May 28 2009
by Todd Hixon

The Venture View from DC

I spent the last two days at the Mid-Atlantic Venture Association (MAVA) annual meeting.  The contrast in the feeling at this meeting to similar gatherings in New England is noteworthy.

The MAVA meeting was well attended:  about 800 people, the same number as in May 2008.  Many of the top VCs in the region were visible:  John Burton (founder of Updata) was the meeting chair; I sat next to Roger Novak (founder of Novak Biddle) at lunch.  There is recognition of a tough fund-raising market for both ventures and venture funds.  But there is a sense of confidence in the air as well.

Contrast this to similar meetings in Boston (regional meetings, not the NVCA annual meeting which happened to be in Boston this year).  

  • NEVCA meetings are often lightly attended.  Mostly younger VCs and partners from the up-and-coming funds show up.  The meetings are driven by the program more than the networking opportunity.  Unless they are speakers, the senior figures in the Boston venture community are distinctly absent, maintaining their aura of mystery and exclusivity, it seems.
  • There is a climate of doom and gloom in Boston.  We hear about “brain drain” of bright young grads from area universities to the Valley (N. California).  Despite a world-class tech talent pool, we mutter that nothing is happening and the region is turning into a bio center.  Some of the major funds are in turmoil:  losing bright young people, encountering fund raising headwinds for the first time in decades, putting a much smaller number on the cover.

Why do things feel so much better in DC?  Three hypotheses:

  • The nation’s capitol region is on the rise right now.  A new administration recently swept into town with a strong mandate and a big agenda.  Financial clout has shifted sharply to DC from New York, San Francisco, or Boston.  This helps to engender a sense of vitality and optimism, no-doubt.
  • Supply and demand is better balanced in the mid-Atlantic venture market:  there is substantial entrepreneurial activity (the array of entrepreneurs at MAVA consistently shows range and quality), and the VC community is not over-large.  Some of the key local funds have already taken the downsize treatment and emerged with business models that better suit today’s market (or any day’s market; the $1 billion venture fund seems to be pretty much a failed experiment).
  • Most important, however, the mid-Atlantic feels like a supportive community of venture investors, angels, and entrepreneurs.  People are working together to build the eco-system; there is no talk of brain drain to California.  The market has unique characteristics and people are working to exploit them, eg, a long-time VC explained to me how you get the government to give you a security clearance so you can troll the classified labs looking for dual-use technologies to spin out.  

I have read a lot about the early days of Silicon Valley (before 1980, when the virtuous circle was just starting to gain momentum).  The Valley’s culture then was one of a “rebel alliance” struggling against the major East Coast corporations that controlled the technology industries:  IBM, GE, AT&T, RCA, the pharma giants.  Venture capital was scarce:  Kleiner Perkins I was raised in 1972 with committed capital of $8 million.  The leaders in the Valley at that time fostered a mutually supportive community.  The Valley focused on the unique resources at hand (eg, the Lockheed Missles & Space Division, which had relocated to Sunnyvale to get away from the “airplane” culture in LA, became the prime contractor for the Minuteman and Polaris/Trident missile programs, and until the mid-60s was the world’s largest buyer of new-fangled “integrated circuits”).  And the Valley developed a unique culture of shirt-sleeved innovative engineers, defying the “suit” norms of the big Eastern companies.  That all worked out well for a long time.

DC seems to be on the same track:  confident, well-knit as a community, pursuing its unique opportunities, making the most of scarce capital.

Boston seems to be crying in its beer, clinging to past glory and the old order it supports.  We in Boston have certainly been taken down some pegs.  But our talent pool and eco-system depth still stands far above anything but the Valley.  Seems to me it is time for us to take our medicine where we need to, and take a lesson from the Valley in the 70s and DC currently: focus on our strengths, work together as a community, and build a sense of pride and confidence in what we can do.

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