June 12, 2013

Elsea Speaks at IBF Venture Capital Investing Conference

LPs Show Enthusiasm For Venture And Even Cleantech Investing

Venture capital has been out of favor as an asset class for more than 10 years. There are signs this sentiment is changing.

Several limited partners attending the IBF Venture Capital Investing Conference said they saw attractive opportunities for returns not just from enterprise startups but in consumer Internet and cleantech businesses as well.

They also reported seeing the sprouts of a changing opinion for the asset class as a whole, which for years now has struggled to raise money from cautious LPs.

While some skepticism continues, venture is rising in “esteem,” said Judith Elsea, a managing director at Weathergage Capital, during a panel discussion at the San Francisco event.

“We have been seeing some limited signs of investor interest,” agreed Gregory Stento, a HarbourVest managing director.

Stento said he sees considerable opportunity for fund managers to generate attractive returns across a variety of investment sectors. Included is not just enterprise, but consumer, social commerce and cleantech.

“When we look at the landscape, it is so rich,” he said. “Venture capital is one of the few places where we can find high growth companies in a low growth economy.”

David York, CEO of Top Tier Capital Partners, echoed the feeling. He identified enterprise as a promising area and said consumer is starting to look more exciting as interest from investors has waned. Cleantech also could be interesting as many of the firms once participating have backed away.

But the contrarian cleantech thesis was hardly universal. “This is not an area we would be interested in,” countered Elsea. Cap-ex can be high, margins can be low and cannibalization can be a concern, she said.

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Weathergage
A nautical term that indicates a favorable position relative to the wind. A ship that "has the weathergage" has the initiative and hence a significant advantage over its rivals.