Bryan Pearce, Ernst & Young's top U.S. venture capital practice leader, told VNC yesterday his firm is keeping an eye on the "flow of capital" in Nashville.
Pearce (above at left) explained that while it's important there be venture-capital firms based in Nashville, capital imported here from elsewhere also catches the eyes of industry observers.
Pearce, whose bailiwick includes the Americas and Israel – because of the two regions' close ties – noted also that Nashville's healthcare cluster "across the board" is an obvious focal-point for him and his colleagues, particularly those in E&Y's Atlanta office, where the VC lead is Carrie Hall.
Alluding to recent venture-capital reports from both E&Y and Dow Jones, Pearce said there's reason for encouragement in the recently reported uptick in seed and early-stage funding, and portfolio-company executives should be heartened by follow-on rounds from earlier investors – even while knowing the VCs would typically prefer a profitable exit from many of their holdings.
Pearce doesn't really see VCs being quicker than usual to pull the plug on portfolio companies. Rather, he said, he believes "good venture funds are doing everything they can to counsel their companies on how you extend the runway," cut costs, find other financing, etc. He added that current pressures may, however, result in VCs attempting to combine companies where that is feasible, to cut overhead.
Meanwhile, Pearce's "main advice," while not novel, bears repeating for founder-entrepreneurs who are hanging on for dear life: Pearced urged owners to "...really stay focused on the customer in this environment and what is it that they want to buy today, and make sure that your feature set...is as laser-focused as possible" on those things a "constrained consumer" is determined to buy.
Companies that do that, said Pearce, will gain "traction on the revenue side" and get to cashflow and profitability more quickly.
All that is consistent with maxims contained in a trove of E&Y reports, including, e.g., the admonition to "never waste a good crisis."
Though there is some cause for optimism, the reality is DJ found VC-backed liquidity at roughly the 2003 level, and M&A activity at its lowest level since 1999. During the reported period, DJ said IPOs and M&As netted $2.8 billion, down 57 percent from $6.48 billion.
In addition, DJ reported that software seemed to take ascendancy over life sciences. For details, please click here. ♦