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Notes from the October 21 Xconomy Forum

The title of the forum was “A Global Vision of Venture Capital and Private Equity”.  This grandiose-sounding title was chosen, I suspect, to honor one of the panelists, Peter Brooke, who is indeed a pioneer of Global VC and PE.

The other panelist was Terry McGuire, a long-time and successful Boston VC who is a founder and Managing General Partner at Polaris Ventures and the current chairman of NVCA.

Bob Buderi (Managing Editor of Xconomy) introduced Terry, saying:  “Terry tells me that he’s on his fifth recession, and compared to Peter, he’s a rookie.”  I’m on my fifth recession, too, since I entered the work force.  They don’t get any better.

A few morsels I found interesting; my comments in italics:

• NVCA has updated its numbers that measure the impact of venture capital on the U.S. economy.  Eleven percent of private sector jobs and twenty percent of GDP are produced by companies that raised venture capital in their formative years.  These percentages have crept steadily upwards in recent years.

• Brooke:  “Private Equity was originally created to improve companies … Cheap debt bastardized the industry (and he meant “bastardized” multiple ways).”  Seems to me that private equity was always a lot about leverage, but in the early days there were some really fat companies that could be streamlined.

• McGuire:  “We have stopped taking risk on commercial/industrial technology.  Our recent experience is not good.”  I want to dig in on this point.  Surely there must be some opportunity in such a large sector?

• Howard Anderson (from the audience, always a good man with a phrase): “The Limiteds (Partners) are turning from sullen to rebellious.”  Ya think?

• Brooke and McGuire:  “LPs expected to much.  Venture Capital generates a premium to the public market, but it is not an absolute return investment.  And, LPs’ liquidity premiums have increased.” And who led them to expect too much?  I recall watching several of the name brand VCs pitch LPs during the bubble.  It was a tour de force of massaging the greed gland.

• Brooke:  “We have nothing to fear from Europe and Asia.  There is tremendous innovation energy in the U.S.”  I would say this differently.  The U.S. is a uniquely effective  innovation platform, and that is hard to copy.  Europe and Asia have different core strengths.  But we could easily kill our golden goose here, and Asia will try incredibly hard to eat our cheese.