Joanna Glasner

The brain is a promising area for growth investments. Yet lately, it hasn’t produced a whole lot of exits. Those are some takeaways from an interview earlier this week with Roger Quy, a neuroscience Ph.D. and general partner at Technology Partners who has carved out a niche investing in what might be called the “brain space.” It’s a focus area involving companies applying advancements in brain science to everything from mental illness therapies to market research. And while in some ways it’s a classic growth sector – particularly with advances in research promising treatments for diseases previously considered uncurable – it’s also a challenging one, Quy pointed out in Q&A sessions, excerpts of which follow:

Ask a VC about the quality of their own firm’s portfolio, and the reply always contains a glowing review about the world domination potential of every investment. Ask about the venture asset class in general, however, and speakers on the VC Panel at this week’s Reuters Technology Summit got a lot more critical. It’s a pretty universal view that there’s too much capital available. And overall performance, well, it speaks for itself. “Venture returns have been poor for a decade, and I think risk-adjusted they will be poor for a long time,” says Khosla Ventures partner David Weiden. Going forward, he predicts, the very best firms will continue to perform very well, and the rest won’t.

Venture-backed companies get a lot of attention when they go public -- especially if there are big first-day gains. But in the first few quarters after an IPO, financial writers have a habit of forgetting they exist. Apparently, we’ve been missing out on some serious riches-to-rags stories. That was a takeaway from a panel of institutional investors and an exchange head speaking at this week’s National Venture Capital Association Conference in Silicon Valley. “The number of companies that miss their first, second, or third quarter out is remarkably high, much higher than we think it should be,” says Duncan Niederauer, CEO of NYSE EuroNext. Such earnings misses create problems for VCs as well as institutional investors, he noted, given that venture backers commonly hang on to their stakes a couple years after an IPO.

Godzilla isn’t the inspiration most angel investors point to when explaining their investment philosophy. But Mike Maples – whose portfolio of early stage investments includes such well-known names as Twitter and Digg – may be on to something. The Silicon Valley-based angel investor this week rolled out a newly named investment fund called Floodgate, which will make investments of $150,000 to $1 million, principally in Internet and technology companies. In building up the portfolio, Maples, says, Floodgate will focus on finding and funding a class of ultra-promising startup teams that he calls thunder lizards. “I thought it was a good metaphor for the disruptive startup,” says Maples, who defines a thunder lizard as one of the tiny minority of venture-funded companies each year that grows up to be worth north of $700 million.