Episode 5 is live featuring yours truly, but even better Soul Patch as part of the soundtrack!

From Dan Primack this morning, these factoids:

"More than half of venture capitalists (52.9%) believe that their industry is “broken,” according to a survey conducted by executive search firm Polachi Inc. Moreover, nearly 60% said that they are less confident in the VC industry today than they were six months ago."

You can read the full report here.

Having spent plenty of time bashing lawyers and the accounting profession, it’s only fair that I call out my own industry today.  Y’all are really confused.

The Industry Isn’t Broken

VC isn’t broken.  In fact, I would argue that there’s never been a more exciting time to be involved in venture capital.  I’m highly optimistic.  (Mind you that I’m a software / IT guy, so I’ll leave the cleantech and biotech opinions to others). 

What’s not to like these days? 

1. It’s never been cheaper to start a business with the advent of cloud computing resources, open source development environments and specifically today, low rents and the ease of hiring quality people;

2. Because of past successes, this country (as well as the rest of the world) is producing a lot of entrepreneurs.  Today, more than ever, our college graduates are creating their own opportunities, not just working for the incumbents.  These folks are scratching their own itches and creating companies of value (see everything from Facebook to Techstars);

3. We have more experienced entrepreneurs ever to fund.  Given the maturity of the industry, it’s much easier to find folks who’ve "been there, done that."  And with point 2, above, there has never been better deal flow and cool stuff to invest in;

4. VC is not a slave to credit markets or other systemic risks like other areas of finance.  While the popular press has dramatized that investors are defaulting on the VC commitments, I’ve spoken to many folks who think this reporting greatly overstates the issue;

5.  While the report says that nearly 70% of VCs are worried about their investor syndicate, this is something that should be in control of the individual VCs.  I understand that some VCs syndicate for extra brainpower around the board table (a good thing), but many VCs syndicate simply to validate their investment thinking.  This lemming approach isn’t good in its own right, therefore I don’t have a lot of sympathy for folks worried about it now;

6. We learned (or should have learned) a tremendous amount during the Internet bust period (2001-2004).  The VC industry essentially got a "free pass" and instead of just being thankful, we should have learned a lot of valuable lessons about building Internet and software businesses.  In short, we know how the next generation of companies should create value; and

7. Broadband, mobile connectivity and attention from advertisers exists today in ways that we envisioned 10 years ago, but finally is reality.

 The Industry Shouldn’t Analyze Itself in the Short Run

The report says that the past 6 months has deteriorated VC confidence.  What?  With all due respect to John Maynard Keynes (who said "in the long run we are all dead"), who gives a shit about 6months?  We are talking about an asset class in which each fund has a 10-12 year life span.  We are also talking about an industry that has proved its best returns are usually made on companies invested into during a down economic cycle.  Why shouldn’t we be excited about today?  If history does repeat itself, we could look back one day as this time period being one of the best for investment.

In short, if you are making decisions in VC based on trends and noise in a 6 month time period, you are in the wrong industry.  We need to be patient.  You can’t rush success and you can’t bet on "what might be" 6 months from now. 

Exit Markets

Alright, all you haters out there are probably saying "none of this matters Mendelson unless we have an exit market."  And yes, clearly, we need to have a vibrant exit market for us to achieve our financial return goals.

That being said, I speak to bankers on regular basis who think we are on the cusp of a wave of M&A.  They are on the front lines and one of them (who is normally the most pessimistic dude that I know) is practically giddy.

On the IPO front, it’s bleak, but we’ve seen a few companies get out and folks like the NVCA are putting their weight behind plans to restore liquidity in the industry. 

Unless you believe the entire U.S. economy is game over permanently, these markets will come back and they will allow us to meet our financial objectives.

So, there you have it - why more than half of VCs (surveyed) are confused/deluded/misinformed, if indeed, this presentation accurately represents their views that the industry is broken.  It’s not.  Invest in good companies with great entrepreneurs, stay patient, make our your investment decisions and the rest will take care of itself.  And if they still don’t like it, I’m happy to have less of them around - it certainly won’t hurt my business. 

*** I’ve had several comments about the VC industry being broken given that it got too big and raised too much money. I don’t think this is a fact of a broken industry, rather this is a situation that will be corrected. The industry will settle into a steady state. This is a bad fact, but doesn’t mean the industry is broken. ***

I love Mexican food.  Having lived in both Texas and California, I’ve gotten to sample some of this country’s finest. 

(As an aside my three favorites of all time are La Fiesta in Mountain View, CA, Sanchos in Redwood City, CA and Mia’s in Dallas, TX).

Having now lived in Colorado for three years, I’m still searching for that one special place that I salivate thinking about.  I tried all the offerings that I can find in and around Boulder and some in Denver and have found good to very good, but not excellent. 

I found a restaurant recently just under excellent classification and the best so far in the state.  Unfortunately, it’s about a 3.5 hour drive from my house.

Drum roll please…..

Los Girasoles Family Mexican Restaurant in Poncha Springs Colorado.

It’s near Salida and 15 minutes from Buena Vista and it’s all good.  Great salsa, well flavored meats and creative use of spices and cheeses.  Best of all it’s attached to a truck stop.  (Don’t try to wash your hands in the bathroom - bad idea).

But the food did rock and I’m going to have to find a way to get back there during my annual hiking trip in the mountains. 

If you know of somewhere that I’m missing, clue me in.

Day number three of the next generation of the iPhone and here are the highs and lows:

Highs:

1. Speed.  Yep, it’s definitely zippier.  I wouldn’t call it screaming fast, but certainly some annoyances of waiting between applications to open have been alleviated;

2. Search.  The whole phone search feature is really nice.  Searching calendar, inbox, contacts, etc. really adds useful data when my old brain is trying to remember things;

3. Battery Life.  It’s better.  In fact, yesterday was the first day that I’ve ever made it through a whole day without a recharge.  Yee Haw!

4. Compass.  It’s neat to look at. 

Lows:

1. Multitasking.  Really? The makers of Mac OS still can’t figure this out.  Argh.

2. MMS.  Who knows how long it will take to work.  AT&T, you suck.  ‘Nuff said.

3. Calendar.  This one is still the killer.  Why on earth are phone numbers and addresses that are added to the "location" field in Outlook appointments not clickable?  This was in my Windows 5.1 phone 5 years ago.  I can’t believe that I can’t go into my calendar and click to call or click to find a location.

Interestingly, one feature that I haven’t really used is cut and paste.  In the words of my partner Ryan McIntyre, "I’ve trained myself to not use the cut and paste feature in previous versions."  I think that I’m in the same boat. 

So overall, nice upgrade, but I think that I would trade them most all of them for an actionable location field in my calendar.  In some ways, I’m surprised that the legal eagles at Apple haven’t told the product guys that they HAVE to do this.  It’s mighty dangerous driving and trying to pull up calendar entries and then get the phone number dialed in.  This is especially true due to the lack of multitasking. 

Last night word spread that FlyClear ceased operations.  I’m seriously bummed.  Clear was one of those small bright spots in my hectic travel schedule.

I don’t have any inside information from the company, but something doesn’t add up.  They claim that they had signed up over 260,000 travelers.  Since joining cost between $100 and $200 bucks that would put lifetime revenues in the $26m to $52m range.

So how does the company burn through all of that cash plus it’s venture funding when from a consumer standpoint their service amounted to a few folks at every airport helping you through security?

My only guess is that airports must have been extracting large sums of cash, or the TSA was bleeding them dry.  Or perhaps Clear was developing next generation screening technology and that created a massive cash burn.

Whatever the case may be, I’m really going to miss the service, as several flights would have been missed without them. 

One of my favorite companies out there is Shareholder Representative Services - the company that professionally manages escrows created out of merger transactions. 

They started blogging today about issues that affect escrows as well as the general state of the VC industry.  If you are involved in any acquisition escrows, their wisdom and experience is worth a lot.  So far they’ve written about working capital adjustments and war chests for escrow battles. 

Nice work, gents.  Keep it up. 

Last night, I had the great pleasure of seeing the Alternate Routes open up for Carbon Leaf.  I’m a huge Alternate Routes fan and authored the following review of their first album under the "music" section of this blog:

I want to sing like this guy and write lyrics that creep up on you like this. Good and Reckless and True is an album that I need to listen to the whole thing at a time. Meanwhile I find myself with some weird self-introspective teary-eyed thing going on that is part sheer joy and part devastation. Simply put this album really hits me.

It was the first time that that I got to see them live and they were great.  In fact, with all due respect to Carbon Leaf, they were the best band on stage last night.

Perhaps the most enjoyable part of the evening, however, was meeting leader singer and co-founder Tim Warren and talking about the business of music.  It was apparent that while they are doing well, there was plenty of frustration in how to actually monetize the asset that they have - specifically their great songs, stage show and their brand.  We spent a while trading war stories with each other. 

It once again reminded of why we’ve invested in Topspin and how tools like this will revolutionize the business model of music and allow great acts like The Alternate Routes to do what they love to do and make a solid living while doing it. 

My friend Julie Penner turned me onto a great CD recently - Dark Was the Night.

It includes a who’s who list of indie rock including: Andrew Bird, Arcade Fire, Bon Iver, David Byrne, Cat Power, The Decemberists, Feist, Jose Gonzalez, Grizzly Bear, Iron & Wine, My Morning Jacket, The National, The New Pornographers, Spoon, Sufjan Stevens, Gillian Welch, Yeasayer, Yo La Tengo and others.  The Red Hot website also let me pick out three of the tunes from the CD to make a widget.  (I will admit that I’m a bit biased toward Topspin artists, but these are all great tracks).

All the proceeds from the project go to AIDS prevention and awareness. 

Congrats to  Memeo for receiving a five star rating from cnet’s download.com for the new release of Memeo Share, version 2! Download.com just gave Memeo Share a five star editor’s rating, and they’ve got a nice more detailed blog post about the software here.  The accolades are well deserved.  I’ve been a huge Memeo fan with their sync products which keep all of my PCs up to date with whatever current content I’m working on. 

Version 2 of Memeo Share is a great leap forward in functionality and ease-of-use from their already-excellent version 1, and it makes sharing full-res photos and videos among friends and family incredibly simple and allows you to do it directly from your desktop, and gives you the option of avoiding sharing your photos on public photosharing and social networking sites, though it also provides tools that make it really easy to autopost photos on Facebook or to Memeo’s cloud-based backup service, if you want to socialize or protect your photos and videos.

Here is a great screen shot:

The Rocky Radar guys are at it again.  This time, they’ve launched a Colorado Company Index. 

It’s free.  The idea is to create a catalog of all technology companies working within the state, from IT to Life Science to Clean Tech. 

They are currently bootstrapping the index – submit your company info here.