Invest for the long term.
That's not just the mantra being pushed by personal finance experts it's the approach being taken by local venture capitalists, who are calmly staying the course.
In fact, they remain relatively bullish about their financial futures.
"Venture capital is more of a long-term play," said Jim Liao, general partner at DynaFund Ventures, a $60 million Torrance-based fund that invests primarily in technology and Internet start-ups. "Short-term fluctuations do not bother us."
Added Brad Jones, general partner with Brentwood Venture Capital in West L.A.: "We don't see the flow of opportunities fluctuating with the market. It doesn't change our strategy at all."
Far from it. Rather than retreating, Jones is rushing forward. His firm has received $600 million in commitments for its latest fund, far more than the company can properly invest. As a result, Jones plans to actually accept only $300 million of those commitments. He intends to plow as much as 40 percent of the fund into Southern California companies.
"We're seeing a big increase in the number of opportunities here," Jones said.
Other investors apparently agree. After years of relative drought, venture capital has been streaming into the region in recent months. For the first half of 1998, $547 million was invested in Southern California companies, up from $411 million for the like period in 1997 an increase of 33 percent, according to PricewaterhouseCoopers. Los Angeles companies received about $200 million in venture capital investment during the period, almost double the amount in the like period last year.
Nationwide, a record $6.9 billion of venture capital was invested in the first half of 1998, compared with $5.6 billion for the like period a year ago. The average size of those deals climbed from $4.4 million to $4.9 million over the like period.
Massoud Entekhabi, a partner in PricewaterhouseCoopers' global technology group, said a period of prolonged market volatility or even an economic slowdown would do little to affect that flow.
"The bottom line is, there is more money available for venture capital investments than ever," said Entekhabi. "There is a tremendous amount of capital looking for the right kind of deal."
Why do venture capitalists remain so bullish? A lot of it has to do with the rhythms of their investments. A venture investment made today is not expected to post any significant returns for at least three to five years, at which time the company is mature enough to stage a so-called "liquidity event" that is, a public stock offering, merger or outright sale, which generates cash for investors.
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