December 28, 2011

WSJ

VC Outlook: Mike Carusi On The Industrys Me-Too Mistakes

As 2011 comes to a close, we asked several venture capital investors to reflect on the past year and give us their outlook for 2012. Continuing our series is Mike Carusi, general partner of Advanced Technology Ventures.

Carusi discusses the shakeout in the industry, the danger of outrageous valuations and how a year that started well turned sour.

Looking back, how would you characterize 2011?

2011 was “A Tale of Two Cities”: It was the best of times, it was the worst of times. There was a renewed sense of optimism in the first half of 2011 with several phenomenal exits like Ardian and Plexxikon helping to reinvigorate the sector. The second half, however, turned sour as a sense of economic uncertainty returned.

What is the most important issue that the venture capital industry faces in 2012?

The industry needs discipline. I believe we are repeating the mistakes of 2000 in 2011. Yes, there will be, and have been, some big winners in the social media space. However, the die has been cast. Those companies were started and funded several years ago. We now have the me-too (companies) getting funded at outrageous valuations. For most, it will end badly. Slow and steady always wins the race.

What impact, if any, do you think the more-difficult fund-raising environment will have on the industry in 2012?

There is clearly a shakeout underway in the industry. It is a story of the haves and have-nots, with the “haves” representing those firms or partners who have generated performance. Ultimately, a healthier industry will reemerge with fewer firms chasing fewer deals.

What is your New Year’s wish for the industry in 2012?

A partridge in a pear tree (and the return of a robust IPO market).