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Tuesday, February 22, 2005

Howard Anderson : No Opportunity For Good Investments In Software!!

Howard Anderson, is the well known technology expert and founder of the Yankee Group, a respected Boston forecasting firm, and Battery Ventures, the Wellesley venture capital partnership that backed Akamai Technologies and Nextel. These days, he is the managing director of YankeeTek Ventures, a Cambridge firm that makes early investments in start-up companies from a $60 million fund, Anderson has decided to opt out of raising a second fund for Yankee Tek Ventures. He acknowledges that the fund-raising climate for venture capital firms isn't great,but says his decision not to raise a new YankeeTek fund is "more about there being no good investments" in software and networking, two areas he has long specialized in. Anderson's bearish on the prospects for RFID and nanotech start-ups, and while he's optimistic about life sciences, but says that's an area where he has limited insight.

There may be a little more than beliefs governing the decision:
- In 1999, Anderson collected $60 million from several other venture capital firms, including Battery, Advent International, and Bain Capital, as well as a group of big tech companies like Novell, 3Com, and Nortel Networks. His objective was to invest in promising New England companies that made software, chips, and networking equipment.YankeeTek's track record hasn't been spectacular. Several early investments disappeared without a trace, like Lydstrom Inc., which was developing a home server for digital music, and a company called Global Electronic Markets. Anderson backed three companies started by Ric Fulop, a Babson College dropout with a powerful entrepreneurial drive. (Only one of Fulop's companies, Watertown-based A123 Systems, which is developing a new kind of battery, is still alive.)Another group of YankeeTek companies were sold off for undisclosed sums. The only two deals with dollar figures attached don't sound too sweet. One was Momentix, a start-up that made software that helped run trade shows. After YankeeTek and two other firms had invested $3.5 million, the company was sold for $100,000. AltaWorks of New Hampshire sucked in $35 million from firms including Prism Venture Partners and YankeeTek; it was sold for $3.5 million in October.YankeeTek's top prospect is Egenera, a Marlboro manufacturer of modular ''blade" servers that filed to go public in June but hasn't yet made its debut. It's one thing to be brilliant and clairvoyant, its another thing to be consistently successful - but there is nothing to be criticised here- after all enteprising attitude and the guts to dare drives the venture capial industry. I do not agree with the view that funding options are narrow in the software field - though challenging, opportunities continue to exist - in web services, grid computing, utility computing, RFID,Nanotechnology, Embedded Systems, Mobile applications etc..

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Sadagopan's Weblog on Emerging Technologies, Trends,Thoughts, Ideas & Cyberworld
"All views expressed are my personal views are not related in any way to my employer"