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Show The Salt Lake Tribune BUSINESS Sunday, December 30, 2001 Chaos of 2001 Made Venture Capitalists C Cautious Wealthy investors no longer throwing cash at any big idea BY MICHAEL LIEDTKE THE ASSOCIATED PRESS SAN FRANCISCO — In the freewheeling 90s, entrepreneur Matthew Glenn had little trouble raising venture capital for three different Silicon Valley start-ups that were quickly years before they can line upan IPO or attract a deep-pocketed suitor. The emphasis on experience seems logical to House, who cameto Allegro after serving as CEO at Bay Networks, a computer networking giant sold to Nortel for $9.1 billion in 1998. Before that, House spent 22 years at Intel Corp., where he developed the “Intel Inside” marketing campaign. Venture capitalists have never suffered a year as bad as 2001, when they were forced to decide which of their existing start-ups merited additional money — and which to cut loose. As investors in the public andprivate markets bailed out of technology companies, the values of venture-capital portfolios plummeted. “The mind-set has nally really chained Venture capitalists are lookingfor a reason NOTto give entrepreneurs money these days.” MATTHEW GLENN even raise enough money to get offthe ground. “Tronically, someday this maybe looked upon as aeet > In the year ending June 30, the average venture-capital fund plunged by 18.2 percent, according to the National Venture Capital Association, the industry’s biggest trade group. The carnage is far from over. Because they aren't governed by the samesecurities regulations thatforce publicly held companies to recognize their losses more quickly, venture capitalists could be licking their wounds for several years. Despite the rough times, some venture time to start a company,” Yang of Redpoint yealines “Butit takes a special type of personto run a start-up now.” capitalists snapped up by eager buyers. “Money seemed like it was free back then,” said Glenn, (; Me; Ya. 8 Ge = pe OF of) ER eee. Ae ago |B a; ey ee now 31. “In retrospect, I was and pretty In 2001, venture capital suddenly wasn’t easy money get up to 5 phonelines, 5 free phones anymore. Through the first nine months of 2001, venture capitalists invested $31 billion, a 63 percent drop from the record with mail-in rebate and unlimited localcalling between them. pace of 2000, according to data compiled by Venture Economics for the industry trade group. The 2,653 start-ups in which they invested over those months was abouthalf the total from the prior year. Thefinancial landscape has shifted so dramatically that Glenn doubts his latest startup, Allegro Networks, would have attracted an additional $50 million in venture capital last month if notfor its recent Sign up for the AT&T Shared Advantage Plan,including 2 phonelines for $59.99 per month. add up to 3 morelines at $9.99 each per month hiring of Dave House as chief 5 free phones with mail-in rebate * 1000 shared weekend minutes executive. Experience Helps: House, 58, infused San Jose-based Allegro with the experience of a 500 shared anytime minutes * nationwide long distance included respected leader who has suc- cessfully navigated previous downturns in the volatile tech industry. “The mind-set has really All on one monthlybill. When yousign up for the two-year agreement, we'll even waive the $35 activation fee on eachline. Alll for as long as you remain on the sameplan. Included minutes and nationwide long distance available from your Home, Calling Area. Unlimited local calling ‘available between plan members within the Shared Mobile-to-Mobile Calling Area. changed,” said Glenn, who founded Allegro with seven other partners in 2000. “Venture capitalists are looking for a reason NOTto give entrepreneurs money these days.” With House on board, venturecapitalists didn’t seem worried that Allegro makes andsells i 3) telecommunications equipment — probablythe high-tech industry’s hardesthit sector over the pastyear. Tobe sure, the products behind the peoplestill matter. _ Venture capitalists say they will continue to invest heavily in technologies that help make the'Internetrun better. With a multi-routing product that promises to deliver information more reliably at lower prices, Allegro fits thebill. Only AT&T Wireless received the highest rating offive stars from Telephia for / wireless network performancein Salt Lake City. Biotech Is Popular: Startups involved in biotechnology, nanotechnology and wireless devices also are drawing more interest. The market’s fascination ECTMU Te Mcey cach Nokia 5165 suggested retail price $79.99 with genomics helped Avalon Pharmaceuticals, a Gaithersburg, Md., biotech firm, raise $70 million from venture capi- talists this month. Avalon is using genomics to try to identify and develop drugs for treating cancer and other diseases. 5 FREE eee $80.00 final cost $00.00 ‘Two-year agreement required, Sales tax applies to original purchase price. Since Sept. 11, investors are also interested in data storage and security. Panasas Inc.’s plansto develop a more reliable data-storage networkfor businesses helped the Fremont, Calif., start-up to attract $24.5 mil- lion from venture capitalists shortly after the attacks. Veteran leadership also helped Panasas’s cause. The company’s CEO is Rodney Schrock, a former Compaq romvennconnie <2)ATT Wireless Computer executive who more recently served as president of troubled search engine designerAltaVista, It was yet another example of why newideas presented by old,familiar faces seem to have the best chance ofgetting venture capital in the coming year. “Havinga little gray hair is back in vogue,” said Damir Perge, CEO of Futuredex, a venture-capital networking service in the Silicon Valley. “And a lot of those young entrepreneurs that were getting fuinded a couple years ago are either back in school or working for somebodyelse.” AT&T Wireless Stores COTTONWOOD MALL 4835 S. Highland Dr. eee Mail) 101-277-5784 For your convenience - Extended holiday hourePlease call local store tor details. HIGHLAND PLACE 6970 S. Highland Dr. ake SANDY 100458.State St Z ‘SALT LAKE CITY 611 S. Main St. 801-575-1300 444 N. Main St. 435-753-2355 OGDEN 4025 Riverdale Rd. 801-621-2355 884 N.State St. 801-802-0725 THE GATEWAY g 160 SoRoGrandeSt Siteasonso SALT LAKE CY 729 €. 3300 South 801-481-8100 UNIVERSITY MALL 979EUniversity Pay foraae! Lowis Wireless. Links Wireless Lynn's Audio/Video Omaisorve Wireless Orion Wireless. Park City Collvlar Prestige Wireless Radio Shack - Heber City aC ees “Easy Riches No More: Venture capitalists could get away with funding inexperienced entrepreneurs a few ©2001ATETWireless. All rights reserved. Requires new activation on a qualiied ATAT Wireless calling plan,credit approval, ‘Ulin Shared wn of phone. the start-ups would be able to cash out in 12 to 18 months by eon Benefits BAeantesNene Sain initial publicoffer. Rabtn Gn onsae wt tepar seven tguannt On rebum poet cna numermistnes eng par 999 oul ors hat eon AAT Wren se Service years ago because they knew aoe ing of their stock, said Geoff dal a Cee Seettia tay & ura one af Given the current market fang start-ups will need five to seven 2p.The eastnin wee fr heres . nc. 2001 Teepe,inc, ‘Teephia % 7 reap. Uirraee a 4 one oF two-year agr = ARRIVE ‘TAT Shared A vagple ATAT i” a , pur bp Performan sr y over nr Pro m7 . i ? ¢ |
