01 Mar 2006
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Venture Capital, Post-Dot Bomb

Re: Stan Reiss (MBA 2000); Sean Dalton (MBA 1998)

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At Cyberposium, a student-run technology conference held last November at the School, HBS professor Bill Sahlman sparked a frank discussion on the current climate for venture capital investing.

“In the future, I see a median rate of return of zero or less,” Sahlman challenged, observing that with so much global liquidity, too many dollars are chasing too few opportunities. “What’s going to prove me wrong?”

Initially, Sahlman found little resistance to his gloomy forecast. “It’s an extremely hit-driven business that’s becoming more like the movie industry in that sense,” said Raj Kapoor (MBA ’96), managing director at Mayfield. Sean Dalton (MBA ’98), a managing general partner at Highland Capital, noted that dire predictions for the industry were nothing new. He counseled a simple, head-down approach: “Do good deals. Focus on what you can control.”

Panelists at the event agreed that alternative energy solutions were beginning to show a higher investment profile. “Venture capitalists haven’t traditionally been interested in that area,” said Stan Reiss (MBA ’00), a general partner at Matrix Partners. “But given the amount of money that’s in the business, somebody is going to try, and somebody will be right.”

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