PureVC

Sevin Rosen & the State of VC

There is an interesting post in VCRatings by The Deal that has a copy of Sevin Rosen's letter to LPs from October of this year. If you don't know already, Sevin Rosen is (was) a storied VC firm in Texas founded by LJ Sevin and Ben Rosen, who established Compaq Computer. Earlier this year, rumors floated that Sevin Rosen who were in the midst of raising their 10th fund, were thinking about giving the money back. Apparently, the returns of recent funds were not that great and the firm was struggling a bit in its identity and strategy.

If you take a look at the letter, you will clearly see that the firm basically admits that it has no clue how to make money in the current environment. It goes on to state some reasons why venture is a tough business including too much money, too few deals, and a poor exit climate.

I am sad to see such a storied firm fold and walk away with its tail between its legs. In my opinion, there is NO BETTER TIME FOR VENTURE CAPITAL THAN NOW. It is clear by this letter that Sevin Rosen simply does not get it!

In this day and age, you can start an amazing business for less than 500k or $1 mm. You can do it for less if you are willing to bootstrap. If you take a look around and can't see opportunities to create great businesses, then perhaps you shouldn't be in the venture business. In that sense, I am glad Sevin Rosen is bowing out because throwing away money on bad deals is not good for the industry.

I believe the current state of venture capital is strong. Rather than too much money and too few deals, I see the main impediment is the empowered entrepreneur who does not want to take venture capital. Most of those entrepreneurs have been successful in their previous startup and want to go it alone. In my opinion, those entrepreneurs can yield greater reward but carry an unnecessary risk.

If you are that individual considering taking venture capital please check out this post for some things you should consider.

Spotzer - A Serial Entrepreneur Strikes Again

Andy Klein has yet again started another company called Spotzer (full disclosure: I am investor in Spotzer). If you don't know Andy, I call him the ultimate Serial Entrepreneur. In his short career he has started Spring Street Brewing Company, Wit Capital, Soleil Securities, and SkyBridge Capital. Andy's departure from SkyBridge was a bit unexpected, but he did a great job with them. The team at SkyBridge is left in more than capable hands.

Spotzer is an Amsterdam-based company that is going to make advertising on the television, internet, and all digital media available to local small and medium-sized business. It is much like the US-based company, SpotRunner, that was seeded earlier this year. Coincidentally, SpotRunner has just last month closed on a $40 mm round that includes some key industry players such as WPP Grey, CBS, and InterPublic Group.

The basic concept is to commoditize advertising and allow customization and personalization of ads in a complete and easy to purchase media package. Imagine being a small business owner and paying only $500 dollars to get your ad on the local TV station, billboards, internet users in your zip code, and digital media. Imagine that this low price includes a professionally produced "spot" that is ready to air. This is essentially the mission of Spotzer and Spotrunner.

Although I do not personally think Spotzer is an ingenious ideas, it is a simple concept that has surprisingly not been done before, and it is extremely disruptive. The traditional media and advertising industry is yet another behemoth industry that is ripe for undermining. It is high time that individuals and small businesses access mainstream advertising at a low cost. I believe this company can transform traditional and digital media advertising in much the same way Google has for web advertising.

Andy and his team at Spotzer are pretty stacked with some major European players and they are going to give the young guys at Spotrunner a good challenge. One thing I like about the company other than its management is that it is focused on Europe and based in Amsterdam - a new hotbed of startup activity and a very good place for a company to get listed on the European exchanges. Andy has a good shot at making this happen - Good luck Andy!