salesforce.com, Workday, Eloquent as the hottest SaaS plays. He notes that his firm will continue to look to make more smaller bets and they will be quick “to pull the plug” if CEOS and their companies are not meeting objectives and reaching milestones.

Other interesting tidbits:

Kittu does not see much disruptive technology in the IT area but surprising says one of the hotter areas is hardware – including flash technologies as hard drive replacements and cloud computing.

Chris using a baseball analogy – singles, doubles and triples are great. An IPO would be a home run obviously.

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