The Tech IPO Window Finally Reopens - Woot Woot!

Today's Wall Street Journal article about the Silicon Valley start-ups readying themselves to go public signals the reopening -- finally! -- of the IPO "window." It' about time! This has been the longest drought I've experienced since I got to the Valley in 1981, and it was historic by any measure.

The notion of a "window" is that there are good times and bad times to take a company public. It mainly has to do with the receptivity of capital markets investors to new issues by unproven companies. When they are in a buying mood, the window is said to be open, and vice versa.

The window has been all-but closed since about 2002 (it never slams shut, it just gets so small that only the strongest companies can get through, such as Google and more recently, LinkedIn). There was good reason, too -- 2002 was when the dying embers of Internet bubble finally went out, and lots of people were feeling burned and in no mood to buy shares of unproven, unprofitable web 1.0 companies (furniture.com anyone?).

Now, though, memories have faded, the appetite for new issues has returned and a handful of companies such as Splunk, Infoblox, Workday and ServiceNow are getting ready to test the waters.

If this first batch is successful in going public, you can be sure that many more companies will file in a rush to take advantage.

 

peHUB Finally Has a New Editor: Jon Marino

More than three months after Dan Primack took his act over to CNN/Fortune.com, peHUB finally has a new editor: Jonathan Marino, formerly of SourceMedia's M&A Journal.

Marino introduced himself today to the 50,000+ subscribers of the peHUB Wire morning email with the following:

Hi everyone, I’m Jonathan Marino, the new editor for peHUB.com. To some of you, I am a familiar face--I spent the last three years covering deals, private equity and banking for SourceMedia's M&A Journal. Additionally, I have written about a range of topics for the New York Times, Los Angeles Times, New York Post and The Washington Examiner, including investigative reports and homeland security coverage. I’ll have all my contact info posted soon, but for now, reach me at jmarino99@gmail.com.

In the next several months, you'll be seeing a number of changes and enhancements to peHub.com and the daily Wire as we look to provide greater networking capabilities, more exclusive stories and more columns from experts and executives. I will also be reaching out to many of you to get ideas about how we can improve our service.

Side note: despite CNN/Fortune's assertion that Primack would broaden his coverage well beyond private equity to the public markets, there is very little sign of that so far in his coverage, which reads just like it did under ThomsonReuters.

Meanwhile, peHUB has suffered in Primack's absence, with its writers employing his quirky language (eg., "shameless plug," "Monday Mouth-off") but without his signature wit. Hopefully, Jon Marino will bring some new life back to what has been a great media outlet for private equity and VC news.

peHUB and peHUB Wire Will Continue After Primack Leaves

Big news in the world of venture capital and private equity media and PR: Dan Primack, author of the peHUB Wire daily email newsletter and creator of its web site, peHUB, is leaving Thomson Reuters to create a similar offering for CNN Money's soon-to-be-revamped Fortune.com site.

Over the past several years, Primack has become arguably the single most important journalist covering VC and PE, largely through his excellent work first on the daily newsletter and then on the web site. Lots of people in the industry can pick a beef with Dan over the way he has portrayed certain news or his tenacity in covering things that they would have rather not had covered, but he has proven himself to be a thorough, dogged and very hard-working reporter.

Now he moves on to Fortune.com, where he will be covering not only VC and PE but also Wall Street and M&A through a daily email called "The Term Sheet" and a sister web site. He starts on Sept.7, the day after Labor Day.

While all the other coverage I've seen on the web has focused on Primack's move to Fortune and the CNN.com web site, my key question was about the VC/PE daily newsletter and the web site. Would they continue without Primack, who once wrote about creating the newsletter simply to raise a small amount of advertising money to fund a pet project, and has been both the brains and the brawn behind it ever since?

Larry Aragon, editor-in-chief of Thomson Reuter's Private Equity Week and VC Journal (the print/online pubs that spawned peHUB), emailed me that yes, they would both continue after Dan leaves next Thursday, though he did not identify who would be staffing them. They know they have some big shoes to fill, and it's not a slam-dunk that peHUB will be as strong, or as vital a read, as it is are now.

From a VC/PE media relations standpoint, however, this is great news -- Primack is going to bring his coverage of VC and PE over to the huge CNN.com web site, while Thomson Reuters will continue to have its offering.

Here's some other coverage on the web so far:

Statements from Fortune.com and Primack

Interview with Dan Roth of Fortune.com about Primack

Betnovate

Voltaren

VC and Private Equity Fundraising is Very Tough This Year

It's no secret in the world of venture capital and private equity  that it's not easy right now to raise new money to invest in portfolio companies. But at the PEI Investor Relations and Communications Forum last week, I picked up some interesting datapoints from Alexander Leykikh, a partner with Atlantic-Pacific Capital, a placement agent [meaning they raise money for private equity and venture capital funds for a fee]

He said that VCs and PE fund managers had been expecting a 25% reduction in the money committed to their funds by institutional investors, but that in reality, investors are cutting back by more like a 50% reduction. Furthermore, he added that only 75-80% of limited partners (investors) are re-upping.

Dan Primack on peHUB reported some data today about one fund that certainly seems to bear-out this trend. He reported that Polaris Venture Partners, which last raised a $1 billion fund, initially reduced its target for its latest fund to $500 million, but has since lowered it again to $400 million, and according to a regulatory filing, they've only raised $233 million it to date.

PR Honcho Turns Venture Capitalist With High-Profile Firm

This doesn't happen every day: Margit Wennmachers, head of tech PR firm Outcast Communications, has joined Andreessen Horowitz as a partner.

That's "Andreessen" as in Marc Andreessen, founder of Netscape and developer of the first successful web browser.

Kara Swisher got the scoop. She reports: "At Andreessen Horowitz, she’ll focus on bringing marketing expertise to the firm and its portfolio companies, starting in September."

I've pinged Margit with my congratulations and a request for an email interview about her new role. Stay tuned. Here's said Q&A but with Connie Loizos of peHub: http://www.pehub.com/74430/from-pr-to-vc-a-qa-with-the-newest-partner-at-andreessen-horowitz/. Key comment:

What does “partner” mean? Will you be evaluating deals? Will you, at some point, begin taking board seats?

Right now, Ben and Marc are the founding partners, and the only GPs and investing partners. I have a principal role in the firm in that I get to look at all the deals and go to pitch meetings and provide my feedback, but they’ll certainly make the final call and they’ll take the board seats in [those] cases where they take a seat.

ABS Capital Has Embraced Social Media - Have You?

ABS Capital is a growth equity investment firm with more than $2 billion in capital under management. Unlike many venture capital and private equity firms, it has fully embraced social media and is currently working on a new web site to make it even easier for Internet users to connect with the firm and its portfolio companies.

Stephanie Carter, head of marketing and communications for the firm, spoke today at the PEI Investor Relations and Communications Forum.

Carter said most of her social media efforts have occurred during the past year, after she brought in a 25-year-old intern who worked her way into a full-time job and who is "reverse-mentoring" Carter.

The firm has a Facebook page and encourages its partners to have their own pages. In recognition of the fact that some people research the firm on LinkedIn, Carter has worked with partners to update their LinkedIn profiles even if they themselves don't use the service.

ABS uses Google Analytics to track traffic on its web site, and one of the key discoveries was that most visitors spent only three minutes on their site looking for information about the partners or portfolio companies. So the ABS web site is being redesigned to make it easier to find that information, with less emphasis on developing written content about the firm that few visitors were reading.

ABS is focused on later-stage investing, so it is constantly interested in connecting with company CEOs, senior executives and board members. By being active in social media, Carter said that ABS is telling these people, "wherever you want to meet us, fine."

What's perhaps most remarkable about this case study is that ABS Capital is not using social media because it has a particular interest in Internet companies or social media as an investment. It is using social media because it recognizes that it's a valuable business tool to help it achieve its objectives.

Limited Partners Want More and Better Communications From General Partners

It's not unusual for the general partners of venture capital and private equity firms to take their investors, known as limited partners, for granted. One reason may be structure: once the LPs have committed to invest, they are contractually bound to do so for as long as a decade or more. Another may be that LPs have traditionally been fairly passive in managing their investments and relationships.

Like a lot of things in the economy, the LP-GP relationship is changing, particularly in the area of LP relations. LPs are getting more demanding, of both the time and attention of their general partners.

I'm at the PEI Investor Relations and Communications Forum in New York, and this is one of the biggest topics of discussion.

"LPs appreciate having you ask 'how are we doing,'" said Mark Barnhill of Platinum Equity. Barnhill added that LPs appreciate having access to investing partners, and keeping them fully informed about developments at the fund and at the fund's portfolio investments.

The last thing LPs want is to be surprised, or to hear about something from someone else before hearing about it from their GPs.

Bottom line: communicate, communicate, communicate. Keep your LPs informed before, during and after you take their investment. In these times, when LPs have an infinite number of private equity options, you can't go wrong using communications as a relationship-building tool.

Would You Want to Have Google Ventures as an Investor or Co-Investor?

Google Ventures, the venture capital investment arm of Google, "came out" yesterday with a media day. Google Ventures has been up and running for a little over a year, but is now fully staffed.

Check out their web site -- it's handsome (no surprise) and sounds more or less just like any other corporate VC. According to PEHub, which had a reporter at the event, here are some of the operational details:

• Budget of around $100 million a year, but set annually by the corporate parent

• 16 investment professionals, which seems high for a firm putting $100 million to work per year


• Google is the sole LP in the fund

I'm writing this as I sit in a National Venture Capital Association (NVCA) session on "corporate and financial VCs working together," as part of the NVCA Annual Meeting in Burlingame. The first topic of the session: stories about co-investing between the two parties. The term "horror story" has come up several times already.

The players on this panel are pretty impressive: Qualcomm, US Venture Partners, Kleiner Perkins and Pfizer. But none of them have the stratospheric rep of Google.

At yesterday's event, Google made all the right noise about investing for value, not for making future acquisitions, and offering value to portfolio companies by putting Google's corporate resources at their disposal. This is what all corporate VCs say. In reality, there are few positive success stories regarding corporate VC. In many ways, having a captive VC arm isn't a natural fit for a profit-and-loss corporation. Here are some of the typical problems associated with captive VC arm:

• Leadership turnover


• Sudden strategic changes


• Uncertain funding stream


• Lack of clarity whether the VC arm is in business to make money like a stand-alone VC, or whether it is making strategic investments to further the larger corporate mission

From the perspective of the start-up company, getting an investment from Google must seem like hitting the jackpot. The name, the resources, the implied endorsement of the technology and business case -- it's a no-brainer. But -- here are some concerns I would have:

• Will Google value the company as highly as other investors, or will they argue that their non-financial contribution is so great that they deserve a discount?


• Will others in the marketplace see the company as an arm of Google, and therefore be wary of partnering with the company?


• Will other potential investors be scared away, unwilling to share the spotlight with Google?


• Will potential M&A partners be scared away from talking to a company that they think is "likely" to be acquired by Google, whether or not that's true?

And if you are considering being Google's co-investor, either by approving a Google follow-on financing or coming in after Google, is the Google name a positive or negative? Some of the questions are similar to the above:

• Will Google scare away other corporate partners or potential acquirers?


• Will Google drive valuation, for better or worse, as well as future funding decisions?


• Will Google play along like a typical "financial" VC, providing support to the company but letting them grow on their own, or will they seek to drive their strategy and decisions?

Make no mistake -- I know it would probably be great to have the opportunity to either co-invest with Google or to have them as an investor. But these are reasonable questions to ask about any corporate VC investment, and especially from a super-market-leader like Google.

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How Things Really Get Done in Private Equity and the NBA

There was a great Dilbert strip several years ago in which Dogbert was telling the Boss how to be more productive. He said “Put all of your high priorities on one list and your low priorities on another. Then do everything on both lists even it if kills you, otherwise you're a freakin' loser."

Then there is this quote that I recently came across and put up over my desk: “If knowledge was power, college professors would rule the world. Execution is power. Execution is everything.”

Too often in the rarified worlds of venture capital and private equity, there is a lot of talk about taking big risks and getting things done. But in practice, I see too much risk-aversion, too many decisions-by-committee, too many people posturing about being doers rather than actually getting things done. I think in Texas they call this, “all hat and no cattle.”

But getting things done is harder than it looks (otherwise, we wouldn’t be talking about it). In my experience, there’s actually a fair amount of emotional risk in trying to get things done – the chance that you will fail or fall short and be humiliated, the chance that you will be misunderstood and be mocked, and the very real chance that you will make decisions or choices that upset other people, who then share their unhappiness with you.

One way to ease the transition from “talking the talk” to “walking the walk” is to have role models. And that’s what prompted this article: two very interesting and different role models who specialize in getting things done. One is super-angel investor Ron Conway, and the other is NBA insider Wes Wesley.

In its most recent issue, ESPN The Magazine has a first-person anonymous account of Wesley’s influence inside the league, while Ben Horowitz of VC firm Andressen Horowitz shares his first-hand observations about the secrets to Conway’s success on his blog.

Some highlights:

• Conway is religious about maintaining his network and he has high expectations of the people in it


• Conway is always working, and is always available to be present in a situation when it calls for it


• "Super human courage" says Horowitz. "Ron fears no man and he definitely fears no phone call. When you ask Ron for help, you don’t have to wait a week while he warms up a connection."


• Wesley helps basketball players cope with fame and fortune, but doesn't have his hand out. He gets paid by others.


• Wesley tells it straight, even when it's hard. For instance, he told a player to dump most of his entourage, and he told an agent to clean up the appearance of another player's entourage.


• Both men value connections and actions over titles and status. Their networks are made up of doers, not talkers and posers.

Mark Suster, Another VC Blogger to Watch

A lot of VCs got into blogging in the 2000s, when blogging was the New Thing. Then they realized you had to write something compelling almost every day, and most of them stopped.Turns out that writing something compelling everyday is hard work!

There's a relatively new kid in town who is getting a lot of visitors, Mark Suster of GRP in Los Angeles. He says his blog, Both Sides of the Table, is getting 75,000 unique visitors a month. That's pretty good. He's doing the two things a VC blogger needs to do to get attention: write extensively about the industry, and write several times a week.

A couple of others to check out:

Brad Feld, Feld Thoughts/Ask the VC

Fred Wilson, Union Square Ventures, AVC

Paul Kedrosky, Infectious Greed

Sonsini, Quattrone and Schlein on the Future of VC Exits

It's no secret that venture capitalists are having a hard time selling the the start-up companies they've invested in. It's really been the status quo for much of the past 10 years, ever since the dot-com bubble burst (10 years ago this month, to be precise).

Venture capital doesn't work if the VCs can't sell their companies -- exit, in VC parlance -- for a lot more than they originally invested. They don't have to turn a big profit on every company they back, but they have to have enough winners so that overall, they can double or triple their money over time.

Lately, though, VCs haven't been able to generate enough exits, meaning that they are still backing thousands of small companies they would rather sell than hang onto. It's the subject of cocktail party talk as well as serious analysis -- including this recent panel discussion.

The names of the panelists themselves should make you sit up:

• Larry Sonsini, the fabled tech industry lawyer


• Frank Quattrone, the fabled tech industry investment banker


• Ted Schlein, managing partner of legendary VC firm Kleiner Perkins

Here's my favorite part from the report on the panel:

Back in the 1980s and 1990s, big names like Morgan Stanley and Goldman Sachs each held between 5% and 10% of the technology IPOs, while the remainder was shared among "boutique" firms such as Hambrecht & Quist, Robertson Stephens, Alex Brown, L.F. Rothschild and Montgomery Securities. "The VC community was pleased to trust those [smaller] firms with book running some of their best offerings, like Sun Microsystems and Adobe," Quattrone said. "Today, it seems like the feeling is if Morgan and Goldman won't take your company public, it's not worth it. It's like saying, if you can't get your kids into Wharton or Stanford, they might as well work in the coal mines."

One solution, according to him, is to use this generation's boutique brokerage firms to lead smaller IPOs for smaller companies. "About half a dozen brokerage boutiques are perfectly capable of taking companies public and are willing to do smaller deals," he noted, pointing out that he didn't have an axe to grind since his firm does not do underwriting."[It] just comes down to some trust," said KPCB's Schlein, whose company is among the bigger VC firms. "The mid-bracket banks can get companies public ... [and] they can find buyers for the stock," although the offerings will be smaller. He recommended that firms look at a "two-stage offering." For example, the first IPO might be for $30 million, followed by another $30 million.

The bottom line is that VCs had better figure out to fix the exit problem, or there likely won't be much of a VC industry in the future.