Last night, Wednesday, Jan. 14, I and over fifty other people braved a bitter-cold evening to attend the annual Venture Capital panel discussion at the historic Vilna Shul synagogue on Boston’s Beacon Hill. The panel topic was: “Boston-area Venture Capital: Looking Back on 2008 and Looking Forward to 2009” with Larry Bohn, Managing Director, General Catalyst Partners, Jonathan Seelig, Managing Director, Globespan Capital Partners and David Aronoff, General Partner, Flybridge Capital Partners.
The discussion was moderated by Galen Moore, Staff Writer for Mass High Tech, a journal which, among other topics, follows Boston-area venture capital trends in the high tech industry.
In the years since I wrote about Harry Hoagland and his experiences in the formative years of Boston venture capital, I wanted to learn more about the field, including the mindset of today’s “gunslingers” – the investors who are taking substantial risks in prospecting this vast frontier for new companies. Before the program started, I was heartened to meet a few attendees who were similarly minded and curious about the general environment for private equity investment. I was impressed by the seriousness with which these individuals approached the topic. Certainly, there was a good deal of networking going on as well …
The discussion generally focused around the belief that the venture capital business going into 2009 is strong; but that investors (otherwise known as Limited Partners) in venture funds are realists about the present weakness of the consumer sector, the tightness of credit, and other economic uncertainties. David Aronoff said that he felt this “correction” was more pronounced than the one we experienced going into 2002, but just as the economy has been enduring these signifcant and wide-ranging challenges, the proposals for interesting new companies are still coming in at a heartening pace.
Larry Bohn and Aronoff in particular were optimistic about the incoming Obama administration, citing its willingness to employ high tech so effectively in the recent presidential campaign. Bohn said it was great to see someone who “gets it” in terms of technology’s potential in all sectors of American life - including the environment and alternative sources of energy.
There was agreement amongst the panel members that the venture capital industry is the true engine of the economy – unlike commercial banks, which customarily are more conservative and don’t take risks on new businesses; that is, ones without accumulated assets or any “track record” to speak of. David Aronoff commented that in terms of how his company focuses its efforts, 25% is devoted to “prospecting” for new investments and 75% “reacting” to the needs of existing ones. That brought to mind Harry Hoagland’s great quote “If I turned down 100% of all proposals, I’d be 95% right.” Investors understand the risks are greater, but the rewards are potentially much more substantial than with most other investments.
On the heels of this line of discussion, Galen Moore asked about issues of “transparency” and cited as an example the recent legal actions undertaken by the San Jose Mercury News against CalPERS, California’s largest pension fund investor, to gain greater access to the company’s records. Understandably, the three panelists defended the right of private equity firms to shield themselves from a certain degree of public scrutiny – largely on the grounds of the delicacy of their investments and other proprietary information in the face of their competition. They acknowledged that public companies are subject to much greater regulation and transparency, and that individuals are welcome to invest in those if they wish; but that private equity firms are private for compelling reasons.
The meeting concluded with a brief discussion of the role of women in private equity and venture capital companies – as it was pointed out by Galen Moore that none of the limited partners of the three panelists’ companies was a woman. The consensus from the panel was that this is basically an evolutionary process where women are increasingly entering the ranks of senior finance executives – and that in due course, they will be represented in the ranks of limited partners.
Overall, the fellowship of those in attendance and the Vilna Shul hosts, as well as the information I took from the discussion, made for a very productive and enjoyable evening.
– Christopher Hartman
