It wasn’t long ago that venture capital was the hottest business in the U.S., this dynamic engine of wealth created by practitioners who during the industry’s apex rose to near celebrity status in Silicon Valley.
At cocktail parties, Alan Salzman recalls, women seemed to perk up when they heard you were a VC at least until the conversation drifted to what type of companies you invested in (data networking and semiconductor start-ups).
Perhaps venture capital isn’t as glamorous as it was a few years ago, but that’s quite all right for bluebloods like Salzman, founding partner of VantagePoint Venture Partners. He started in the gilded age of the 80s and taught venture capital at Stanford University for many years. Many of his students are in the business today “and could buy me and sell me many times over,” he said.
“Venture was a good business in 1995 [before the dotcom craze], and it will be a good business again” he said. “So we’re not rock stars, but it’s fulfilling. The tourists are all going home and the natives are staying, and Darwin is having his day.”
To his point, many of the venture prospectors who got into the business to make millions in the late 90s without paying their dues have left or are exiting the market. The true VCs remain, and Salzman says it is a good time to be in the business because the industry has returned to its senses.
San Bruno, Calif.-based VantagePoint, with $2.5 billion under management, recently opened a New York office on Madison Avenue to expand its East Coast presence, and is adding partners. The firm is focusing entirely on very early or seed-stage companies and is picking and choosing its portfolio companies carefully.
“The blooming of entrepreneurs. Innovating. What could be better?” Salzman said. “We see this as very healthy.”
For the time being, perhaps into first-half 2002, Salzman sees some rough weather ahead. He talked of “battening down the hatches,” “lowering the sale in the face of a stiff wind” and other weather/nautical terms to describe the market.
“When you’re driving in fog and can’t see what’s in front of you, what do you do?” he said. “You slow down…Don’t be a hero.”
Salzman has been through downturns before. This too shall pass. On the dotcom frenzy, he shrugs. “So what? It was over with quickly and it had less impact on the country than the S&L bailout did.”
While the pace of deals has slowed this year – VantagePoint will do about 40% fewer deals than a year ago – Salzman and others say deal flow isn’t the issue, Rather “it’s separating the wheat from the chaff.”
And until VantagePoint sees the right combination of business and management team, it will feel no pressure to cut a deal.