Dancing with venture capitalists

Source: Technology Digital

Date :29/11/2007 11:09:06

VC companies have become more fickle on whom they will partner with. National Venture Capital Association President Mark Heeson reveals the best ways to still catch their eye.

By David Weldon

When media mogul Rupert Murdock made his recent bid for Dow Jones, and with it The Wall Street Journal, he wasn’t just acting on a whim.

Communications companies are hot properties these days. At least that is the take of the National Venture Capital Association (NVCA), the national group of companies that fund corporate investments.

In demand

“Biotech and communications companies are hot commodities right now,” says Mark Heeson, president of the NVCA, head-quartered in Arlington, VA. “There are also good investment opportunities in the life sciences area and in the clean sciences [sciences that use so-called clean rooms].”

Heeson is a good judge of economic opportunities, since his association represents the financial drivers of virtually all corporate sectors.

“The association was founded, and continues to be, a public policy organization,” Heeson says. “We were founded to try to enact legislation that would allow personal investment funds to be invested in venture capital funds.”

The association, now in its 33rd year, represents 475 venture capital firms in the United States, which in turn account for 93 percent of all U.S. investment activity.

To put that into perspective, Heeson says that customers served by members of the association accounted for 17 percent of the entire Gross National Product (GDP) in 2006.

Things are looking pretty good in 2007 as well, Heeson says, which he interprets as meaning in a positive — if only slightly — curve upward on the economic growth chart.

Outside of the biotech and communications sectors, “Venture capital companies continue to invest at a constant pace,” he notes. “For the past 18 months or so, investing has been about the same in each market. We’re not seeing one sector or another getting suddenly hot, but more of a broad steady increase.”

Gradual

But slow and steady is fine for association members, considering the experiences of the few years just preceding. Following the dot.com bubble burst, many venture capital firms took a royal soaking in the market.

Still, “The dot.com period was an anomaly,” Heeson insists. “Venture capitalists were doing deals much too quickly. Today, they’re much more slow in that regard, and that’s a good thing.”

Venture capital firms are certainly used to pendulum swings in the market, since they are always at the forefront of pumping cash into business ideas or technologies that haven’t yet proven themselves.

Heeson refers to it as a continual dance, with venture capital firms seeking out attractive entrepreneur partners, and entrepreneurs seeking out interested venture capitalists. The trick is to know when to lead, and when to sit the dance out…

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