Over the years, Don Valentine (founder of Sequoia Capital) has had quite a few memorable quotes. He was the original investor behind successes like Apple, Cisco, EA and Oracle and is known to never mince words.  After coming across one of his quotes the other day, I used Google to chase down an array of others as listed below:

"The trouble with the first time entrepreneur is that he doesn’t know
what he doesn’t know. After a failure he does know what he doesn’t know
and can beat the hell out of people who still have to learn."

"That’s easy. I just follow Moore’s Law and make a few guesses about its consequences." (on his success investing in semiconductor plays)

"I got to Silicon Valley in 1959. Nothing is revolutionary; it’s
evolutionary. Look the sequence of Intel microprocessors. It’s all
predictable. The nature of silicon and software and storage go hand in
hand. In the case of software, you just have to be more clever about
the nature of the application. So all these things kind of tick along,
feeding off each other"

“All companies that go out of business do so for the same reason – they run out of money.”

"Why did you
send me this renegade from the human race?" (comment after meeting Steve Jobs)

"Great markets make great companies."

"I like opportunities that are addressing markets so big that even the management team can’t get in its way." 

“In
30 years we haven’t convinced ourselves to set up a presence in Boston.
It’s a very difficult business to be good at consistently over a long
period of time, and it requires a lot of thoughtful and integrated
decision-making….”We make enough mistakes on investments we make here
(in Silicon Valley), that we’re not comfortable we can (be successful)
3,000 miles away, never mind 8,000 miles away.”

"I am 100% behind my CEOs right up till the day I fire them."

"The world of technology thrives best when individuals are left alone to be different, creative, and disobedient."

"One of my jobs as a board member has been to counsel management to avoid distraction and to execute with constructive paranoia."

“I’ve always been mystified by the
critically important disc drive industry, without which the PC is a
useless device. You have to be brilliant in electronics, you have to be
brilliant in magnetics and you have to be brilliant in mechanics to get
all that memory capacity in a very little place and do it for next to
nothing. That market has never been rewarded financially for its
brilliance."

In yet another example of the new wave & breed of philanthropists, Feeney made his fortune in duty-free shops. In Out of Sight, Till Now, and Giving Away Billions, O’Cleary gives a taste of what is in Feeney’s upcoming biography The Billionaire Who Wasnt: How Chuck Feeney Made and Gave Away a Fortune Without Anyone Knowing . I love to hear about people who become successful, give back and keep their perspective on life, values and money.

Last year, the foundation Mr. Feeney created, the Atlantic Philanthropies, gave $458 million in grants around the world, more than any United States charity except two, the Ford and the Bill and Melinda Gates Foundations. Atlantic,
  and small predecessors also started by Mr. Feeney, have given $4 billion since 1982; the plan is to give away the remaining assets — now $4 billion, but growing every day — by 2017.

Despite this record, Mr. Feeney is little known, a result of the web of intrigues that he fashioned to disguise his identity, his wealth and his giving. Atlantic does not appear in the annual rankings of the biggest American philanthropies because it was set up in Bermuda, to avoid the disclosures required in the United States. A rare glimpse of Mr. Feeney’s story emerged a decade ago during a business dispute, but he quickly disappeared from the news.

Now, however, Mr. Feeney, who is 76 years old and grew up in Elizabeth, N.J., is stepping out from behind his veil. He cooperated with a biographer, the journalist Conor O’Clery, whose book, “The Billionaire Who
Wasn’t,” is being published by Public Affairs. In it, he describes how Mr. Feeney and his partners went into business nearly 50 years ago selling five-pack boxes of liquor to American sailors in ports around Europe, and expanded into a worldwide empire of duty-free airport shops — often one quick step ahead of police or immigration authorities.

As told by Mr. O’Clery, Mr. Feeney’s life makes a compelling saga, a fortune built on consumption by a man who is defiantly indifferent to it; what Donald Trump would be if he led his life backward. Mr. Feeney buys clothes off the rack. He owns no homes, but stays in apartments around the world rented by the foundation. He flies coach. He rides the subway or takes cabs. His five children — four daughters, one son — worked summers as waiters, hotel maids,
cashiers.

Vineeth forwarded this article onto me: Google’s new role: Venture Capitalist. In yet another sign of where we are in the cycle, strategic VC’s are accelerating their activity. Strategic activity tends to peak (along with angels’) right before a market pull back. Google may be a different animal, but many of the strategics are diving in. Maybe this time will be different…

Google’s New Role: Venture Capitalist

The tech giant’s startup investments are narrowing opportunities for
VCs. Other corporations are upping their venture investing, too

Just as it has done to companies in the software, publishing, and
advertising industries, Google is becoming a thorn in the side of
venture capitalists. The owner of the world’s largest Web search engine
is scooping up young tech outfits for a relative pittance, giving
itself first dibs on hot-growth technologies and in some cases boxing
VC funds out of potential big-bang acquisitions and initial public
offerings.

TiE Midwest is holding its annual conference on October 5th from noon to 6 at the Hyatt Regency in Chicago. This is a great event and this year, they have the dynamic and always interesting brothers, Glen (CEO of Allscripts) and Howard (founder CCC & CEO of Flashpoint) Tullman keynoting. Definitely worth the time if you can make it. You can register at TiECON Midwest 2007

As many of you may have followed, there is a battle royal brewing around the taxation of carry (the 20% of the upside GP’s receive). Historically, this has been treated as capital gains (usually long-term) so enjoys a low tax rate. With the excesses of the hedge fund & buyout managers, Congress has begun evaluating different ways to tax carry as current compensation just as salary is. What preceded this is that Blackstone’s CEO, Steve Schwatzman, hosted a very high profile, $2m birthday bash for himself (like the Romans would…) and then followed this up by taking Blackstone public (thereby exposing the significant carry & fees they earned). Now, carry charged by all types of investment managers (VC, Buyout, Hedge, Real Estate, etc) is under attack and the various asset groups are trying to extricate themselves from snowball. Daniel Primack published an interesting piece today in PE Week that lays out some of the resulting behavior. As a VC, I’ll enjoy being in the good guy camp for short interim period…

"Private Equity Cleavage

An interesting subplot to the carried interest tax debate has been how venture capitalists keep trying to disassociate themselves from buyout pros. PE Week Wire considers both groups to be part of the private equity landscape (I take “private equity” literally), but most VCs would sleep better is Kleiner Perkins was never again mentioned in the same breath as Blackstone or KKR. Buyout pros, on the other hand, keep clinging to VCs like elderly straphangers on a bumpy subway line.

Why the fissure? Because VCs believe they are forces for good and buyout pros are forces for bad. Or at least they believe Congress and the general public believes that – and they are worried about their halos being dirtied. For buyout pros, it’s the same idea in reverse – with LBO mavens hoping to launder their reputations through the VC wash…"

My friend from B-school and BCG, Al Warms, recently sold his firm, BuzzTracker to Yahoo.  Al created a viral approach to linking news stories with leading blogs to determine the importance of a given article. You have seen the VC channel of BuzzTracker in my left rail for nearly a year now. Creating channels is pretty straight forward in that the channel sponsor & BuzzTracker (often the same) define the influential blogs in a given space as well as the key news feeds. BuzzTracker does the rest. Now, Al is not only part of BuzzTracker but is taking over as GM of News. This is another great win for Chicago and for Al. He previously sold his stake in RealClearPolitics for a nice win last year. Definitely a rising star to watch…time to buy Yahoo stock!

Here is Al’s commentary on the acquisition: Joining Yahoo!

David Dalka asked an interesting follow-up question to my post yesterday about the consolidation in the venture business. What does this consolidation mean to the business? A couple of things:
1) a lot of the firms out of the business now should not have been in it to begin with. They drove up prices and encouraged a loss of discipline in the entrepreneurial world. So, this segment going away is actually a positive to both entrepreneurs and VC’s. If they had helped back successful firms (versus the 10th loser in a space), their performance might have been good enough for the next fund.

2) I don’t think that there will be a massive impact on quality start-ups. As consolidation occurs, there is generally room for the smaller niche or focused funds. These often, due to size, focus earlier stage. As the brand funds get bigger, most will keep an early stage segment going but raise like DFJ and Sequoia, later stage funds in addition to their early stage ones. So, the sub-$100m funds will survive as will the brands. The $150-400m funds will take the hits in numbers most likely.

3) as long as the cycle continues, angels and strategics will do a lot of earlier investing. Should the stock market turn ugly, this money will dry up. This will have the biggest impact, I believe, in the seed/early stage world.

This all said, good ideas & teams will get funded but not necessarily at the higher valuations or larger rounds sizes of today. Running these companies will require more discipline which is a good thing and there won’t be as many competitors. First time entrepreneurs will take the brunt of any kind of pullback. This impacts the future since it is these first time efforts that lead to bigger second or third time successes.

So, this shake-up is a natural, and in the long run, healthy, correction. It prunes the herd. It won’t always be enjoyable for the VC’s or the entrepreneurial communities, but does result in a better environment. We will see if I am right on this…

The team at OVP Partners in Seattle/Portland puts out a quarterly newsletter. In the most recent one, Charting the Course, they cut into the NVCA Yearbook numbers to get a better sense of what is going on with the consolidation in the industry. As I wrote in Fidelity Comes to VC, LP’s are driving a shake-up through choosing to invest in a core group of brand funds. OVP estimates that less than 50% of 2000 venture funds are still active. This number will continue to contract as funds wind down current investing and are unsuccessful at new fundraising.

"In 2000, there were 1156 different venture firms that made at least one new deal. In 2006, there were only 597. This is more like a 50% drop, not just 15%! We think that is the big, so far unwritten, story. The US venture industry has been cut in half. That certainly qualifies as a major shake-out."

My wife sent me this article. She is on the Women’s Board over at Children’s Memorial and comes across  these stories often. Talk about keeping things in perspective. No matter how hard my working world becomes, it is nothing compared to this one…

The Night Rounds
There’s no darker place than a children’s hospital at night. Chaplain Stacey Jutila brings light and solace to those lonely halls…

This is a hilarious video for all of you parents: