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December 14, 2008

The "Positive VC" PR

After Sequoia Capital's much publicized "RIP Good Times" presentation, other VCs are now generating "good PR" for "rallying their troops".

Arvind Sodhani of Intel Capital in TheDeal.com:
"What we have now is a very broad based decline. It would not surprise me if we saw a fairly large GDP decline in the U.S. and a prolonged recovery after that. We view this as an opportunity. We will continue to lead and not waver. We will find the good investments and help them. We are leading our deals, by and large. That's different from 2001, when we were not leading deals. We had to rely on other VCs back then. The VC community pullback will not impact us at all. It will create the opportunity to do more investments for us."

...While in October some VC firms used scare tactics in communicating with portfolio companies about the impact of the economy on startups -- most famously Sequoia Capital with its "R.I.P. Good Times" presentation -- Sodhani chose a different path. He wrote Intel Capital's portfolio companies a letter full of reassurance. "Intel Capital remains committed to investing in technology innovation globally," wrote Sodhani the last week of October. "We are not wavering."

Altos Ventures has provided a "different perspective" on the Sequoia presentation here where it quotes Peter Drucker to emphasize that entrepreneurs are "the beneficiaries of change".
The reason that we feel like we are contrarians again is that we have not seen such a good environment for building companies in years. Entrepreneurs are more focused on getting to profitability and building companies based on solid fundamentals. Before, we felt like lonely voices in the VC world, which seems to be filled with people working toward billion dollar exits for money losing companies.

Over this entire year, we've noticed a trend. Some of our companies started seeing a steady flow of high quality resumes from competitors. I think it's now about to turn into a flood! It's will be much easier to hire great people who are more hungry and realistic about compensation and how long it will take to build shareholder value.

For entrepreneurs in it for the long haul, this downturn just bought them more time. Impatient VCs won't be hounding them to take more risk, to grow faster, to get more aggressive. Remember, as an entrepreneur, you have one company. You don't have a portfolio of companies.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in