VC Chief: 2009 Is Year Of Triage

Atlanta Business Chronicle, September 16, 2009

Atlanta is “a regional capital for moxy,” Chrysalis Ventures’ David Jones Jr. said, referring to the area’s can-do spirit.

“It’s a big city, with a concentration of engineering and entrepreneurial talent,” Jones said, noting Atlanta’s “big-company” executive and entrepreneurial talent in financial services, telecom, Internet security and health care.

Louisville, Ky based Chrysalis invests in early and growth stage companies in the health care and technology arenas. The company eyes firms “between the coasts” that have revenues of between $1 million to $5 million and are nearing profitability.

Chrysalis has invested $25 million in five Atlanta companies. That accounts for about a twelfth of all deals Chrysalis has made since launching in 1993.

Local investments include Connecture, a sales automation software company serving health insurance firms; and afterBOT, a supply chain management company geared toward retailers.

Chrysalis, which has looked “seriously” at about half a dozen Atlanta investments in the past month, is looking to do more deals locally, said Jones, who stopped by Tuesday, on the way to a Connecture meeting.

“Atlanta has a lot going on, a lot to look at,” said Jones, who is also managing director. “I bet you we’ve got 25 or 30 Atlanta companies in our deal log right now.”

And Chrysalis has the dry powder to make those deals happen.The firm closed a $175 million fund — it’s fourth — last year.

Shakeout ahead
2009 has been the “year of triage” for the venture capital industry, Jones said.

“There’s been a huge shrinkage in the amount of capital available,” he said. “Venture firms have not been able to raise new money, new fundraising is down 80 percent since the first quarter of 08.”

The recession, meanwhile, has slowed the growth of venture firms’ portfolio companies.

“Most venture capitalist have been consumed by dealing with their existing portfolios — how to choose who are the ones that are going to be the winners [and] the ones that have no hope,” Jones said.

Jones, like many, is expecting a shakeout in the venture industry, as me-too firms fall by the wayside.

Fundraising is going to me markedly more challenging, with $400 million funds being a thing of the past.

“All that will mean that capital is dearer,” Jones said. “It’s going to be more of a challenge for entrepreneurs to raise money.”

Entrepreneurs and investors had better suck it in and tighten that proverbial belt a notch or two.