InterWest News
Belt-Tightening Remains A Central Theme In Start-Up Land
Wall Street Journal: Venture Capital Dispatch
Scott Denne
21 September 2009
One year after the collapse of Lehman Brothers Holdings Inc., venture capitalists still emphasize belt-tightening and throwing capital behind only the best companies.
"If you're not getting escape velocity, that company should be sold or closed," said Kate Mitchell, a managing director with Scale Venture Partners, speaking last week on a panel titled "Keeping Portfolio Companies Alive & Thriving" at the Dow Jones Private Equity Analyst Conference in New York.
While there's still a willingness to spend money on portfolio companies that are having success, "there's a lot more dialogue about whether it is too early or too late" to try to accelerate a company's growth, Mitchell said.
With difficulties in raising new capital, "the best CEOs are very cognizant of how hard it is" to get new funds and adjust their spending accordingly, said David Lane, a general partner with ONSET Ventures.
"For companies with multiple products we have to focus," Lane said. "When capital was more available we might try four or five products and get two" that worked best, he said.
It's not just the sour economy that is a contributor here. "There is disagreement on boards about where projects should go" since different funds have different reserves remaining, Lane said. This can lead to fractured investment syndicates, as we noted last week.
Not all the talk was about lowering costs. All investors on the panel said they see an opportunity for companies to succeed in the recession.
"You should take this opportunity to emerge above the fray," said Doug Pepper, a general partner with InterWest Partners.
