Venture capital spreads the wealth around the country (USA Today)

VC Investments by Region (chart)

"Come for brunch. Bring billions." (LA Times)

An entertaining read ...

SAN FRANCISCO -- The Internet bubble of the late 1990s ended with a painful pop. When today's young entrepreneurs get together, the only bubbles they see are in their mimosas.Even as the rest of the business world frets about the gloomy economy, Silicon Valley is living the high-tech high life. Nowhere is that more evident than at Founders Brunch, a private, invitation-only gathering where new-boom kids and industry veterans pick up whispers of the next big trends, invest in one another's ideas and push one another to think big.

Every three months, these elites of the Web crowd pull themselves out of their beds or cubicles and pile into a different upscale home for a Sunday spread of community and conversation.

Founders Brunch has that informal vibe for which Silicon Valley is famous.
No deal makers arrive in Armani and Porsches to Founders Brunch. The hosts' homes may be grand, but they're loaded with entrepreneurs in worn jeans and Teva sandals cutting deals over Costco bagels and coffee. ....

35 facts about venture capital (John Cook)

How Investing in Intangibles -- Like Employee Satisfaction -- Translates into Financial Returns (Knowledge@Wharton)

Do happy workers generate better returns? According to this study, yes ...

In today's business world shaped by new technology, knowledge and creative thinking, the value of each employee is increasingly important, although hard to measure directly, Edmans says. "Nowadays companies are producing more high-quality products. They are focusing on innovation and looking for the value-added to come from workers rather than machines."

Perk Place: The Benefits Offered by Google and Others May Be Grand, but They're All Business (Knowledge@Wharton)

So, how do good companies maintain top talent and continually attract the best? Yes, soaring stock prices can be helpful, but this article presents some other interesting examples and also points out the challenges, since not all perks are meaningful to everyone.

David Sirota, co-author of The Enthusiastic Employee: How Companies Profit by Giving Workers What They Want, says far too many companies do not value employees -- and pay a price for treating them that way. "The key question in organizations is not the typical one -- how do you motivate people or engage people?" he explains. "It's how do you keep management from destroying motivation?"

Surveys of employees conducted by Sirota Survey Intelligence, the Purchase, N.Y., firm that Sirota founded in 1972, have determined that when people enter an organization, their morale is high. But, in as little as six months, the level of morale can drop precipitously if employees feel unvalued and, in Sirota's words, are "treated like paper clips."

Sirota says morale will decline if management views employees as costs rather than assets, if they are treated disrespectfully and if they are poorly compensated in salary and benefits. "Google and other organizations like it are just the opposite of these things," Sirota says. "Perks, of course, are an important part of it.... Our research indicates that the more companies do this kind of thing, the higher the morale and the higher the performance [of employees]. This is really enlightened self-interest."

The new VC model: Small is beautiful (Fortune)

The 20 Worst Venture Capital Investments of All Time (Inside CRM)

Another Look at VC-Backed Busts (PE Hub)
"In all, we uncovered 4,300 VC-backed busts that raised over $63 billion in funding."

You're Out of a Job, Now What? (CFO.com)

Angels play key role in financing (The Boston Globe)

"US business angels, many of them wealthy entrepreneurs who have sold their companies, injected $11.9 billion into 24,000 ventures in the first half of this year, Jeffrey E. Sohl, director at the University of New Hampshire's Center for Venture Research, told the Northeast Regional Angel Investor Conference meeting here last week."

"In the same period, venture capital firms invested $14.5 billion in 1,822 companies, according to the MoneyTree survey sponsored by the PricewaterhouseCoopers accounting firm and the National Venture Capital Association using Thomson Financial research data."

"In fact, while angel capital fuels a variety of businesses, the largest three investment categories mirror those of traditional venture capitalists: computer software, healthcare, and biotechnology."

After Succeeding, Young Tycoons Try, Try Again (NY Times)

"He thought he would spend the time after the sale “exploring my inner self.” Instead, he spent the better part of 12 months “feeling worthless and stupid” and baffled by what he might do with the remainder of his life. He felt too young to retire or downshift a gear or two — and too restless to become a philanthropist."

“I’d run any company; it’s completely irrelevant to me,” Mr. Levchin said. “It’s really about this drive to win.”

Looking for a Company to Run? Search Funds Could Be the Answer (Knowledge@Wharton.com)

What's the Secret To Serial Success? (WSJ.com)

"They had a higher propensity for risk, innovation and achievement. They were less scared of failure. And they were more able to recover when they did fail. Beyond that, many serial-preneurs bring tactical advantages from their first venture to apply the second and third time around. For instance, they recruit top talent from their original companies to subsequent ventures. They double-dip financially, getting money -- and connections -- from people who backed their earlier brainstorms. Several lean heavily on a trusted partner for financial, professional and emotional support in whatever endeavor they undertake.

More than anything, however, the greatest, and more crucial, challenge among repeat entrepreneurs is figuring out how to rekindle for future ventures the innocence, love and hunger that fueled their first enterprise."

"I've learned from this that it doesn't matter what I'm good at. It matters what I like." Tom Scott, Nantucket Nectars co-founder

Leading for the Next Act: Why CEOs Must Evolve or Step Aside (Knowledge@Wharton)

Part of the CEO's task, then, is to ruthlessly assess him or herself as the business context changes. "Do I have an understanding of what's needed now in terms of new leadership requirements? Do I have a sense of my own leadership capabilities? Can I understand the gap between what's required by the new situation and what I'm capable of doing?"

How Much of Leadership Is About Control, Delegation, or Theater? (HBS Working Knowledge)

This topic includes some thought provoking opinions...

..."It may be important for us to believe that our leaders have control over performance, whether or not it is true, particularly in times of turmoil or concern about the future. So to what degree should leaders become thespians, creating an impression that fits expectations? How does one do this and still maintain some sense of modesty and perspective that Jim Collins, in his research, has identified with the most effective leaders? Is some part of leadership about creating the myth of being in control while subtly transferring it to others in the organization? Or, as Pfeffer and Sutton ask, "Should leaders be in more complete control of their organizations?" ..."

Some reader comments I found most notable ...

"In my experience the leader who gets things done on a consistent basis has a persona (or character) that they use to get the job done. It must be consistent with the person, and they have to live it. We often see through the people who are putting on a show but we still listen to the presentation if it has enough theater." - Charlie Cullinane

"I'm sure we all will agree that appropriate delegation is essential to any leader, but leading by example and being in the trenches with your people is more powerful than any e-mail or memo on how to exceed customer expectations or how to demonstrate best practices. By demonstrating the positive deviance behaviors in any organization, you set the tone for those around you. Your team will look to a leader not only for guidance, direction, and praise in words, but also action. " - Grant Koster

"These ideas and hundreds like them miss the whole point of leadership. Leadership isn't measured by performance improvement or how well we can act. It is about relationships and helping others be better. I developed a philosophy many years ago that I teach to others. Leadership is enhancing the worth of others so they can make sound decisions. Real leaders make a difference. Turnover will be low, careers will grow, and performance will increase. I have seen real leaders change lives. I have seen them save a company. I have seen them accomplish tasks with fewer people. Leadership isn't about stuff, it's about people. Leaders don't worry about control. They realize their control and power is accomplished only by giving it away." - Phil Clark

"Change does not occur due to facts alone, but on the hearts and the passions of the team." - Joseph Zayac

"Leadership is modeling proper action and values with integrity and authenticity. "Theater" works only when the "actor" believes in their own role. Good leaders are not pretending, fooling others or fooling themselves." - Mal Rudner

"A good leader must be willing to empower those around them. In addition to empowerment, a leader must work to remove any encumbrances that prevent individuals from setting and reaching goals. However, true leadership is the ability to inspire individuals to rise above themsselves and perform at levels they would normally not reach." - Mike Sowers

"Theatre may be a part of occasional leadership messages which are company-wide in scope and of major significance, yet even then, it is important for the leader not to appear as "grand-standing." True leaders have a desire for power and control; not in the sense of command and control, but in setting direction, philosophy, and strategy. The power in the position should never take a leader away from the fundamentals that brought the leader to the position of power." - Bette Price

Tangled Up in Tasks (CFO.com)

One, take control over your life, while accepting that total control isn't feasible or desirable.

Two, prioritize: decide which tasks matter the most.

Three, rebuild the boundaries that technology has broken down. "Close your door and turn off the cell phone," he says. "Decide that your day does have an end point, that there are places where you can't be disturbed."

Making Presentations (Entrepreneur.com)

6 Part Series ...

The Perfect Presentation: Materials

The Perfect Presentation: Technology

The Perfect Presentation: Speaking

Private Buyers Worried about Future M&A (CFO.com)

Survey by the Association for Corporate Growth and Thomson finds tighter debt-financing as the top concern, although PE and public companies alike are rejoicing in record 2007.

Moody's Downgrades Private Equity (CFO.com)

At B-School, Private Equity Is Getting a Class of Its Own (WSJ)

"Amid the recent flurry of deals to take public companies private, M.B.A. programs are offering more intensive private-equity courses and strengthening their connections with buyout firms to help students land jobs. At the same time, schools are trying to lure junior employees of buyout shops to their M.B.A. programs to groom them for higher-level positions in private equity."

Why M&A deals are bad for shareholders (CNNMoney.com)

The process starts with identifying key employees early - preferably within the first 30 days of the transaction's announcement - and moving quickly to retain them and find roles that keep them motivated. Sounds obvious enough, but in a Bain survey of 40 recent deals, barely half of the acquirers bothered.

Acquirers are also paying more attention to what makes entrepreneurs tick. They've learned, for example, that plugging company founders into middle-management jobs is a retention strategy doomed to failure - but giving them their own division to run often works.

Joined-up Thinking (CFO.com)

The most avid users of social-networking websites may be exhibitionist teenagers, but when it comes to more grown-up use by business people, such sites have a surprisingly long pedigree. LinkedIn, an online network for professionals that signed up its ten-millionth user this week, was launched in 2003, a few months before MySpace, the biggest of the social sites. Consumer adoption of social networking has grabbed most attention since then. But interest in the business uses of the technology is rising.

Where the Next Big Bets Lie for Venture Capitalists (Knowledge@Wharton)

Investors who have traditionally shied away from venture capital, like rich families, have begun to show interest in the sector, and wealth is growing around the globe. "Worldwide, there are 70,000 people with at least $30 million in assets each. And there are 950 billionaires in the world, with a total of more than $3.5 trillion in assets."

• Clean tech
• Clean water
• Medical devices
• Biotech
• Personalized Medicine
• Ailments of affluence, like obesity and diabetes.
• Cancer drugs

Private Equity Bidding Wars: When Capital-rich Funds Compete, Intangibles Win the Deal (Knowledge@Wharton)

From Star-power to Branding, Firms Look for New Ways to Court Private Equity Deals (Knowledge@Wharton)

The Vultures Take Wing (CFO.com)

Some excerpts ...

Behind this cyclical burst of activity is a deeper trend. Distress, once the preserve of specialists, is now attracting the mainstream. Edward Altman, a finance professor, counts 170 institutions that invest primarily in distress, more than ever before, with an estimated $300 billion at their disposal. The field has benefited from growing interest in "alternative" investing (which also includes hedge funds, private equity and commodities). Punting on clapped-out securities is now on many a hedge fund's list of favoured strategies.

More junk bonds are being issued than ever before, more risky loans are being offered. And remarkably, this lending free-for-all continues despite a sharp drop in credit ratings, says Martin Fridson, editor of the indispensable Distressed Debt Investor. No one seems bothered that 17 percent of senior, unsecured junk-bond issues are on the lowest possible rung, compared with 2 percent in 1990.

The next wave of distress will be unlike the last in two respects. First, commercial banks no longer dominate the process. According to Standard & Poor's, a rating agency, non-banks such as hedge funds now make roughly half of all high-yielding leveraged loans and hold the lion's share of the secondary market.

Though hedge funds offer quicker, more creative solutions than banks did in the past, their tactics can upset other creditors. They have also ruffled the feathers of the private-equity firms that sponsor leveraged takeovers. Fearful that activist funds will make trouble in a downturn, the buy-out shops have started asking their banks to insert legal clauses that prevent their debt from being sold into such hands.

The second change is likely to cause conflict too. Borrowers' capital structures — the various layers of debt and equity, each with different rights in the event of default — are now more complex. It is less clear than it was who is entitled to what.

Hedge funds expected to encroach deeper on VC turf (Boston Business Journal)

Hedge funds expected to encroach deeper on VC turf

With a recent study showing that total hedge fund assets grew by an estimated $1.89 trillion last year, fund managers are scrambling to invest quickly as they can.

Tech Companies Pursue IPO Gold (WSJ StartupJournal.com_

Technology companies that bleed red ink are once again lining up to go public -- and once again finding plenty of takers.

"Profitability is preferred, but we don't say that you have to be profitable to go public," Mr. McLeod says.

All of this is good news for financiers such as venture capitalists, who invest in private companies with the hope of a payout later if they go public or are sold at a profit. Venture capitalists have been unable to cash out of many investments in recent years because the IPO market has been largely moribund. Of 623 tech start-ups to which VCs gave initial financing in 2001, more than 50% remain closely held and independent, according to research firm VentureOne. (VentureOne is owned by Dow Jones & Co., which publishes this newspaper.) The huge backlog has crimped venture returns and caused hand-wringing across that industry.

"People weren't willing to trade off growth for profitability in 2004, but now the public markets are looking for growth again," says Kevin Fong, a partner at venture-capital firm Mayfield Fund in Menlo Park, Calif. "So things look pretty healthy" for venture capital.

Hedge Funds Escape Regulation: Should Investors Be Worried? (Knowledge@Wharton)

"According to the Treasury Department, the number of hedge funds, for example, has more
than doubled over the past five years, to more than 9,000, and their assets under management have quadrupled since 1999. Some experts believe that hedge funds account for a third to half of the trading in the U.S. stock markets."


So much money has poured into hedge funds that they have taken to betting on ever more exotic and illiquid investments, Marston notes. The effect can be seen in the shrinking risk premium, or extra return, demanded by people who invest in risky securities like junk bonds and emerging-market debt. "Right now I believe that in both the high-yield market and the emerging-debt market we have the most optimistic pricing I have ever seen in my career," he says. "They are assuming there are never going be any more devaluations, there are never going to be any more emerging-market crises....There is very little realization of the risk out there, in my view."

If something does go wrong -- such as an emerging-market country defaulting on its bonds -- hedge funds and other holders could rush to sell but not find enough buyers, causing a vicious downward cycle, Marston says, adding that there hasn't been a serious shock of this type since the Russian default crises of 1998 -- before the hedge-fund boom. "A lot of traders in the market haven't seen anything go wrong, and a lot of risk managers haven't tested their approaches. This is a little unsettling."

What really happens at mixers? (Columbia Business School)

The study also offers a bit of reassurance to anyone who has ever attended a mixer and spent the whole time chatting with friends and acquaintances. Though many of the executives who attended the EMBA event made fewer new contacts than they’d intended, they said they valued the opportunity to strengthen their existing relationships. “Relationships have to be maintained,” Morris explains. “We can turn acquaintances into true friends by having more personal conversations than we’ve had before. Mixers turn out to be very good for that.”

Private Equity Players Hit the Big Time: An'Out-of-Body Experience' (Knowledge@Wharton)

... Boards and executives are so concerned with Sarbanes-Oxley and compliance that they take very little risk in running their companies. Board members now come to meetings with their own lawyers, Schwarzman said, adding that accounting changes limiting write-offs for extraordinary events, such as plant closings or layoffs, prevent corporate executives from taking steps to enhance their business for fear that their earnings will take a major hit. "We have a bit of a broken system right now and the solution for these frustrated managers is to sell their businesses to private equity."

... If today's climate for private equity is so hospitable, what could cause clouds to form? Schwarzman said that while the capital markets side of the equation is a happy accident for the sector, capital markets never stand still. Eventually, the interest rate spread will grow wider, reducing private equity's ability to generate huge returns on leveraged investments. "Nobody knows when or why it will happen. But it's hard to imagine it can get better than it is [today]. We're at maximum advantage in all probability right around now."

Start-Ups Increasingly Add Debt to Stay Afloat (WSJ StartupJournal)

Though they remain largely out of the spotlight, venture-debt providers are growing fast, becoming some of Silicon Valley's biggest stakeholders. They loaned nearly $2 billion to U.S. venture-backed companies last year, up from $434 million in 2002, according to research firm VentureOne. In total, debt formed 7% of the money invested in U.S. venture-backed companies in 2006, up from 2% in 2002.

While venture debt isn't new, it is becoming more important because it is taking longer for start-ups to go public. In 1999, the median start-up took three years to go public from the time it first got financing. That wait has now doubled to more than six years, according to VentureOne. Many companies thus need more money to stay private longer, creating more opportunities for venture lenders.

The Uneasy Crown (The Economist)

... Firms in private-equity portfolios are free of the most onerous regulations to which public companies are subjected, such as aspects of America's Sarbanes-Oxley act, which was rushed into law after the collapse of Enron. They are subject to less scrutiny in the press, especially when it comes to short-term dips in profits. And they can pay executives whatever they wish without facing an uproar. Compared with public companies, private-equity firms tend to be more generous in rewarding good performance, but they punish failure more heavily. Given that many of the most talented executives are risk-takers who want to get rich, it is no surprise that many are switching to private equity.

The "drain of management talent at all levels to private equity is one of the main reasons I am open to taking the firm private," the boss of a company with a market capitalisation of $16 billion recently told The Economist. That is the most striking difference between private equity today and in the 1980s, says Chicago's Mr Kaplan. "In the 1980s company bosses were implacably opposed to LBOs. Now they see an opportunity to be able to do a better job and be better paid when they succeed."

... And there are the diseconomies of scale common to any business that has grown so far from its entrepreneurial roots. Not for nothing have the biggest private-equity firms been called the "new conglomerates". They are sprawling empires, with extremely diverse firms to manage.

... Activist hedge funds are also putting pressure on likely targets to increase their borrowing. This, they think, will both increase the value of the firm in just the way it would under private-equity ownership, and remove one of the main incentives for private equity to buy. Perhaps the greatest threat to the continued growth of private equity is regulation. The burden on public companies may be eased. Sarbanes-Oxley is likely to be given a makeover this year, with its notorious section 404 on internal controls watered down. On the other hand, politicians may increasingly try to regulate the private-equity industry.

One chief executive recently observed: “The moment a public pension fund loses 20% of its value due to some private-equity investment going wrong, private equity will get its own Sarbanes-Oxley.” The new kings of capitalism must try to prevent this from happening by showing that they really are a force for good.

2006 VC Investment by State

For the full year, California firms obtained 48% of the $25.5 billion invested in more than 3,400 deals, nearly two times as much as Massachusetts.

Learning from Private-Equity Boards (HBS Working Knowledge)

Boards of professionally sponsored buyouts are typically more informed, more hands-on, and more interventionist than public company boards.

Eight Resolutions to Enhance Your Career (WSJ)

This article makes some salient points for those interested in taking a more proactive approach to career management.

• Create a board of advisers
• Spread the word
• Try something new
• Take inventory
• Watch your company
• Beware burnout
• Get involved
• Assert yourself

Private Equity Is on a Roll, but Are Investors in for a Let-down? (Knowledge@Wharton)

"With $660 billion in corporate buyouts last year and a war chest of $750 billion still to deploy, private equity investors are on a roll, but concerns about the sector's ability to deliver sizeable returns are also welling up. Angel investor Rob Weber's first reaction was surprise when a hedge fund swooped in a few weeks ago to snap up the entire $10 million second-round financing of a life sciences startup he owns."

"Amit [Wharton professor] says liquidity events, such as an IPO or a sale to strategic buyers in the same industry, are now taking much longer than they once did. In 1999, it took less than two years for investors to cash out of an investment through an IPO, but in 2006 it took more than five years, he notes. The timeframe has also expanded in the other chief form of private equity exit -- merger and acquisition deals. In 2001, it took an average of about 18 months to do a sale or merger, but by 2006 the timeframe had stretched to more than five years.

Savor [Wharton professor] points out that private equity firms may shift toward a completely new model in which funds hold companies longer and repay their investors through dividends. "In the past, IPOs were the preferred exit, and I would say they will remain so in the future," he says. "But if for some reason they do not, private equity shops will find other ways to monetize their investment -- as long as there is something to monetize."

Do Start-Ups Really Need Formal Business Plans? (StartupJournal.com)

"The critics of formal planning contend that it runs counter to what's at the heart of the entrepreneurial spirit: the ability to learn and adapt through experience. And there's a growing body of research supporting the notion that formal planning may not make much difference."

"The most compelling reason to write a formal business plan, even critics agree, is when seeking venture capital or angel investors. But only roughly 55,000 of about four million start-ups each year get that money. And even then, the merits of having a lengthy business plan may be overblown."

Sales Management Lessons (from Cube Management)

Cube Management's Sales & Marketing Blog contains some great sales management lessons / suggestions.