Lawrence Aragon

It’s not the 16x return that VCs expect to get from the sale of AdMob to Google, but the 4.5x VCs will see from the sale of LifeSize Communications to Logitech International looks pretty good in these gloomy economic times—especially to Redpoint Ventures. Redpoint launched with much fanfare during the Internet bubble, but its first two funds haven’t produced spectacular returns. Still, 2009 is turning into a pretty decent year for Redpoint. LifeSize will be its third acquisition this year. Logitech on Tuesday agreed to pay $405 million for LifeSize, an Austin, Texas-based maker of high-def video communications products. LifeSize had previously raised $90 million from Austin Ventures, Norwest Venture Partners, Pinnacle Ventures, Redpoint Ventures, Sutter Hill Ventures and Tenaya Capital (fka Lehman Brothers Venture Partners), according to Thomson Reuters (publisher of peHUB).

I had the pleasure of moderating a venture capital discussion for boutique investment bank Iron Capital Partners recently. It was a lively debate, since each of the participants came from a different aspect of the venture business (see video after the jump). There was one VC, two secondaries buyers, an I-banker and the head of an online exchange where accredited investors can buy or sell shares in private companies. One of the principal questions I asked was: If someone wants to get into VC today, where’s the best place to put his or her money? Should he invest in a primary VC fund or go with a secondary fund? Or should he avoid funds altogether and buy shares of Facebook on an online exchange such as Sharespost? This led to a very interesting discussion about the poor performance of venture as an asset class over the past 10 years and some interesting perspective about where it will go in the next decade.

It isn’t often that you feel young at 51, but that’s one of the benefits of competing in the Senior Games. Just ask David Jones Jr., founder and chairman of Louisville-based Chrysalis Ventures, who came in 9th in the triathlon portion of the games in August. Jones was a relative kid compared to some of the other competitors, one of whom was 85. I caught up with Jones and we talked about his passion for health and fitness and how that ties into his investment strategy. Q: How’s your firm doing these days? A: We’ve had two good exits since the market cracked. We sold a company called HealthMedia in Ann Arbor to Johnson & Johnson for about 18 times our money in October of ‘08. And we’ve got another company called MedServe down in Houston that Stericycle, which is the leader in medical waste processing, is buying for $185 million. We did well on that one, too. It was a multiple of our invested capital.

It may have delivered a jolt to the IPO market, but battery maker A123 Systems didn’t produce a high-voltage charge for its venture backers. A123 priced its shares at $13.50 this morning and they shot up to $20.29 by the end of the day, an increase of more than 50 percent. That was the best second-best debut of the seven VC-backed companies that have gone public this year and the second-best debut for any IPO on a U.S. exchange this year. (Updated: OpenTable rose 59% on its first day.) Despite the impressive performance, the company’s backers didn’t see a huge return because they invested such a large amount in A123. (See table below) Prior to its IPO, A123 raised more than $240 million from more than 15 investors over 11 rounds since 2001, according to Thomson Reuters (publisher of peHUB).

Google CEO Eric Schmidt told Reuters today that the worst of the recession is behind the company and he expects to start doing about one acquisition a month. “Acquisitions are turned on again at Google and we are doing our normal maneuvers, which is small companies,” Schmidt told Reuters Television at the G20 summit. That may be good news for VC-backed startups, which haven’t felt any love from Google since 2006, when it bought three VC-backed companies, including YouTube.

Update #3. Scroll down for survey results. Unless something magical happens in the final week of September, the U.S. venture industry is on pace to raise less than $3 billion in the third quarter. The last time the number was that low was 13 years ago—in the third quarter of 1996. Way back then, 21 U.S.-based […]

I had the pleasure of moderating the venture capital panel at GigaOm's Mobilize '09 conference yesterday. While investment in the mobile sector is down substantially, particularly for brand new startups, the five panelists are actively looking for deals and are optimistic that deal making will pick up next year. I think it was telling that after the discussion, Dixon Doll, a co-founder and general partner of DCM, who was one of the panelists, approached another panelist (who shall remain nameless) and expressed genuine interest in learning more about a new deal that the panelist was working on. More thoughts and video after the jump...

By most measures, the mobile space is exploding. So why is venture investment in the sector down? That’s the principal question I’ll be asking when I moderate a venture panel at GigaOm’s Mobilize ‘09 conference on Sept. 10. U.S. VCs put just over $2 billion into 204 mobile companies last year, down from $2.5 billion invested in 237 such companies in 2007 and $3.3 billion invested in 252 such companies in 2006, according to Thomson Reuters (publisher of peHUB). This year is looking even worse, with just $1 billion invested in 66 mobile companies as of the end of August, according to preliminary data.

Randy Komisar, who wrote the bestseller “The Monk and the Riddle,” will be back in bookstores in September with “Getting to Plan B.” A partner at Kleiner Perkins Caufield & Byers since 2005, Komisar co-authored the book with London Business School Prof. John Mullins. The basic premise is that most entrepreneurs find success not by clinging to their original business plans, but by tweaking them, or even overhauling them, based on feedback from the marketplace. Don’t buy it? Well, consider this: When Komisar asked the CEOs at a KP offsite last year how many of them had discarded their original ideas for a Plan B, two-thirds of them raised their hands. And Mullins studied 70 businesses that his students had created over five years and found that more than 60% of the 63 companies that were still active were pursuing different strategies than the students started out with.

If you’re looking for an easy-to-understand explanation for the problems facing the VC business, check out Bill Gurley’s essay: “What Is Really Happening to the Venture Capital Industry?” It does an exceptional job of explaining in plain language why the venture industry is shrinking. You can argue with Bill’s analysis, of course, but you can’t argue with the facts that he’s laid out. Definitely worth reading, especially on a slow summer day. Check it out here.