What’s New in the World of VC Jonathan Aberman Managing Director Amplifier Ventures.
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Transcript of What’s New in the World of VC Jonathan Aberman Managing Director Amplifier Ventures.
![Page 1: What’s New in the World of VC Jonathan Aberman Managing Director Amplifier Ventures.](https://reader036.fdocuments.net/reader036/viewer/2022062309/56649e215503460f94b0de1c/html5/thumbnails/1.jpg)
What’s New in the World of VC
Jonathan AbermanManaging Director
Amplifier Ventures
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Jonathan Aberman• Founder of Amplifier Ventures –
seed venture capital fund.• Adjunct Professor, Smith School
of Business, University of Maryland.
• Advisor to government and universities on technology creation processes and policies.
• Former hedge fund trader and venture capital attorney.
• Founder of Accerta Group – consultants to family owned businesses.
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Where Is All the Venture Capital?
• Venture Capital fundraising at mid-1990s levels.
• Angel investors abandoning seed and early stage financing.
• Fundraising concentrating in “existing teams” and into historically large funds.
• Large VC Funds making un-VC investments.
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Meanwhile Capital Goes Elsewhere
• Hedge Funds -- $2.1 Trillion under management.
• Private equity -- $269 Billion raised in 2009.
• Venture capital -- $13 Billion raised in 2009.
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Why Is This Happening?
The Investor Perspective– Returns are better in
hedge funds.– Private equity more
“predictable” than venture.
– Venture Capital suffers from “the Internet Bubble.”
The Fund Manager Perspective
• Managers make much, much more running hedge funds.– $25 Billion paid to top 25
managers of hedge funds in 2009.
• Fee income from private equity is large.
• Venture Capital is a long and difficult road.
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The Market Is Acting Rationally
• Institutional investors chase predictable returns – they have to.
• Venture Capital and Angel capital are merely “asset classes.”
• Larger VC funds need predictable, shorter term investments to compete.
• Smaller VC funds and Angels are better suited to pursue long term returns.
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Why Are Venture Returns Lower?
• Well, the economy hasn’t been terrific….
• But the larger reason may be found in the relationship between the creation of new technologies and commercialization.
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New Technology IndustryNew
Company
New Company
New Company
New Company
Venture Capital Returns and New Investments
The Relationship of Government R&D to Venture
Capital
Venture Capital
Government Funded
R&D
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New Technology Industry
As Technology Industries Mature Profits Decline
0 10 20
Time (years)
Launch
Exploitation
Commoditization
Returns from a Sustained Competitive Advantage
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The End of Venture?
• Returns are depressed because certain technology industries are “maturing.”
• Venture Capital doesn’t create new industries; it finances their growth.
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But Here’s Some Good News
• What we have seen through many cycles is that capital will flow to Venture Capital when the returns are there.
• We have a long history of new technology industry creation in the US.
• If we wait long enough, the current downward cycle in Venture Capital will likely “correct” as new industries emerge.
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What Does this Mean for Starting Companies Now?
• Bootstrap, bootstrap, bootstrap.
• Utilize government grants and programs to promote technology company creation with emerging technologies.
• Understand industry your start up is going to operate in – if its in a “mature” industry – favor business plans that get to customers quickly.
• Adjust to the reality of the world.