Venture Capitalists Flush With Cash, Short on New Talent
Venture capitalists, flush with cash from the Internet boom, say they’re confronting the same problem as the companies losing executives to dot-coms: a shortage of talent.
“What’s in short supply are great teams and leaders for teams,” said John Doerr, a partner of Kleiner Perkins Caufield & Byers, in an interview at the annual meeting of the National Venture Capital Assn. in San Francisco.
The hunt for talented executives is one of the growing pains facing the industry as money pours in and portfolios of both publicly traded and closely held companies multiply.
The association’s annual meeting drew 650 people this year, its largest gathering since 1986, the year before the stock market crashed. In the aftermath, venture capital fund-raising dwindled, to just $1.5 billion in 1991. In the early 1990s, fewer than 100 people turned up.
Then came the Internet and the public’s demand for shares in start-ups that promised a revolution in how commerce is done. Venture capital firms in the U.S. raised a record $46.1 billion in 1999, dwarfing the previous year’s $27.7 billion.
Kleiner Perkins, which financed Internet retail pioneer Amazon.com Inc., is focusing more on recruiting for the companies it backs. Some firms, such as Bessemer Venture Partners and Centennial Ventures, have hired in-house headhunters to speed up the executive search process.
“The industry is getting more mature,” said Don Parsons, a general partner at Denver-based Centennial. “Money is a commodity. We’re taking the stance that we’ve got to provide services to our companies.”
Venture capitalists also face bigger challenges to invest the larger funds being raised nowadays. “It’s a lot easier to return 10 times your investment on a $100 million fund than on a $1 billion fund,” Parsons said.
Firms are going after new investment opportunities in different ways. Japan’s Softbank Corp., for instance, is setting up several funds to invest in Europe, Asia, and Latin America. Softbank plans to invest as much as $5 billion in Internet ventures worldwide in the next year and a half.
“Venture capital is tough to scale,” said Charles Lax, a general partner of Softbank Capital Partners. “So instead of getting bigger, you get smaller and go more places.”
