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Churchill Club – What’s Hot in 2005?

January 27, 2005

Last night I attended the Churchill Club’s “Venture Capital: What’s Hot? What’s Not?” On the panel were Jim Breyer of Accel Partners, Bill Gurley of Benchmark Capital,
Joe Lacob of Kleiner Perkins Caufield & Byers and moderating the panel was yet another venture capitalist, Geoffrey Yang of Redpoint Ventures.

After a superb comedic introduction by Yang, the panel settled into mostly violent agreement on the topics.

Hot – Digital Home, particularly component plays. Software with Open Source components or delivered as a managed service. Later stage deals in China.

Not – Packaged Enterprise Software. Storage. Semiconductors. Nanotech (for decade).

Breyer restated his belief in “content deals” and peer-to-peer networks as he said at last year’s event. Oddly he suggested that distribution through retailers and PC OEMs was promising – it’s 1994 all over.

Gurley pushed his belief in the future of multiplayer gaming, mobile devices and security.

Lacob was the most candid. On too much money in the venture business, “the venture capital business has ups and downs but over the long term venture capital averages 30% returns and that is a very sustainable business.” On the flow of good ideas, “good ideas are always out there, but the venture business tends to follow trends not lead them so our attitude is not always receptive.” On outsourcing, “we had a company with 800 people in Pakistan and after 9/11 we had to move that operation to Costa Rica.”

Yang closed with a few thoughts. We are entering a bubble in internet media companies that have “search” or “local” in their business plans. We are entering a bubble in investing in China. Finally, the recent run up in stock prices will create a “carbonated environment for startups,” and valuations will go up – I’m always happy to spread this type of news.

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