Facebook founder and CEO Mark Zuckerberg speaks during a news conference at Facebook headquarters on October 6, 2010 in Palo Alto, California.
The venture capital business has been under some stress for a while now. It's not that it's doing all that badly. It's just that it isn't doing as well as it has in the past. This is related to the overall weakness in the economy, not just in the U.S. but also Europe: it's tougher for VCs to raise money, and it's tougher for VCs to sell their portfolio companies to established firms or exit their investments via initial public offerings (IPOs).
But that could all change with the much-anticipated Facebook IPO, due to happen later this year.
Or not. This is from Fox Business:
“A little wind may have left the sails after some of the big name IPOs failed to live up to the overblown expectations. VC fundraising challenges are likely to start having a negative trickledown effect,” Tom Rodgers of Advanced Technology Ventures said....
That mixed track record is putting even more pressure on Facebook, which is expected to become the largest Internet IPO on record. Unlike some of the recent Internet companies that stumbled, Facebook has a well-developed business model and an estimated $4 billion in annual revenue, which may pave the way for a valuation of up to $100 billion.
David Siemer of Siemer Associates and Siemer Ventures.
I had a great conversation recently with David Siemer of Siemer & Associates, a boutique investment bank and early-stage venture capital investor — Siemer Ventures — that's based right here in Southern California. The merchant banking side of their business is "new" old school investment banking, centered on raising capital for clients and providing advisory services. In other words, investment banking the way it used to be, before trading of the sort practiced by the Big Boys — Goldman Sachs, Morgan Stanley — became a profit-driver.
Not surprisingly, David Siemer wanted to get into venture capital, as well. What's interesting about this part of the business, which focuses on digital media, is the firm's bullishness on Asia and India. Siemer Ventures was started in 2007 and currently has its main office in Santa Monica, which is beginning to re-establish the "Silicon Beach" critical mass of tech companies that we first saw back before the dot com crash. For what it's worth, New York is also picking up steam. Silicon Valley isn't the only place to go for venture funding anymore. (Not that it ever was, but it's always been easy to get that impression.)
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People work at computers in TechHub, an office space for technology start-up entrepreneurs in London, England.
This is one of the best ideas I've seen in a while: following on its establishment of an early-stage venture fund at the beginning of the year, the Knight Foundation has announced that it's going to fund a Public Media Accelerator, to the the tune of $2.5 million. It's clear what Knight is up to here: it's putting together a fully functioning venture capital metabolism for the non-profit space, with a focus on media.
It used to be that you could think of VC in terms of early and later-stage funding. But the emergence of incubators, like Pasdena's own Idealab, and accelerators with a somewhat different funding model — they seek to identify, nurture, and develop startups at an extremely early stage, sometimes before an actual company even exists — has made it necessary for any entity that wants to mimic Silicon Valley to think more broadly.
Venture Capital in Southern California panel. From right, KPCC's Matthew DeBord, Rustic Canyon Partners' Nate Redmond, Idealab's Alex Maleki, and Ben Kuo from socalTECH.
Last night, I sat down with Nate Redmond of Rustic Canyon Partners, Ben Kuo of socalTech, and Alex Maleki of Idealab's newly formed New Ventures Group to talk VC in SoCal.
We enjoyed a lively and informative 90 minutes of discussion at the Crawford Family Forum with plenty of good questions from the full-house audience (Thank you, KPCC community!)
I'm going to post some outtakes from the event, but one of things that struck me, for whatever reason, was a recent grad who asked the panel about how to break into venture capital as a career. This got my attention because VC is a relatively new option in professional finance (dating back to the late 1960s and early 1970s) and because, well...most young people seem to want to start companies, not fund them.
That said, in my experience VCs, at every level, are interesting people, glad to share their knowledge and committed to the idea of entrepreneurship, innovation, and a positive future. I wasn't surprised that Nate Redmond's advice was simple but insightly.
The California Community Foundation has released a new study, "The Future of Philanthropy in L.A.: A Wealth of Opportunity." My KPCC business vertical colleague Brian Watt will have a report on air later that you can listen to, and I'm going to provide a bit on insight in the overall trend of wealth formation and transfer in the LA area.
The numbers are far from trivial: "Despite the recession, Los Angeles County residents have an estimated net worth of almost $1.3 trillion." Just to put that in perspective, the entire annual GDP of the United States is about $14.5 trillion. What's truly staggering, however, is how much of this money will transferred generationally: the RUPRI Center estimates $1.4 trillion by 2060 — a huge increase over 2020's projected $114 billion.
What's truly fascinating about these numbers is where the wealth is coming from. According to the report, "LA's growing and future wealth will be driven by entrepreneurs, especially immigrant entrepreneurs."