Venture Outlook 2003

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Venture Outlook 2003
San Diego Venture Group

Doug Carlisle Menlo Ventures Doug_at_menloventures.co
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Last Year - 1988 Replayed?

• Many similarities to post 87 crash
• Slow growth environment
• Skepticism of technology hype
• No next big wave driving startups
• Major international upheavals

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Differences from 1988-92

• Significant excess capacity worldwide
• Technology spending is larger as of corporate
  capital expenditures
• Computing environment has matured

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Implications for Entrepreneurs

• Harder to raise money
• Valuations will be lower, longer
• Some ideas become unfundable

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Implications for Entrepreneurs

• Longer time to gain liquidity
• Public Investors want to see more results
• Menlo IV had three San Diego deals
• Pyxis Corporation (invested 90, distributed in
  93 4 years)
• HNC Software (1990-1996, 7 years)
• Tudor/EdVISION (1992-2002, 10 years)

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Back to Basics

• You need to plan (and achieve) meaningful
  milestones
• Typically includes technical feasibility, product
  demonstration, revenue, and profitability
• Expect little or no increase in valuation along
  the way (Pyxis, HNC)

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Summary

• More normal (ie, tough) times ahead for early
  stage companies
• Good companies will still succeed
• Exit valuations will be lower