I Predict… –

What’s going to happen this year? We asked venture capitalists and others to “make a prediction about anything that will have a significant impact on venture capitalists in 2003. Don’t hold back: Your prediction can be positive or negative, serious or silly, reserved or far out.” This is what you and your peers had to say.

“The long-awaited and often misjudged life sciences IPO market will materialize, except that this time it will be led by medical technology companies.”
Guy Nohra
Partner, Alta Partners

“More of the same: pain and suffering. The key is to find the aspirin for our industry. That will separate the long-term players from the others.”
Tony Sun
Managing General Partner, Venrock Associates

“The top tier of venture firms and their respective level of activity will be marked by significant change. VC personnel competent in promising new areas will migrate from older firms toward younger ones without as many ailing investments. Professionals who built their careers in sectors now plagued with over-saturation and financing woes will exit the game.”
Peter Hebert
Partner, Lux Capital

“I think the stock market is going to move into a solid bull mode. I believe that deal flow is going to continue to be thin.”
Jim Nichols
Treasurer/Chief Investment Officer, Ohio State University

“The best deals of 2003 will be those that have been incubated by [entrepreneurs-in-residence]. VCs who don’t have EIRs exploring new opportunities will be left behind.”
Yogen Dalal
Co-Managing Partner, Mayfield

“Based on an extrapolation of recent data, venture groups will cross the axis and begin a reverse cycle of committing funds to limited partners by late 2003. This will occur as the industry searches for the bottom and will continue to do so until revenues improve and successful exits emerge.”
Randall Crawford
General Partner, Lee Munder Venture Partners

“It is going to be more fun than 2002. The venture capital business will rely on networks again. People will syndicate deals more, and the deals they do will be more interesting than they were in the last three years. Published results by the pension managers will happen universally in one way or another but will no longer be big news, and the funds and their investors will go back to thinking long term.
Tim Draper
Founder/Managing Director, Draper Fisher Jurvetson

“The pace of failures of venture-backed companies that started during the Internet bubble is going to accelerate.”
Steven P. Bird
General Partner, Focus Ventures

“The mythical and much predicted Year of the LAN’ will finally occur due to the outrageous growth of the family of 802.11 standard products!”
Charles P. Waite Jr.
General Partner, OVP Venture Partners

“There will be a significant increase in new startups invested in. You’ll start to see more participation by the venture capital community in opportunities in Asia. Publications like yours might start covering China.”
John Miner
General Manager, Intel Capital

“A lot of companies that were presumed to be fully financed in their last internal round are going to be coming up for their next round of internal financing. So you’re going to see a lot of companies shutting their doors in 2003.”
Peter Barris
Managing General Partner, New Enterprise Associates

“I expect that 2003 will be another tough year for IPOs (best guess: less than $2.5 billion in offering value), but a good year for new startups. At least one company formed in 2003 will reach the Fortune 500.”
Roger McNamee
Co-founder/General Partner, Integral Capital Partners

“Investments will continue to return to a normal, incremental style of investment. It will go back to the way VCs started: invest, test, invest some more. I don’t think the shakeout in portfolios is completed yet, and I think there will be an increasing amount of capital deployed into secondary purchases.”
Bryan Finkel
Managing Director, Advanta Growth Capital

“Bush’s plan to reduce taxes on dividends will have an unexpected (although probably small) impact on the growth companies that venture capitalists generally back. Other things being equal, the market will place an even higher value on mature cash-generating companies (such as Cisco and Dell), which will make investors less interested in small, high-growth companies that (although profitable) are years away from returning any cash to shareholders.”
Robert T. Coneybeer
General Partner, New Enterprise Associates

“The year 2003 will see a continued deceleration in private equity investment in the United States (possibly back to 1997 levels). This is due to continued geo-political uncertainties as a result of the current U.S. government’s ambivalent policies (even buyout funds will continue to have trouble getting money out of limited partners). Internationally, Japan and China will be the main attraction in PE-Japan because the banks will finally have to lower their non-performing debts by selling assets, and China because that is the only large market with dynamic growth.”
William Yung
Partner, Emerge Ventures

“Nanotechnology will go from small science to big business.”
David Lackner
Nanotech Commercialization Manager, NASA Ames Research Center

“The number of corporations investing in companies at a venture stage will decline by 80% as it did between 1986 and 1990. The Israeli high-tech industry will not be affected by events in the Middle East since Saddam Hussein will flee rather than fight.”

Kenneth W. Rind
General Partner, Israel Infinity Venture Capital Fund

“Maybe 2003 will be the year that venture capitalists finally realize that it matters very little what most other VCs think or do, and, instead, avoid fashion and develop more independent and creative points of view about the future of the business of technology.”
Bob Stearns
Managing Director, Sternhill Partners

“In this year’s market, we will recognize some senior citizens who quietly stroll the beaches, sift through the sand dunes and discover a few gems that were lost by once-wealthy tourists.”
Jeffrey D. Lovell
Chairman and CEO, Putnam Lovell Capital Partners

“Tech M&A activity will be significantly higher this year due to continuing stagnant sales at smaller software companies, many of which are bleeding cash and/or trading at cash value. Sector leaders like Microsoft, Symantec and IBM will take advantage of this opportunity to consolidate the market and position themselves for future growth.”
Sean Sebastian
Partner, Birchmere Ventures

“World demographics will have an important impact on VCs. The hump for 46-year-olds (highest-earning/highest-saving age group) was back in 1998, and it’s downhill from here, with the Dow headed for 4,000. No matter what you hear about your grandmother going online, old people just do not have the same appetite/need for tech spending.”
Tolga Uzuner
Dresdner Kleinwort Wasserstein

“A fair amount of money will be wasted on nanotechnology investments and conferences. Ten years too soon.”
Micah Avni
Partner, Jerusalem Global Ventures

“2003 will be a year of consolidation. The startups which have survived through the last three years will merge in record numbers to build enough scale and profitability that they can go public in … well, probably no time soon.”
Andrew Anker
General Partner, August Capital

“A tight credit market will prevail and the uncertain public markets will continue to straight-line through 2003. 2003 will be a tough year for portfolio companies to become public, the cost of compliance and the regulatory stress will convince many LBO shops to keep their exit strategies more focused on M&A rather than IPO windows. This same point will influence many companies (small to mid-size) to become private, due to unrewarding public markets and the costs/concerns of public compliance. M&A and private equity will need to work a great marriage in 2003 to have a great year.”
Reginald E. Greiner Jr.
UBS Capital

“Top-tier venture funds will not be able to raise new funds by relying on their historic investors-endowments and foundations-as they will find themselves over-allocated to private equity. They will for the first time be looking at letting public pension funds invest with them, most often done through funds-of-funds, which will allow these venture funds to keep the confidentiality that they might otherwise sacrifice by letting these public funds invest directly.”
Brad Miller
Peppertree Partners

“A lot more people will realize that China is a sleeping giant that has woken up. Consumer electronics will influence the venture world more than in the past. And I think 2003 is the year that we start showing signs of an economic recovery.”
Charles Wu
Managing Director, Panasonic Ventures

“Industry standards will significantly reduce viable startup activity. VC money will cease to support startups that are designing to an industry standard, be it Web services, 802.11, 3G, or any other. The reason: VCs will wake up to the fact that producing a great implementation of a standard is only truly valuable if you are almost certain that the incumbents will not be able to produce a product to meet the standard. Incumbents are now so strong relative to startups that this is literally a one in a million’ probability-not good enough odds in the venture business.”
Sven Jacobson
Carrot Capital

“Based on its technical implementation, the elimination of the dividend tax will support more angel investment and new business development.
Roger Akers
Managing Partner, Akers Capital

“Though it may be boring to say so, I think 2003 will be more of the same.’ Business fundamentals will still be the overriding factor. The Gold Rush is over, we all are getting back to the business of building solid businesses brick by brick.”
Brad Silverberg
CEO/General Partner, Ignition

“GPs will leave their firms in much greater numbers than in the past five years. Why work for only a salary? Why not leave a partnership with large losses and join a new firm?”
Harry Edelson
General Partner, Edelson Technology Partners

“2003 will see the reemergence of the tightly focused, quiet, totally unsexy corporate venture program. In 2002, there were a number of high-profile exits from the corporate venture scene, and even more unannounced flameouts. … After two years of soul-searching, I have seen many of my corporate clients slowly begin to move back in to corporate venturing and-even more encouraging-new market entrants.
Michael R. Littenberg
Attorney/Partner, Schulte Roth & Zabel LLP

“We will be investing more in the second half than in the first half. The buy cycle and the demand cycle for products are as unpredictable as ever. Prices for tech products will be down and staff will be let go. The good news is that it’s the beginning of the upswing. The best returns are made in the three years after a down cycle in a recovery.”
Niall Carroll
Managing Director, ACT Venture Capital

“Mobile phones will move toward commodity, with startups using a variety of templates such as Microsoft/Intel and others. Many opportunities for VCs will arise. Wireless IP will spur new low-cost operators moving beyond Wi-Fi to use alternate technologies and build low-cost, high-bandwidth WISP services.”
Jeff Pinkham
Entrepreneur in Residence, MSC Venture Corp.

“Last year we worked 80 hours a week in $1,200 chairs for $5 million in options. This year it’s 25 hours a week for $7 an hour with two 15-minute breaks. But we get to take the movies home for free, right when they come out!”
Jamis MacNiven
Founder/owner, Buck’s restaurant (VC hangout)