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VC Resurgence?
Shannon Henry
Washington Post business columnist
Thursday, October 23, 2003; 1:00 p.m ET
Washington Post columnist Shannon Henry was online to talk about signs that the Washington-area venture capital sector is picking up steam. Read her latest column: "Betting The Glass Is Half Full."
Shannon was online earlier today. A transcript of her discussion is below.
About Shannon
Washington Post columnist Shannon Henry has been covering the local technology scene since 1995, documenting the successes and failures of local tech companies, and the culture and ideas of local business personalities. She is the author of "The Dinner Club: How the Masters of the Internet Universe Rode the Rise and Fall of the Greatest Boom in History," which was published last November by The Free Press.
Editor's Note: washingtonpost.com moderators retain editorial control
over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.
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Shannon Henry: Hi! It's great to be back. Let's get to the questions.
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Washington, D.C.:
Shannon, why should anyone care about the VC community? For the most part, these guys bet wrong during the boom. Why should anyone pay attention to them now?
Shannon Henry: I love this question. VCs made a lot of bad decisions during the boom. So did CEOs, investors, etc. The reason why VCs matter is they are part of the food chain for many technology companies. One of the best lessons learned in the crash was that not all companies need outside investment. But many CEOs will find that their costs outweigh their ambitions and they need to sell off a part of the business to get to the next level. VCs are also a great way to get a sense of the mood of the market.
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Bethesda, Md.:
Who's running the D.C. Tech Council these days, and what's that group up to?
Shannon Henry: Laura Vande Walle is DC Tech Council's president and John Sanders is the chairman. It's not been easy for the group--as they were trying to build membership many technology companies in DC shut down. I'm going to get to the state of networking in the next question...
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Dulles, Va.:
Is the local tech networking scene going to pick up again? What are the must-attend events these days, if any?
Shannon Henry: There's less networking going on now than when I started to cover local tech in 1995. Most of the groups that ran the best events, like Netpreneur, Washington Business Forward, etc. have gone out of business themselves. The sponsors (law firms, etc.) are having their own financial difficulties. And the tech workers, well, they're working, trying to save their companies and their jobs. There was an uptick for networking events for job-seekers but those have a whole different feel. I think these things are cyclical and we'll soon see one or two interesting--possibly new--groups take on the networking mantle. Someone will try to do what Indian CEO council did in the late 90s when their events were must-go-to. None are mandatory now.
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Falls Church, Va.:
So how's Steve Case doing these days? I see the feds have issued a subpoena to him. Can he pretend he didn't know anything about the accounting shenanigans much longer?
Shannon Henry: It's a problem either way. Same thing with Worldcom. If the CEO doesn't know what's going on I think investors have a right to ask why doesn't the CEO know what's going on? That's what they're paid for.
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Chesapeake Beach, MD:
We've heard some rumors of live in the DC VC community, but what I'm wondering is whether the money from the mid-atlantic area is going out to a wide number of companies in various technologies, or are the local money men continuing to stay focused on telecomm and gov't related type work?
Shannon Henry: The ones I talk to are focusing on companies with solid business plans, real customers and experienced management, in all corners of tech. Many are looking for deals in not gee-whiz tech, but saving-money tech, like the software I wrote about in today's column that helps large companies manage their telecom systems. Not sexy, but real.
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Wilmington, NC:
Shannon,
What is the Washington Post doing to encourage tech development and investment? (Other than running your wonderful column).
Chip Venters
Shannon Henry: Hey, thanks. Just notice and understand what's going on and then write about it, whether it's encouraging or discouraging.
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Rockville, MD:
Can you address the number of successful biotech companies that have received vc funding, in addition to the tech companies? Biotech is a major force here as well and should be given some recognition.
Shannon Henry: It's hard to underestimate the importance of biotech--this is life and death stuff. Still, it shouldn't be compared to Internet business. Biotechs have a completely different -- usually much longer -- life cycle. Drug trials, research, all that, take a long time. Think about how fast some of the Internet companies popped up. It also takes a different kind of expertise. Even the best telecom investors aren't educated to understand biotech deals.
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Tysons Corner, VA:
Back in the late 90s there were many stories in your column on small tech companies that were doing interesting things but were, in retrospect, bad business ideas(they never earned a profit). What do you look for today when doing a story on a young, up and coming company? Profitability? High growth? Or are you still just looking for a "cool" story?
Shannon Henry: I've always written this column with an eye toward Washington technology culture, rather than what companies will succeed or fail or which stocks to invest in/avoid. It should reflect what's happening, whether it's silly business ideas or not. So yes, I guess I'm still looking for the "cool" story;-)
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Herndon, VA:
So is anyone speculating on the next big wave for the tech community in the DC area? Any killer apps? Any groundbreaking services that will remind us of the wild days of the late '90s? Or are things going to muddle along for the foreseeable future?
Shannon Henry: You heard people saying biotech, then government/homeland security...but it's really not the same. The Internet was a once in a generation opportunity. I think there will be boomlets in areas we can't predict now but nothing as big. That said, everybody is still looking for the Next Big Thing. Any chatters care to guess as to what that may be?
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Washington DC:
Will the New Economy VC's ever recover? There is a whole class of Neuvo VC's. Brilliant till the bubble-boys. Will they make it: Columbia Capital, Core Capital, FBR, Walker, Schoffstall. Are we going to retrench back to the traditional, done that, been there guys (i.e. New Enterprise, Growtech, Edison)?
Shannon Henry: VCs don't file bankruptcy plans like companies, so it's sometimes difficult to tell when they're dying. Those that aren't raising new funds show signs of trouble. But you have to remember that even one great deal can totally make a portfolio.
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Bethesda:
Early on in the life cycle of biotechs, would you agree that assuming that you will do an IPO prematurely leads one down an significanlty more expensive path--requiring more money and more time to feed?
Shannon Henry: This is a problem in all tech, not just biotech. It's interesting to see now that some of the companies that never took venture capital and never went public are still alive, while their to-the-sky counterparts have gone bust. Going public changes everything for a company in terms of constituents and sometimes is not the best road.
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Washington, DC:
Do you think VC firms in the area believe all of the important Internet plays have been made or do you think they are still looking for those next generation of websites that will change the world?
Shannon Henry: Yes, they're still looking at the Internet. After all the hype of the bubble and then the nightmare of the bust, the Internet has fundamentally changed the way we live and work. Smart people will find new ways to use the technology.
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Great Crossing, KY:
Why isn't more of a fuss raised regarding former senior government officials who work for Washington VC firms specializing in defense contractor investments and the incestuous relationship they have with current senior administration officials, congress and the military? Is there any standard of accountability in place to protect the taxpayers from the very real possibility that their best interests might not be served?
Shannon Henry: Email me at henrys@washpost.com if you know something specific. I agree this area is ripe for bad behavior or worse...
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Somewhere, USA:
Shannon - great to see you back! Where have you been? ;-0 What stories are you looking for? What happened to the techies you used to know and smooze with? Where are they now?
Shannon Henry: Thanks. Maternity leave. Cool stories;) Many of them are still on the sidelines but some are coming back with new companies and ideas. Watch for upcoming columns (and to the poster who suggested three specific where are they now ideas--I'm working on two of them, glad to see there's interest).
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Falls Church, VA:
You mentioned the Internet "was" a once-in-a-generation opportunity, but I still think that should be phrased "is." Sure, it will never be as good as it was but it is still an incredible opportunity for the entrepreneur not afraid to bootstrap. While thousands of dot-coms failed, hundreds have succeeded and more continue to pop up, just without as much fanfare. And this time, they are being forced to run profitably and grow their headcount slowly. Give them a couple more years and their names will start coming out. The Web is the most incredible direct marketing channel ever - ask Google, Amazon, Yahoo, eBay, Barry Diller's InterActiveCorp, FindWhat.com, NetFlix and the hundreds of other smaller dot-coms that are proving it. Just about every Fortune 500 company is taking more and more money away from tv and print ads and allocating toward Google and other websites.
Shannon Henry: Yes, yes, yes, I agree on "is." In fact while so many people are looking for the Next Big Thing those still focusing on the Internet (older and wiser) may create the most interesting new opportunities.
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washingtonpost.com:
We're out of time now, sorry I didn't get to all the questions. Great to talk with you again!
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© 2003 The Washington Post Company
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