Venture Capitalists See Opportunity as Valuations Normalize

Dave Hendrick

Good news for venture capitalists: It may be a great time to buy.

Participants at the Fifth Annual Darden Private Equity Conference — an event hosted by the student-led Darden Private Equity Club at the University of Virginia Darden School of Business — heard a specialized view of the investing landscape at a venture capital panel, where BlueRun Ventures General Partner Jonathan Ebinger (MBA ’93) and KEC Ventures Managing Partner Jeff Parkinson (MBA ’10) both noted ample near-term opportunity in their fields.

Ebinger, who is based in Silicon Valley, said BlueRun remains focused on making Series A investments in businesses that can be disruptive of the status quo. Admitting that sounded like an obvious goal, he said it nonetheless remained true.

“Everywhere you look, there are industries that are really sort of stuck in the past,” Ebinger said. “The first filter is whether or not this company is using real-time data to disrupt an existing industry. That really clarifies things for us.”

Parkinson, who is based in New York City, said his firm, which is broadly focused on e-commerce, retail and enterprise software, tended to source businesses a bit earlier than Blue Run, offering mostly early-stage seed-funding investments in the range of $500,000 to $1.5 million to companies and trying to be as “value-added as possible” to entrepreneurs, many of whom are accepting institutional capital for the first time.

Parkinson said his firm had tried to not “chase deals” during a time of prolonged lofty valuations, but predicted a strong buying cycle for the foreseeable future.

“I think we are going to see some of this market self-correct, and I think for the next four, five, six years, you are going to see valuations continue to stabilize,” Parkinson said. “You’re seeing that even from some of the premier publicly traded enterprise software companies.”

Ebinger agreed on the rise of a buyer’s market, in part due to the sheer number of new businesses currently in some stage of creation.

“I saw that there were 8,000 companies created in the last 12 months coming out of incubators and accelerators around the U.S.,” Ebinger said. “There are more companies being created than there are investors.”

In terms of attractive sectors, Ebinger said his firm continued to see strong opportunity in financial services. On a macro level, he predicted the “end of the app economy” in favor of what he described as “conversational commerce,” with e-commerce capabilities built into the text exchanges.

“There’s always more room for communications,” Ebinger said.

For more on the Darden Private Equity Conference, read “Private Equity’s ‘Philosopher King’ Charts Cautious Course in Uncertain World.”