Mar. 6, 2007 SDF VC PWC

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SDForum Quarterly Venture Breakfast with PWC
On Tuesday, March 6 2007 at Pillsbury Winthrop Shaw Pittman LLP, Palo Alto, SDForum held the first quarterly Venture Breakfast Series in partnership with PWC. A panel of venture capitalists talked about what is really happening in venture investing.

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Steve Bengston runs the Emerging Company Services (ECS) group at PricewaterhouseCoopers. ECS refers companies to investors and offers audit and tax services. Bengston presented PWC’s Money Tree statistical report on seed funding over the past decade. Most numbers for seed capital investment peaked during the dotcom boom and are only a third of that now. The growth has been modest over the past five years. Today there is more investment at the expansion stage than the start-up stage of development.

Steve also presents the Money Tree data each quarter summarizing venture capital investment results and trends at

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Allison Leopold Tilley moderated the panel discussion of the inside story behind the numbers and what investors see as current market trends. She is a partner at Pillsbury Winthrop and represents technology companies in securities and venture capital transactions, including mergers and acquisitions, private placements, public offerings, venture funds and joint ventures. Leopold Tilley is co-head of the Firm’s Information Technology Practice Team, Head of the Silicon Valley Business and Technology Group and co-head of the Southeast Asia Specialty Team.

The panel consisted of Steve Bengston of PWC, Larry Kubal of Labrador Ventures, Jim Marshall of Selby Venture Partners, Bill Reichert of Garage Technology Ventures and Richard Wong of Accel.

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Larry Kubal founded Labrador Ventures and invests in seed and early stage information technology companies like Aperto Networks, MeeVee, Pandora, and Teraburst Networks.
His firm is usually the first institutional investor in a company valued under five million dollars with a working prototype. They’ve seed funded as little as $50,000. He thinks the unreported investment may have a higher failure rate. He still thinks there is a surge in early stage investment. At the low end there is more cooperation than competition among investors.

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Jim Marshall co-founded Selby Venture Partners in 1998. He currently focuses his investments in software and consumer services. Previously at Silicon Valley Bank, he worked closely with more than 75 early-stage, emerging growth technology companies, including Accrue Software, BEA Systems, Broadbase Software, E.piphany and Nuance Communications. Jim has sourced or led Selby’s investments in Blue Pumpkin Software (acquired by Witness Systems), ConsumerReview (acquired by E-centives), and Panopticon (acquired by Kana, NASDAQ:KANAE). Jim is also a board member of the Silicon Valley Chapter of the Association for Corporate Growth, the VC Angel Roundtable, and the Center for Innovation and Entrepreneurship at Santa Clara University.

Marshall defines seed as less than three million dollars, pre-product and pre-income. They focus primarily on broadband, from consumer services to a wireless chip. The smallest amount they’ve invested so far is $86,000. He says the angels are back. Angels are individual investors rather than a formal institutional investor. He see this as a risky, hit-driven business.

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Bill Reichert is a Managing Director at Garage Technology Ventures. Since joining Garage in 1998, Bill has focused on early-stage information technology and materials science companies. Previously, Bill was a co-founder or senior executive in several venture-backed technology startups, including Trademark Software, The Learning Company and Academic Systems.

In comparison to other companies, Reichert sees his firm as the ‘seediest of the seed investors’. They get involved early, when a company really is two people in a garage. They will invest in any new technology that can be capital efficient in their evolution. He thinks there is more investment activity than most people think, perhaps two to three billion dollars from non-institutional sources. Most early stage companies are under the radar and would not show up in official reports.

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Richard Wong joined Accel in 2006, focusing on mobile, broadband services software, messaging and security applications. Rich is a Board Member of the MIT CNC – Entrepreneurship Program, the CTIA Wireless Internet Caucus, and has served as a board advisor to a range of mobile and Internet startups including, 4thMedia, Plaxo, Zoove, Simplicita, and Sana Security.

Accel invests in the three to four million-dollar ranges. He sees angel investing as something in the $40,000 range. Angels and other investors who have made money recently in the valley are more likely to reinvest in seed money.

Basically, the economy has slowly been improving and more people are investing in new companies. Build a network of people you trust.

Copyright 2007 DJ Cline All rights reserved.