We have just wrapped up the National Venture Capital Association annual meeting in Santa Clara, and amidst the gloom, there are a number of bright spots and even compelling reasons to be excited again. Clearly one of the highlights of the last two days was hearing legendary VC – Arthur Rock – when receiving the Lifetime Achievement award say “Writing the check is easy; doesn’t take much ink…”
Any investor would be pleased to have invested in just one of Rock’s many successful portfolio companies (Intel, Apple, Fairchild Semiconductor, Teledyne, Scientific Data Systems, etc). Listening to Rock and his re-telling of the many great war stories of the early days of the VC industry highlighted some of the parallels to what we are once again (hopefully) seeing – great and hugely disruptive new companies, explosive markets being created in very short order, brilliant and passionate entrepreneurs out to change the world. And maybe a return to a smaller VC industry – Rock’s first fund was $5 million and he did not invest more than $300k in any one company!
All this was echoed in Frank Quattrone’s (Qatalyst) comments earlier in the program who reported that he had not seen such optimism in the capital markets since the mid to late ‘90’s – although he did tick off the obligatory concerns such as domestic housing, China mark-down’s, Europe, modest growth, etc. Quattrone also noted that over the last few years there has been on average $150-$200BN of tech M&A which he expected to continue through 2012. His optimism was founded on six important trends he sees in the market: (i) enterprise models trending towards vertical integration (ii) move from “over-provision” to the cloud (iii) desktop transition to mobile (iv) structured going to unstructured data (v) physical to now digital commerce, and (vi) search being replaced by social/mobile/local. Quattrone closed by predicting a meaningfully more robust IPO market which is already helping to drive private market valuations to levels not seen since the ‘90’s ( can you say Instagram?).
Other chatter in the hallways included:
- Pats on the back all around for the JOBS Act, favorable definition of what the VC industry is and isn’t for regulatory purposes, defeat of SOPA/PIPA
- This may be the most uncertain period in DC over the last 20 years and there is little to no expectation of meaningful regulatory advances through the end of the year
- SEC is very nervous about crowd funding as they are still trying to get their collective arms around the Dodd-Frank implications
- Tax reform debate in 2013 may take on eliminating any differential between capital gains and ordinary income rates, as well as challenge “pass through” entities (and impose corporate tax structures on them)
- Real crisis at FDA as they take on the reauthorization of “user fees” which apparently covers ~40% of the FDA’s annual budget. This all needs to be wrapped up before year-end or the FDA shuts down. All this urgency, optimists believe, may drive real FDA reform.
- Cumulative market capitalization of listed securities on NYSE (they were a sponsor) is $24 trillion dollars – much of which I am now convinced Arthur Rock is responsible for.