VCs Look Back on 2009, Look Forward to 2010

Yesterday I emailed a handful of VCs to get their thoughts on 2009, and what might lie ahead in 2010. Same four questions for each. What follows are the replies of five venture capitalists and a VC fund placement agent. If more replies roll in — hard to know with so few folks working — we’ll be sure to add them.

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[slide title=”Warren Lee, Canaan Partners”]
What was the headline for 2009’s venture capital market?

Lee: 2009 was a lost year for the venture capital market. For many startups, 2009 was all about treading water, preserving cash, and not taking any risks.

What was the year’s most important development that didn’t get the attention it deserved?

The number of IT startups that did NOT go out of business in 2009. Despite Sequoia’s RIP presentation. Too much money is still being invested to prop up companies that have very little chance of generating venture-like returns. In 2010, a large number of startups will finally go out of business.

What will be different in 2010, for the industry and/or for your own investment activity?

The amount of venture capital invested in 2010 will be equal to that of 2009.

What will become the 2010 headline?

In 2010, at least a dozen Internet and digital media startups will either go public or get acquired for over $200M.

[slide title=”Maria Cirino, .406 Ventures”]
What was the headline for 2009’s venture capital market?

Cirino: Apocalypse Averted (or postponed). The dire predictions coming out of ’08 for a multi year VC freeze turned out to be overblown.

What was the year’s most important development that didn’t get the attention it deserved?

VCs are being held accountable for results regardless of their brand/status–this will create a new world order in the VC kingdom within 10 years.

What will be different in 2010, for the industry and/or for your own investment activity?

More discipline than ever around deal valuations and executing a stated strategy.

What will become the 2010 headline?

Sub-performing mid-tier firms shut down in droves… will make 2009 look like a fairy tale.

[slide title=”Dennis Miller, Spark Capital”]
What was the headline for 2009’s venture capital market?

Miller: The rationalization of the venture capital industry.

What was the year’s most important development that didn’t get the attention it deserved?

Amazon selling more Kindle’s then books.

What will be different in 2010, for the industry and/or for your own investment activity?

The emergence of the tablet/kindle/netbook converged device that becomes the new platform.

What will become the 2010 headline?

The emergence of Eastern Europe and Brazil.

[slide title=”Gary Rubinoff, Summerhill Venture Partners”]
What was the headline for 2009’s venture capital market?

Rubinoff: A tough year for venture capital

What was the year’s most important development that didn’t get the attention it deserved?

Venture is not going away – just being recast – survival of the fittest.

What will be different in 2010, for the industry and/or for your own investment activity?

For the industry – should see better exits. Will see a contraction of funds – reality will set in this year for fund-raising. For our firm – we have capital, its a good time to invest – lots of good opportunities at low valuations.

What will become the 2010 headline?

A better year for venture capital exits – fundraising remains tough.

[slide title=”Clint Chao, Formative Ventures”]
What was the headline for 2009’s venture capital market?

Venture firms, old and new, large and small, had their venture thesis, team dynamics and investment models tested in perhaps the worst venture cycle ever.

What was the year’s most important development that didn’t get the attention it deserved?

Some of the more interesting exits in 2009 were companies that weren’t necessarily in the limelight (SpringSource, Gomez, LeftHand Networks, etc.).

What will be different in 2010, for the industry and/or for your own investment activity?

Big brands and big media finally begin to capitalize on new initiatives in online marketing/search, cloud computing and social/gaming platforms.

What will become the 2010 headline?

More companies enabling big trends from the infrastructure layers will continue to see heavy M&A activity as big incumbents continue their land grab to own the new world infrastructure.

[slide title=”Kelly DePonte, Probitas Partners”]
What was the headline for 2009’s venture capital market?

DePonte: The NVCA’s Report covering 10 year horizon returns released in the 2nd quarter, clearly showing returns dropping like a brick. Many LPs I chat say they haven’t made money in VC in 10 years, and this really brought the story home. Secular trend, not cyclical.

What was the year’s most important development that didn’t get the attention it deserved?

The Distressed Debt/Restructuring boom of 2009 didn’t seem to pan out as broadly as first thought as government intervention ameliorated the situation – at least so far. In addition, a number of distressed players were too aggressive early in 2008, and spent a lot of 2009 dealing with problems in their portfolios.

What will be different in 2010, for the industry and/or for your own investment activity?

As a placement agent, I think the fundraising drop off in 2009 has been so sharp that it is likely hit bottom, and that overall more money will be raised in 2010 than in 2009. However, so many GPs have delayed fundraising that it will very crowded and difficult to attract what is likely to be only marginally more money.

What will become the 2010 headline?

Happy Days Are Here Again! (Of course, that song was a big hit in a 1930 movie and things remained difficult until 1939.)
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