Feb 14 2005

Venture Capital in the Rockies

I spent the much of last week attending the annual venture conference sponsored by the Colorado Venture Capital Association. The purpose of the event is to attract out of state VCs to take a look at Colorado venture deals that are in the market (click here for a link to the companies that presented this year). I’ll talk about Colorado’s venture capital market in a separate post, but suffice it to say, it’s important to the local VC community to have financial support (at least on some deals) broader than the local community can provide. While each of us has relationships with firms out of state that we syndicate deals with, as a group this is our one annual chance to put our best foot forward to out of state investors.

The conference has been going on for over 20 years, but a few years ago the CVCA figured out that they would attract more people (particularly out of state VCs) by holding the conference up in the mountains rather than down in Denver (there was always a ski day after the conference, but since most people were staying down in Denver the skiing wasn’t really a big draw). As a result, the conference has been held up in Beaver Creek for the past 3 years, to great success. This year was no exception – the conference drew a record number of attendees (over 270); a record number of venture capitalists (81) and a record number of out of state venture capitalists (31).

The conference is a mix of social activities (there are a number of cocktail parties and an astonishing number of ‘private’ dinners hosted by various service providers over the 2 ½ day conference), company presentations (the conference had both a life sciences track and an software track) and topic specific presentations (one panel presentation in the morning and a lunch keynote). Here are my observations/notes from the conference: Company Presentations: I caught about a dozen company presentations and overall walked away impressed with the quality of the deals that presented at the conference (see this Denver Post article for some other people’s thoughts on the presentations). I was on the selection committee that chose the presenters for this year’s conference and I can tell you that my impression of the deal flow in Colorado having gone through the process of looking at a majority of the local companies that are currently in the market is that, while the deal quality at the top is high (which was reflected in my positive reaction to the presentations at VCIR) the depth is pretty shallow. I remember being a little nervous about filling out the speaking slots at the beginning of the process – there was a very clear inflection point in deal quality. As the selection process wore on and we received additional business plans we were able to fill out all of the available slots, but the process definitely left me with the impression above – there are a number of great Colorado deals in the market, but below the top 25 or so deals, the quality really drops off.

Companies of note includedRally Software and Oxlo (both Mobius portfolio companies); Umbria Communications (I blogged about this company last week – they could have taken up a full hour just with the q&a interest their presentation garnered); Webroot (who just announced a $108m raise – the CFO Mike Irwin spoke and while I can tell you that the company is experiencing remarkable revenue growth, he didn’t offer up any details of their recent round); New Global Telecom (these guys were a wholesale provider of carrier services that went bankrupt a couple of years ago, somehow avoided liquidation, recapitalized with only a couple of million dollars (less?) and are now transitioning into the VOIP space; and Tendril (Zigbee middleware platform founded by local entrepreneur Tim Enwall).

Keynote Address: This year’s keynote was given by Seth Godin. Other than having a great first name, Seth is an incredibly engaging speaker. The gist of his presentation was that marketing has changed – companies don’t create a product and then somehow get the message out to people that they should buy it but rather that product itself is the new marketing – creating something extraordinary that people want and will tell their friends about is the way to create ‘buzz’ around products. Clearly he’s slanted to the consumer space (he sold his last business to Yahoo), but there’s lessons for the enterprise space as well. I’d put the presentation in the category of ‘brain candy’ – it was interesting, well put together, engaging, Seth is a great speaker who had some interesting ideas that were clearly designed to be presented in a way that were both thought provoking and entertaining. My sense is that I’ve now effectively read a couple of his books having sat through his presentation.

Panel Presentation – the state of technology m&a and the IPO market: I almost skipped this panel but am glad I didn’t.  There was a lot of good info conveyed here – I’m going to write a separate post to really cover it well.  The panel consisted of two bankers (one m&a banker and one corporate finance) and an institutional investor talking about the state of the markets, what they look for in deals, etc.  The highlight of the panel was when the institutional investor, in response to a question, said that the bank that takes you public really doesn’t matter from his perspective (the two bankers visibly grimaced on that one). Key themes from the panel were that dual track processes are becoming more in vogue (using the red herring or the threat of one as a way of driving m&a) and the general easing of the markets (both IPO and m&a).

So – there you have it.  Two and a half days of schmoozing and company pitches into a couple of paragraphs.  We’ll do this again next year – please join us.