Interviewing the Yoda of venture capital


The yoda of venture capital.I’ve been a bit absent from this blog, thankfully working on some very exciting projects that will soon see the light of day. More blogging to come soon, so hang in there!

In the meantime, I would like to draw your attention to an excellent interview by Jim Connolly of Mass High Tech of Paul Maeder, co-founder of Highland Capital Partners (and my boss). Paul has been in the venture business for about 30 years and has backed game-changers like Avid, Checkfree, Sybase, Vertica, Vistaprint, and many others. He is also Chairman of the National Venture Capital Association (NVCA) and is fighting the good fight in DC on behalf of our entire industry.

Friend and fellow VC at Village Ventures Matt Harris has also called Paul “the Yoda of venture capital.” Better grammar though.

Jim was nice enough to allow me to reblog parts of the interview below. If you want to see Jim’s entire interview, go here.

On public market liquidity for sub-$100 million companies:

“The public markets right now are really open only to the superstar companies, the half dozen or so companies that will knock your socks off, the Facebooks of the world. You don’t have a healthy environment. Imagine a high school where you had three kids who went to Ivy Leagues and all the other kids didn’t go to college at all. That’s not a healthy high school environment.”

On what is needed to start a tech company today vs. the 80’s:

“Look at it from 35,000 feet, in the period from mid 80s to the end of the last century, it was all about technology, and what do you need to build a technology company? You needed people who are really good at managing coordinated development efforts. We needed experienced VPs of engineering. We needed people who are really good at building direct sales forces to sell a lot of technology. You needed really good marketing people to create a bigger than life image for the company, and to target their products to what customers need. And you need really experienced CEOs to orchestrate all that.

Today, the engineering is almost trivial because of the development tools that are around. I’ve talked to entrepreneurs who developed a product over the weekend, posted it, it didn’t go viral, they do it again weekend after weekend until all of a sudden something goes viral and they have a business. So the sales and maketing is no longer a question of understanding the skills involved in building a big sales force. It’s post it on the Web and see if anybody eats the dog food.

So we have gotten to a point where you don’t need 20 years of experience to start these companies. That’s why we are all moving from 128 back into Cambridge in the venture industry. It’s to be close to the universities because the most important thing now is really creativity, business model creativity.”

On the shrinking venture capital industry:

The VC industry has come through a significant shakeout in the past decade. You can get all kinds of numbers, but the raw numbers can be deceiving because this is an industry where preople don’t admit that they are not in business any more, just like nobody admits that they are retired. But I would guess from just the feel of things that something around 40 percent of the industry that existed in 2000 is gone today.”

On the so-called “valley of death” in seed funding:

“It’s not a valley of death, it’s a valley of purgatory. The real valley of death is between $30 million in revenue and $100 million in revenue. Historically the venture industry was designed to carry a company from birth to solid profitability at around $30 million in revenue. That is when the industry was designed to pass the baton off to the public markets. Because of the regulatory intrusion — inadvertent regulatory intrusion — that public market isn’t there for us to pass onto. So companies that get to $30-35 million are not able to raise the capital to both grow and rationalize their market.”

An editorial note from me on this last quotation: just because you can’t raise money for your seed stage startup, doesn’t mean there’s a “valley of death.” It may be the market telling you something. Plenty of other folks have raised oversubscribed seed rounds at high valuations, many of them first-time founders. Food for thought.

On what’s awesome about venture capital:

“I love working with entrepreneurs. I love being in the middle of the fray and the tech development, and venture capital lets you do that. VC is the greatest business there is because you are always on the cutting edge. You always get to see what is new and you get to help people realize their dreams.”

On regulation of the venture industry:

“The most important thing the NVCA can do is protect an environment where the entrepreneurial ecosystem can operate relatively freely….I believe in neither extreme of regulation. If you want to see what too much regulation does to an economy look at the Soviet Union in 1960. If you want to see what too little regulation does to an economy look at the Soviet Union 1990. It was a complete free for all.

There have to be referees in order to have a football game. The challenge that we have is that VC and entrepreneurship are such a small piece of the economy but have such a huge impact that our activities are invisible for the longest time.”

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One Response to Interviewing the Yoda of venture capital

  1. Pingback: Starting your MBA this week? Read this first. | infinite to venture

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