"There's never been a better time to start a company," First Round Capital LLC partner Chris Fralic told a Drexel University hall full of business professors Friday. From my column in the Sunday Inquirer here. More:
Fralic, who holds degrees from Villanova and St. Joseph's, built a 25-year computer career into a partner's role at First Round, one of the busiest U.S. venture capital firms, with offices in San Francisco, New York, and West Conshohocken.
He knows the v.c. business isn't what it was in the high-profit 1980s and '90s. "It hasn't even returned investors' money in the last 10 years," he told the crowd, smiling. "It's a failing asset class."
Until, suddenly, it isn't: "LinkedIn changes everything," Fralic said, citing the high-priced debut of the business-oriented social-networking and job-recruitment site last week. "It's like Netscape in 1995," he said of the online service whose pricey IPO sparked mass investment in Internet, software, and wireless companies.
LinkedIn made just $2 million in profit, on sales of $94 million, last quarter. But the New York company has grown rapidly, and the stock is worth nearly $10 billion, boosting valuations for Facebook, Twitter, Groupon and other still-private social-networking sites.
It costs less to start new tech companies than ever, Fralic says, citing the proliferation of "completely mobile" new cloud-computing, iPhone-application, and social-media businesses that require brains and long hours, not sprawling warehouses or lines of credit.
He cited the example of Nat S. Turner and three other First Round-backed Penn students, who founded Web ad-sales site Invite Media in their dorm rooms during the recession, and sold it to Google last year for more than $70 million.