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Venture Investor has High Hopes Despite Economy

At times, Tom Huseby almost sounded like he was giving a stump speech.

By Nancy Gohring

October 21, 2008 — IDG News Service —

At times, Tom Huseby almost sounded like he was giving a stump speech.

"There's one thing that hasn't stopped at all and that's the great American startup machine. It will continue to produce. That's why this country is great," said Huseby, managing partner at SeaPoint Ventures, addressing a small group of people, many involved with wireless startups, at the Mobile Northwest conference in Seattle on Monday.

Huseby is a bit of a legend in Seattle. His fund has fueled startups in the area and beyond, particularly in wireless. He's revered for his keen insight into technology trends. Plus, he's funny.

"It turns out that not getting your money back is so much better than knowing you lost it. Isn't it? It's kinda nice to hope you might get your money back than to say, 'God, it's gone'," he said. That's his reasoning for why venture capital is actually now considered a safe bet. "Who would have thought that early-stage venture capital looked like one of the safe investments," he said. "A year ago people would have laughed. Who would have thought it'd be better than mortgages?"

Huseby offered his optimism about how the economic downturn might only minimally affect the startup engine in the U.S. and his opinions about what he continues to look for particularly in new mobile companies.

The downturn is unlikely to have a major affect on venture capital because the venture capital machine doesn't rely on debt, he said. "If you're an early stage venture play, you don't really rely on debt markets. You rely on equity. That equity comes from people who don't borrow to give it to you. No one borrows money to create a venture fund," he said.

Venture investors are also typically prepared for a long return on their investment. "Everyone who raises money from us says, 'in three years we'll be cash flow positive.' We nod and say, 'that's nice'," he said. But in reality, he doesn't usually expect a return before eight or so years, he said.

"There's no reason to panic despite the Sequoia panic notes," he said. He was referring to reports of a meeting that Sequoia Capital reportedly called recently to warn its portfolio company of dire times to come because of the economic downturn.

Still, Huseby acknowledged that there is certainly an economic crisis. "We will have high unemployment rates and people are really going to be suffering. We need to help people who aren't as well off as we are. Those are economic realities," he said.

 

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