Although plenty has changed for venture capitalists with the slowing of the economy and market upheavals, there are still plenty of opportunities for entrepreneurs and those who fund them, said panelists at the 2001 Harvard Business School Entrepreneurship Conference.
The new VC landscape was debated at a panel discussion called "Venture Capital: Hot Markets and Current Industry Trends," moderated by Harvard Business School professor Lynda Applegate.
The "strike zone" for his firm is network infrastructure, IP, and security storage, said Jeff Fagnan, Principal, Seed Capital Partners. "A lot of noise has been eliminated. The people I deal with are true believers."
His company is "not looking for quick flips. We're willing to roll up our sleeves."
The growing field of photonics will be very important in the years to come, as will nanotechnology, he added.
Neeraj Agrawal, Senior Associate, Battery Ventures, said he's interested in enterprise software and data center automation, but not so keen on customer relations management or wireless. "The shine's off that apple."
We're not looking for quick flips. We're willing to roll up our sleeves.
Lisa L. Wiersma, Principal, Tribune Ventures, invests around core businesses or newspapers and television stations. Her firm, perhaps not too surprisingly, is particularly interested in ventures that are not driven by advertising revenues.
Healthcare is a significant sector of investment opportunity for Ann M. Bilyew, Principal, Advent International. She's also interested in medical devices, miniaturization of devices, and biotech. "We're thinking five, six, ten years out," she said. For example, she wondered, what are the opportunities around people conducting their own annual checkups in the home?
Riding Out The Downturn
Priorities have changed within VC firms since the economy headed south.
Several panelists said they are now spending more time with their portfolio companies, "getting back to basics," as Agrawal described it. Jeff Fagnan, Principal, Seed Capital Partners, said up to 80 percent of his firm's time is spent working with companies, doing whatever needs to be done, including basic blocking and tackling, recruiting and hiring, and developing a product road map.
In terms of funding companies today, Agrawal saw the arrival of "a different notion of capital efficiency. It's better to underfund right now than to overfund."
But the criteria for funding companies remain the same, taking into consideration the people, competitive landscape, technology, timing, and the market.
And it's still important to have a really sophisticated understanding of that market, said Wiersma. One reason the TV recorder company TiVo ran into difficulty, she said, was the company didn't understand that consumers don't want to have to get another box for their television.
"You can go out and evangelize through technology all you want. [Ultimately], it comes down to explaining the product to the customer," said Fagnan.
The winning company, said Bilyew, is not necessarily the company with the coolest technology. The key is marketing and timing, and working with an entrepreneur is a partnership relationship. "That doesn't mean you always agree—hopefully you don't," she said. "There is a need to push each other, but also to know your goals are the same at the end of the day."
Their vision becomes your vision, Fagnan said. "I would lie down in the street for any one of my entrepreneurs," he said.