Howard Dean, Fiscal Conservative?

I was fortunate enough to attend the ASF 2010 Working Lunch, pretty good rubber chicken with a side of CNBC's Larry Kudlow moderating between Howard Dean and Newt Gingrich. Much to my surprise, Howard Dean appeared to show signs of fiscal conservatism and the willingness to speak with candor and criticisum about the Obama administration.

Couple of memorable points (paraphrased):

• "You can't have capitalism on the way up and socialism on the way down." - Newt Gingrich when about about US government invention into the financial markets.
• "I'll let Newt save his modesty - he's running." - Howard Dean answering for Gingrich when Gingrich was asked if he was gearing up for a 2012 Presidential run.
• "No way." - Howard Dean when asked by Kudlow if Hillary Clinton was preparing to oppose Obama in the 2012 Democratic primaries.
• "There's a 50/50 chance that the Republicans will pick up a majority in both the House and the Senate in the 2010 mid-term elections." - Newt Gingrich
• "About 45 Senate seats and 30-40 House seats." - Howard Dean's perspective.
• Dean & Kudlow agreed that they would not have re-appointed Ben Bernanke to the Federal Reserve. Gingrich said he would have.

Much to my own surprise, and maybe more to my initial disappointment, I found Dean to be lucid, intelligent, and seemingly likable. Gingrich has a knack for explaining complex issues with ease.

There was lots more said between the two throughout the 1:30 discussion, but the rest focused on the economy, unemployment, and health case. Nothing earth-shattering that you wouldn't expect to hear from either side.

I have a hunch that these two like and respect each other in real life. TV interviews and media outlets typically showcase the animosity between any two individuals of the two parties, but it seems that these two could sit down over a bottle of scotch for a complex, civilized, philosophical conversation about the ways to approach societal, government, and economic challenges. They don't hate each other - just mostly disagree on the basic way to approach issues. Maybe that is what I learned the most.

An Appreciation of Milton Friedman

I got into a Facebook conversation yesterday about capitalism and greed, and immediately thought about this excerpt of the Phil Donahue show, interviewing Milton Friedman back in the 1970s:

http://www.youtube.com/watch?v=RWsx1X8PV_A

And as is the beauty of YouTube, I also found this episode of the Charlie Rose show, taped just a day after Milton Friedman passed away a couple years ago. Great stuff:

http://www.youtube.com/watch?v=-pbHo_fQCFg&feature=fvw

"Inflation is a monetary phenomenon..."

The Venture Capital Market

There's a wonderful blog conversation ongoing between Paul Kedrosky and Fred Wilson on the optimal number of venture capital firms. To summarize, both advocate for a reduction in amount of capital and number of VC firms participating in the market.

Check out Kedrosky's post from this week - Fred Wilson and the Venture Capital (Non-)Cartel and Wilson's - The Venture Diet is Working.

I look at it from a market standpoint, driven by supply and demand. But like a good economic analyst, I've got more than two hands...

1. Good firms will survive and poor ones will exit. The challenge though is the slow speed of entry and exit in the VC market. Firms can take years to raise capital from investors, then need time to evaluate eventual investments, then ride them through to exit. Unsuccessful firms that enter the market take years to display their incompetence, so the market is stuck in the intermediate term with an over supply of VC firms and capital. Overall, you'd think that's a good thing for entrepreneurs - more investment money chasing fewer projects. But, VCs are not a commodity product - each have their advantages and strengths that abet entrepreneurs in their drive to successful exit. This means that entrepreneurs need to examine their options more closely - more money and more favorable terms doesn't always mean the best deal.

2. Maybe the challenge is not an over-supply of VC firms, but a dearth of investment targets. Are we out of good ideas? I'd say no way this is the case. There are always plenty of good ideas in today's global marketplace, with that number rising exponentially as countries like India and China gain increased access to technology and build a economic infrastructure that supports the development of new technologies to replace the old.

3. Market inefficiency could be an explanation - there isn't enough communication between aspiring entrepreneurs and VCs. I don't think this is the case either - VCs get hundreds of business plans submitted every week and "investable"start-ups only going to develop in markets with access to communication nodes and infrastructure that provides clear awareness and access to the existing VC firms.

4. Or maybe it's that the venture capital model is no longer relevant for a majority of emerging companies. Back in December 2008, I wrote that venture capital is moving "up the ladder." As deal size requirements get bigger and bigger, that means that the exit opportunities must be bigger and bigger. There's limited room for the mega-exits, so that means that more and more start-ups are seeking smaller investment amounts funded by angel investors, leaving the formal venture capital firms with fewer investment opportunities. Bigger exit requirements also mean smaller rewards for company founders and early-stage team members that accept venture capital. That makes the whole idea of funding with VC less attractive. Altos Research is bootstrapped, profitable, and quickly growing (gasp!). Our company founders never wanted to use VC as a vehicle for precisely this reason (and others...).

Profile of Angel Investors

Received an emailed list of the :most cited articles from Institutional Investor Journals. One of them caught my eye - "A Profile of Angel Investors" - published in the Journal of Private Equity. Haven't downloaded or read the article yet, but passing along in case you should care to...

Technology & Start-ups in the Sacramento Valley

I've been spending some time of late researching some of the organizations focused on technology and start-ups in the Sacramento Valley of late. Couple of interesting items to share:

UC-Davis Center for Entrepreneurship - Based at the University of California, Davis in a brand new facility, this center focuses on Green Technology and Food & Health (but technology stuff too!). I've chatted with a couple of people over here - very engaging and committed from what I can see - looking forward to getting involved with them in 2010.

The Sacramento Area Regional Technology Alliance (SARTA) is a tech-focused corporation that supports entrepreneurial programs, companies and technology investment throughout Butte, El Dorado, Nevada, Placer, Sacramento, Solano, Sutter, Yolo and Yuba counties. I'm planning to attend a couple of their events in the next month or so to learn more about them.

More to come on this. Now that I'm getting settled in the area, I'm excited to get more proactive helping out and contributing to the technology and start-up efforts out here. With the state government situated in Sacramento, the inherent industries (food, agriculture, energy), and a number of research and state colleges nearby, it's seems to be a natural extension of Silicon Valley to diversify the economic base locally.