Once again the setting for our Annual Funding, Exits and IPO’s event was held at the beautiful Quadrus Centre in Menlo Park. We were delighted to have back our moderator Richard Waters (financial Times, West Coast Editor), Bill Reichert (Managing Director, Garage Technology Ventures) and Mitchell Kertzman (Managing Director, Hummer Winblad Partners) who always offer some fantastic insight and anecdotes. We were very pleased to welcome Gaurav Tewari (Managing Director, SAP Ventures) and Kate Mitchell (Scale Venture Partners) who were joining us for the first time at this event.

For a third year in a row, our Venture Capital Forum was dominated by the ever newsworthy Facebook. Two years ago Facebook had just filed – and was about to launch its stratospheric $100 billion IPO, and has recently been valued at around $170Bn. The dominant focus for our speakers this year was Facebook’s purchase of whatsapp. A $19Bn dollar purchase, analysts across the world can’t seem to agree if it was a bargain or a gross over valuation. Naturally then, the key question to be answered was, ‘was it worth it?’ That is exactly where our moderator Richard Waters (Financial Times, West Coast Editor) led our panelist to open the discussion.

The interesting conclusion that our panelist seemed to agree on was that it was worth it – for Facebook. With an ageing demographic and a fear that the younger generations are moving away from Facebook, our panel were in agreement that whatever the actual valuation of whatsapp may be (if anyone truly knows), the price was a good one and perhaps even a necessary one; if you are Facebook. Gaurav Tewari noted that the app (whatsapp) has over 450 million users, 70% of which use the app daily, with expected growth to between 2 and 4 billion users in the next 2 years, so there is huge potential for Facebook to capitalize on the investment, if they can successfully monetize their new half a billion user market. The number of users is seen as the key factor that is driving valuations. Bill Reichert also pointed to markets in Indonesia, where the usage of online social media is hugely expanding, particularly in the younger dynamic, which Facebook wants to target and capture which is why this acquisition was deemed (by Facebook at least) a wise necessary acquisition. Kate Mitchell also pointed to ever increasing usage of mobile social platforms, which is really where a lot more and more of online communications and connections are being made, and whatsapp is a great example of this, which is why Facebook were so interested to acquire them.

The conversation moved onto the increase in the amount of valuations of companies being set at multi billions of dollars, Richard Waters pressed our panelists around why this feels (if it does or not) different to the bubble we experienced leading up to the economic downturn in the late 2000’s, he points to example of CEO’s making large claims and the market seemingly following them as we notice a stock increase a few days later; is speculation still driving the market? If it is, are we in danger of another bubble burst? Our panelists overwhelming response was that this ‘feels different’ to the last time. These companies are ‘real’ and have real business plans and models behind them, and though valuations can seem to be high it would be ‘very surprising’ to see stock fall 70% or more, which was what was happening during the end of the last bubble.

The scope then shifted toward the predictions for 2014. Who was likely to go big or fall short in 2014, and what trends were the venture capitalist networks looking towards developing or continuing moving forward. One of the big sectors that cropped up as one to watch was security. Mitchell Kertzman described security as ‘evergreen’ adding that the ‘bad guys’ develop techniques to harm as quickly as companies are finding solutions, so there is a continuous need and demand for security, especially in tech space. Fire Eye was a company that all panelist seemed to think could make some big waves in 2014, for the precise reason that the demand is always there and always changing.

Questions were then opened up to the floor where Rudy Burger of Woodside Capital Partners questioned the seeming consumer lack of interest in privacy in the social media space. Will this continue as business models are being driven by data that we are putting out there? Bill Reichert replied that it is clear that the vast bulk of players don’t care, ‘a main concern is that they don’t want to be intruded by an app’. Mitchell Kertzman ‘social media companies themselves are not worried about the individual person; they are more worried about politicians. If the governments put firewalls on certain info, there could become an encased virtual world’. Kate Mitchell ‘we have seen a slow march against such things as target digital marketing personalization. Companies need to find a line between relevance and creepy; people don’t mind seeing adverts for things they may be into, but don’t like an overreaching invasion’.

John Flynn of Addvocate then brought the topic round to content creation from various online platforms. Netflix for example, with the creation of original series- which way do you see this playing out? Will Netflix buy Comcast, or can/will anything that drastic develop? Kate Mitchell ‘I was surprised when Netflix decide to create content, as they are, in effect, competing with those who put content onto their website but can they ever create enough demand for their original content?’

Stuart Bagshaw, BAB Leap, rounded off the questions by asking our panelists what investment opportunities they’d had, but passed on, and now wish they should have made?

This produced some really interesting answers and some brilliant repartee from our panel; you needed to be there to hear this and we’re afraid you’ll have to wait for next year’s event if you want similar insight!

We would like to thank our generous sponsors for making this event possible,
Carr McClellen, HSBC, CCW Business Solutions, The Racers Group (Aston Martin Racing), Delyse Nash and Associates and Dunkirk Spirits. We look forward to welcoming our speakers back next year!