The atmosphere at this year’s National Venture Capital Association gathering in San Francisco was electric. All the big names were there, along with a star-studded cast of speakers and panelists. Bob Grady, managing director of The Carlyle Group and chairman of this year’s event, was beaming. He was particularly excited about the inclusion of two former National Security Advisors-Samuel Berger and Lt. Gen. Brent Scowcroft-as well as Lou Gerstner, who was interviewed during a lunch presentation by PBS talk show host Charlie Rose.
No Autographs, Period
Even the absence of California’s new governor, Arnold Schwarzenegger, couldn’t deflate the event. The Governator was supposed to give one of the keynotes, but he couldn’t make it because he was busy signing off on a new state budget. Most attendees claimed they weren’t disappointed that Arnold didn’t show up and were plenty happy to see Gerstner. But Hendrik Susanto, a principal in the San Francisco office of IDG Ventures, confessed he was discouraged that the action hero wasn’t there. He had brought an invitation for a Terminator II screening for Arnold to sign and had a digital camera in his breast pocket to catch the action.
During an LP panel, Michael McCaffery of the Stanford Management Co. was asked what he learned from the Internet Bubble. “We were all morons; we all made mistakes, regardless of where we were in the food chain,” McCaffery told the crowd. As for lessons, he cited two: First, “diversifying” by investing in a broad group of venture firms isn’t really diversifying. Instead, it results in many different investments in the same group of portfolio companies. Secondly, interim valuations can be misrepresentative of the true value of VC portfolio companies. McCaffery wondered aloud whether accountants-in the form of FASB and its current attempts to implement accounting practices on private equity investors-were providing the industry with any real help in terms of valuations.
Going Public Too Pricey?
Jim Breyer, managing partner of Accel Partners and the newly elected chairman of the NVCA, is concerned about the high cost of going public. During the NVCA’s media roundtable, Breyer said that one concern that makes him count sheep at night is the rising costs for being a public company. The increase in costs-which come from complying with new corporate governance rules, such as Sarbanes-Oxley-can total as much as $2 million a year, Breyer said. That’s a steep price to shell out for a newly company that nets only a few million dollars a year.
In addition to naming Breyer chairman, the NVCA named eight new directors who each will serve for four years: Peter Barris of New Enterprise Associates; Michael Cronin of Weston Presidio, Joanna Rees Gallanter of Venture Strategy Partners, Robert Ketterson of Fidelity Ventures, Mark Klopp of Eastman Chemical, Gilman Louie of In-Q-Tel, Ted Schlein of Kleiner Perkins Caufield & Byers, and Chad Waite of OVP Venture Partners.