Exit strategies
By Scott Kirsner, 1/7/2002
The Boston Globe
Being a venture capitalist used to be as much fun as being a Good Humor vendor who was allowed to give out free ice cream on a hot summer day. Who wouldn't want to be the person doling out cash to ambitious entrepreneurs, along with promises of impending millionaire-hood?
Now, the job has more in common with the guy who follows the circus parade with a wheelbarrow and shovel.
''Most of a VC's bandwidth is taken up with cleanup work,'' says Lars Perkins of Idealab Boston. ''You're not looking for new investment opportunities. You're doing shutdowns, fire sales, and asset liquidations.''
That's no fun, and it's precipitating a wave of departures from local venture capital firms.
There are other reasons, too. The industry expanded wildly over the past few years, and now firms are pruning back - with the partners who made too many investments in ill-fated dot-coms being strongly urged to ''pursue other opportunities.'' Other partners are simply not willing to wait around four or five years for the IPO market to return and reinvigorate their net worth.
Among those who have split are Gautam Prakash of Bessemer Venture Partners in Wellesley Hills; Jill Krzewina of YankeeTek Ventures in Cambridge; John Doggett of BancBoston Ventures; Leigh Michel of Ascent Venture Partners; Jim Brown of Polaris Ventures; and John Shue, sibling of the actors Elizabeth Shue (''Leaving Las Vegas'') and Andrew Shue (''Melrose Place''), who lost his job last fall when Audax Group couldn't raise the money to keep its venture capital arm alive.
''Those people who are leaving I would put in the category of rookies and tourists,'' says Dick Testa of the law firm Testa Hurwitz & Thibeault, which provides legal advice to more than 100 venture capital firms.
''People who joined the industry in the last five years experienced instantaneous success, and now it's proving to be a hard job. They've never experienced a down cycle.''
But it's not just individuals who are choosing to change careers; many firms are deciding to shrink the ranks of their partners or their administrative staffs. Summit Partners of Boston, which specializes in funding more mature companies, was late to get into the
early-stage game with its Summit Accelerator Fund, and is now exiting that business.
''There are a lot of firms that are evaluating their human capital, and concluding that their configuration is probably not optimal,'' says Dan Nova, a managing general partner at Highland Capital Partners. ''At the end of the day, venture is no different from a Fortune 500 company or a mutual fund. If the performance isn't there, people will be held accountable, and people will lose jobs.''
The profession, these days, is suffused with graveyard humor.
''We had a great outcome last week for one of our investments,'' you're likely to hear a venture capitalist report, tongue planted in cheek. ''We made one times our money.''
Monday morning meetings of a firms' partners used to end with lunch; now, they often stretch past dark. And where partners used to chastise each other for deciding not to invest in companies that eventually hit it big, now they chastise each other for deciding to invest in companies that have hit the rocks. The venture world these days seems less like an exhilarating adventure and more like a rough slog.
''It was fantasyland,'' says Ted Dintersmith of Charles River Ventures, reflecting on the late 1990s. ''[Venture capitalists] were viewed as being unbelievably smart and powerful. Now, it's a lot of work. You're dealing with CEOs who are unhappy, because they're laying people off, and they're realizing that they may not succeed after all the hard work they've put in.''
A rumor circulating recently had it that Testa Hurwitz had handled a record number of partner exits from venture firms in 2001 - 50 or 60, by various accounts. But both Dick Testa and Robin Painter, who co-chairs the firm's private equity practice, say that's not true. Says Painter: ''You did have lots of people over the past few years saying, `This looks easy. Let's be VCs.' And clearly, you do see more comings and goings [reported in the trade press] than there once was.'' But she says there hasn't been an ''unusually large number of partner exits'' of late.
Still, many individuals are deciding that this might be a good time for a career transition.
That's what Jim Brown did in December when he moved to InvisibleHand Networks in Burlington, a Polaris portfolio company, where he's now president and CEO. A lot of people ''went into venture when it was the hot new thing to do, and now they're seeing the downside,'' Brown says. ''They're taking a step back and asking, `Is this something I really want to do for the rest of my life?''' Brown still serves on the board of several Polaris companies.
Michael Frank of Advanced Technology Ventures in Waltham observes that ''people are definitely getting pushed out or, if they're at a firm that's having trouble raising money, they're looking for a job with a more stable firm. Others are looking to take jobs with operating companies.''
Finding safe harbor will be difficult. Tech companies have their own set of troubles, and most established venture firms aren't hiring right now.
At this juncture, it seems few jobs in technology or tech investing can offer much stability or excitement or a guarantee of riches. But one thing they do offer, in exceptionally generous quantities: plenty of hard work.
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New ideas brewing
Visiting the Guinness Brewery in Dublin last month - on business, I swear - one of my hosts mentioned that, since I was from Boston, I should stop by and see the new Media Lab Europe while I was in the area.
Turns out that the ''European Research Partner of the MIT Media Lab'' is located in an aromatic old warehouse, once used for hops storage, within the walls of the Guinness plant at St. James' Gate. (Somehow they left that detail out of the press announcements when the satellite lab opened in 2000.)
Chief operating officer John Callinan gave me a quick tour of the 18th-century brick building. Sponsors of the lab's research include the BBC, Irish telco Eirecomm, Intel , and Ericsson. A homegrown videoconferencing system called iCom serves as a window between the lab in Cambridge and the one in Dublin.
''Some Cambridge faculty come over for a week at a time,'' Callinan says, ''and students from the lab there can spend a semester here.'' About 40 percent of the researchers at the Media Lab Europe are Irish, about 30 percent come from the United States, and 30 percent come from the rest of the world.
US ambassador to Ireland and EMC Corp. cofounder Richard Egan has already visited several times, once with the Irish prime minister. U2 lead singer Bono serves on the board. Before coming to the Media Lab Europe, Callinan worked in the prime minister's office as an adviser on e-commerce policy and strategy, and helped to develop the Irish government's Action Plan to Implement the Information Society in Ireland.
He jokes that the European branch of the lab almost wound up in Germany, but ''the Germans were concerned about researchers bringing dogs to work, and the impact the dog hair would have on the carpet. It didn't seem like it was the right culture there.''
The European lab holds an event later this month called ''Extreme Interfaces,'' featuring a keynote by MIT Media Lab founder Nicholas Negroponte. See www.medialabeurope.org for more info. Eventually, the Media Lab Europe plans to expand into a renovated vat warehouse next door to the current building.
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Scott Kirsner is a contributing editor at Wired and Fast Company. He can be reached by e-mail at kirsner@att.net.
This story ran on page C1 of the Boston Globe on 1/7/2002. |
