Wednesday, January 28, 2009

Micah Adams of Vencore Capital Talks about the Current Economy

Micah Adams of Vencore Capital Talks about the Current Economy

How is business for you?

The traditional lenders have pulled back so we’re seeing quite a bit of interest. It’s an opportune market even though we find it more challenging to lend ourselves.

How do you see the economy shaping up?

One fear within Vencore is that the economy won’t turn around till 2010 at the earliest. Once it starts to roll again, I’m also concerned about the potential inflationary consequences of the government bailout. We’re looking at new opportunities but at the same time we’re spending a great deal more time with our current portfolio companies to make sure they are taking the necessary steps to handle their business in this environment. The basis for some of our concerns comes from our institutional investor, DE Shaw, which is also forecasting a down year for 2009.

What are some warning signs?

If a company has one big customer or potential customer they’re relying on then we need to look at alternatives. It’s better if the company has several smaller customers rather than one big one. We also look for recurring revenue generation rather than one-off sales. Enterprise sales tend to be one-shot deals. If they miss that one shot then it’s game-over due to current market conditions for some startups.

What’s coming up for you?

I’m speaking on the Association for Corporate Growth panel in February. Usually, ACG members are companies that are middle market which are further along than most startups that we deal with. I’m seeing some opportunity in later stage companies as capital is quite scarce.

What’s a company to do in this environment?

From the startup perspective this is an ideal time to start a company because the costs are low and labor is plentiful. For larger companies it’s an opportunity to refocus on the core business since the envelope-pushing business is not going to happen given the pull back on budgets. It’s an opportunity to go back and re-evaluate your business.

Best regards,
Hall T.

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