High Tech Investment Trends

Our 1/8 High Tech Entrepreneurs' Forum hosted Plug and Play Real Estate was on the topic of high tech investment trends, featuring panelists: Marc Burch; Steve Bennet, Sand Hill Angels; Clifford Tong, Keiretsu Forum; Ben Wan; and Ron Weissman, Band Of Angels with Q&A moderated by Steve Bengston from PriceWaterhouseCoopers and Fred Greguras from Fenwick & West.

Below are some big-picture take-aways from the meeting:

Trends in 2007:

1. M&A will continue to grow at a faster pace then 2006. Private equity will play a larger role along with hedge funds.
2. Biotech funding in Q3 received more VC funding then Software for the first time. Software funding in Q3 for deals was the lowest since 1996.
3. Job market will be good for the next six months. Look for a job now as fed is concerned about inflation and I don't see the fed changing the rates until Q3.
4. IPO will continue to be weak / non existence.
5. "Green" is in! Record funding in all areas: Some examples:
   - Energy generation (ethanol) $200 m in funding for Cilion.
   - Energy storage (fuel cells) $102 m in Ion America
   - Energy infrastructure (electricity efficiency) $130 m Current Comm
6. Prop 77 funding will move forward as the final lawsuits get dismissed. $300 m a year for the next 10 years. Many embryonic and life science project will receive funding grants. San Francisco / San Diego will receive the largest grants.
7. China / India VC funding will accelerate. Many VC's are opening offices there.
8. Software as a service / open source / Linux trends will continue.
9. Mobile web will be hot. Many new services / devices / applications being developed.
10. Political climate has changed in Washington. Homeland security grants are at risk of being eliminated / reduced.

Web 2.0 comments:

• Aggregated data makes it easy for people to create rich content collaboratively
• Aggregated users in community impacts possible business models for organizations
• Investments decisions are more difficult because it's easier to start a company (investments are lower, infrastructure is established so it's cheaper and easier to get, companies are easily replicated) so it's hard to differentiate companies

Comments on trends in funding of IT companies

• For the first time since 2000, IT investments are on the rise. However, the buyers are selective about their vendors, leaning toward fewer vendors from larger, established firms
• Companies are leaning toward integrated solutions

Advice on getting funding

• Build traction and momentum - product, customers, partners, team etc.,
• The more you have built up, the more likely you will get funding
• Be just as strong in business development as you are with technology - develop channel, co-development, OEM partnerships and results-oriented sales teams rather than senior VPs of sales focused on building customers in 18-month cycles
• Build relationships with investors - they would be more likely to invest in you, and coach you in getting your company funded

Aiming for M&A as an exit:

• Companies such as Yahoo and Google will continue to search for good ideas and quality talent => Build your company, build traction (not just about building the technology, also about business development and partnerships)