Note: The Skinny blog is written by Rick Smith, editor and co-founder of Local Tech Wire and business editor of WRAL.com.
RESEARCH TRIANGLE PARK, N.C. – Venture capitalists and entrepreneurs gathering Wednesday and Thursday for the are doing so at a fortuitous time. As the stock market climbs to 18-month highs, exit routes for venture-backed firms have finally re-opened.
With initial public offerings no longer scarce as rain in the Sahara and as mergers and acquisitions grow in number, startups not only see a profitable exit as a possibility but investors also are opening the checkbooks a bit more to make deals.
Among the national VC leaders who closely monitors the southeast market is Mike Elliott, managing partner at One of the largest and oldest VC firms in the region, Noro-Moseley operates in Atlanta and Charlotte, where Elliott is based. Elliott, who also a member of the board at the National Venture Capital Association, is one of the most experienced VCs in the country. A UNC-Chapel Hill graduate, he worked at Wakefield Partners before joining Noro-Moseley in 2005.
LTW recently talked with Elliott about the state of the VC industry.
Are VCs looking to invest or are they hunkering down like everyone else?
I’m sensing a reasonable level of excitement and drive to get deals done. We’re not in over-drive mode, but there is a sense that now is a good time to invest.
Is there money readily available for deals for new companies or is most money committed to keeping current portfolio firms alive?
I believe there is money available – though the Southeast remains capital constrained. I also sense that follow-on investments are being more scrutinized by investors than ever in the past.
What were the key points speakers and VCs made at the recent TechJournal South-sponsored venture conference in Reston, Va. to prospective entrepreneurs or entrepreneurs seeking funding?
Capital efficiency is important. Angels have not returned, so watch every dollar. While the cash funnel at the top has opened with a few IPO’s, we are not at a robust level yet, so that will continue to slow the pace of new investment.
Have these points changed from the basic management team/products/customers due to the recession?
Not really. Just much more emphasis on getting there with as little cash as possible.
Fund raising fell off last year and reports have said the new startups will be hurt since so much money has to go to existing investments. But as a followup, will lack of fund raising hurt the new companies?
I think the ones who make it through will be very strong.
Can we expect VCs to put together more syndicates for deals in order to reduce risk and stretch funding?
Yes, but you will also see much more thought on the part of VCs as to who their syndicate partners are and how healthy their funds are.
What was the word about IPOs as firms such as Motricity and Alimera Sciences try to go public? (SciQuest, once a public company, is seeking to go public again.)
Great to see glimmers of hope, but we are not at a healthy pace yet. [NVCA President MarK] Hessen made the point that we are not on track to have a great year – even with the talk – it will be a poor year.
What did you see that you liked from showcase and exhibiting companies in terms of trends in technology, services and products?
This conference had a few more companies focused on building enterprise solutions vs. consumer oriented products. I think we need to rebalance in that direction – with a focus on building highly scalable businesses, solving emerging problems relating to more efficient computing platforms (cloud, software-as-a-service).
What do you see as the hot plays this year— alternative energy? More social media? The immersive Internet and 3D?
I think we will continue to be over-run with tool sets cloud enabling proliferation of computing in the enterprise – some of which will be very large and important companies – but making it very hard to pick the winners from the pack. We continue to see software oriented toward smartening the grid for alternative energy.
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