Venture Capital Today - June 20, 2012 - A Short Summary

“San Francisco is the center of the universe for entrepreneurs.”

Ann Winblad, Heidi Roizen, and Laura Roden spoke to a large crowd of FWA members and friends about venture capital trends in the San Francisco Bay Area.

Macro is always a concern to venture capitalists (VCs), but the environment is good for VC with Facebook having re-opened the IPO window during a time when M&A is also strong. Companies need $100m in annual revenue, independent directors, and a good CFO and maybe CMO to go public. Private acquisition targets typically need a seven-year operating history. Social networking is overfunded; life sciences (excluding pharma) and wellness are underfunded. South America is the next hot region for investment.

While VC IRRs are good (5 year returns average 7% for 5-year funds), cash on cash returns are lagging, hindering capital reinvestment. Overlapping funds vs serial fund raising is another factor drying up available capital. Crowdfunding, angels, and micro VCs are not taking dollars away from bigger VCs, but they are lower quality investors that lack the advisory services to develop leadership and increase likelihood of liquidity events.

Laura noted the post-recession risk-off trade shrank funds from$400m to $75m, and 72% of late stage funds and 38% early stage funds use external capital raisers. Laura encouraged women interested in VC to take advantage of existing networks, including Golden Seeds, Springboard, and Astia.

Ann, a series A investor, talked about investing on a set of assumptions instead of facts, pattern matching, and the tendency of portfolio company demographics to mimic investor profiles. In the Bay Area, 86% of funds are still run by white males. Ann urged young women and FWA members to acquire dual degrees in finance and technical fields, pursue MBAs, stay involved with their undergraduate universities, and look to hire women entrepreneurs from outside the obvious schools.

Heidi said one’s social graph—in work and play—impacts VC job opportunities and investment opportunities. Referencing her entrepreneurship class for engineers at Stanford, Heidi talked about the relevance of soft skills in addition to leadership development and the teaching role a good VC partner plays. Mentorship and access are critical to advancing women in venture capital, according to Heidi, who encouraged FWA members to become financial experts on private company boards and mentor women entrepreneurs.