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Polaris' Terry McGuire on Changes Ahead for the Venture Capital Industry

Posted by Scott Kirsner  July 20, 2009 07:45 AM

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As I started to develop yesterday's column on changes in the local venture capital scene a month or so ago (some columns stay in gestation for a while), I chatted with Terry McGuire, co-founder of Polaris Venture Partners in Waltham; this was in June, shortly after McGuire had been elected chairman of the National Venture Capital Association, the Washington lobbying group for the VC industry.

We talked about the shrinkage that the industry is currently experiencing… whether firms that have been having trouble raising new money will simply vanish, or try again… and possible changes at Polaris.

On a shake-out in the VC industry: “People expect that the industry will have a tendency to get smaller; [NVCA president Mark] Heesen makes that statement regularly. I think Boston will see its proportional share of any industry changes. I don’t think we’ll be immune, or suffer more dramatically."

On firms trying to raise new funds right now: “Firms will look at their strategies. They’ll figure out what works, what doesn’t. If certain firms need liquidity events to prove their strategy works, they’re going to have to wait for their liquidity events.” (After we spoke, LogMeIn, a Polaris investment, went public; it was the fourth venture-backed start-up to get out in 2009.)

McGuire said, though that it is “a little premature to say the whole world has changed [as far as raising new funds goes.] Guys who’ve gone to the market may have asked the question at the wrong time.”

On whether Polaris, in future funds, might focus more on life sciences and less on tech (I’d heard a few vague rumors to that effect): “Our strategy is a diversified strategy. In life sciences, there’s no better place than our neighborhood to invest. For us, most digital media investments are in New York and California. Then you have [Polaris partner] Dave Barrett [looking at] enterprise and cloud [investments, which] are mostly around here. Blending life science and tech has worked for us. Every day, I’m struck that diversity is a wonderful strategy. If it ain’t broke, don’t fix it.”

On whether Polaris might pull back from the cleantech space, considered by some to be over-hyped and over-invested (Polaris also had invested in GreenFuel Technologies, a company turning algae into biofuels that ceased operations in May): Polaris “will continue to invest in cleantech and energy. The cleantech space is on one hand, enormously exciting, and at the same time, the business models are still in the development stage –- unlike biotech, where we kind of know the way the world works.” With cleantech, the ways companies forge partnerships, and the amount of capital they require to get to exit is still a bit of an unknown. “And then,” McGuire said, “you have government intervention trying to stimulate it.”

On whether there were any lessons the firm had learned from GreenFuel, an MIT spin-out: “When we go to bat, and we don’t bat a thousand, and we don’t expect to bat a thousand. …I think cleantech will suffer the same fate as any other sector: some things will work, and some things won’t.”

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1 comments so far...
  1. Misleading analogy, re:GreenFuel
    It's OK to bat below 1.000, but you at least try to swing at a ball.
    GreenFuel's business model contradicted the laws of thermodynamics, they swung at mere hot air, there was no ball there.

    Posted by Krassen Dimitrov July 21, 09 08:30 AM
 

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Scott Kirsner was part of the team that launched Boston.com in 1995, and has been writing a column for the Globe since 2000. His work has also appeared in Wired, Fast Company, The New York Times, BusinessWeek, Newsweek, and Variety. Scott is also the author of the books "Fans, Friends & Followers" and "Inventing the Movies," was the editor of "The Convergence Guide: Life Sciences in New England," and was a contributor to "The Good City: Writers Explore 21st Century Boston." Scott also helps organize several local events on entrepreneurship, including the Nantucket Conference and Future Forward. Here's some background on how Scott decides what to cover, and how to pitch him a story idea.

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