Tuesday, November 4, 2008

Venture Capitalists Talk Smart Money Moves

Venture capitalists talked about smart money moves during this financial restructuring period at CresaPartners, October 29, 2008. Around the table were Joseph Killackey of NewSpring Capital and Lindzen Capital Partners’ Kristian Hansen, both invest in digital media and technology companies. Why listen to technology VCs, given they were involved in the dot-com bust of the 90’s? Listen because they are wiser from the incident.

Kristian Hansen believes digital media is one area that will fair well. “The economy is getting worse but this is the cheapest period to buy business equipment, says Hansen. “PCs are cheap; essential online backend services are free. Much product development and business strategy can be derived from crowd sourcing. An entrepreneur can start a company with $100,000—maybe $40,000.” Technology VCs will study the business plan to determine whether it’s a good investment.

It’s important to view the economy in terms of creative destruction. iBreakfast founder and event sponsor Alan Brody sees this as a time of great opportunity. Creative destruction is taking advantage of property loss to use it for a more innovative use. For example Ryan Air, a European concern, is buying airplane fleets and specializing in flights to countries known for quality yet, inexpensive medical or therapeutic treatment.”

All around the table agreed “bailing out people who’ve been making mistakes for forty years had to stop.” Joseph Killackey desired more thoughtful investing. “Entrepreneurs and VCs need to stop chasing ‘stupid deals’—enterprises satisfying passing wants—and identify business that meets people’s real needs. What people currently purchase ‘on the margin’ or on credit cards are good indicators.” Killackey believes capitalists and consumers need strong leadership at this time.” Alan Brody gave a thumb up to Barack Obama’s choice of Warren Buffet and Robin Ruben as his chief financial advisors.

Translating this talk for application by average working people includes reducing frivolous spending. Work together and pool funds the way venture capitalist do. More foreclosures and property seizures will result in auctions and odd-lot sales to recirculate the items back into the economy; i.e., $700,000-homes are available at a fraction of original sale price. Though credit will be tight through March 2009, hand-held device and laptop prices will fall.

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At November 4, 2008 at 1:59 PM , Blogger kristianhansen said...

Thanks for the write up.



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