Friday, August 1, 2008

How We See It

Navigator's venture exit is not an industry-wide trend

This week’s news that Navigator Technology Ventures, the venture arm of storied R&D hothouse Draper Lab, will no longer be investing may be construed as the latest in a string of hard-luck stories in New England technology circles.

After all, it follows last week’s news that New England VC deals dropped in the second quarter at a much steeper rate than the national slide. Add to that the IPO window that was sealed shut until GT Solar Inc.’s recent public offering (that’s right, not a single IPO had closed by midyear, the first time in five years  that happened). You would be forgiven if you assumed Navigator’s woes represent the other shoe dropping.

But we’re not ready to make that call yet. Corporate venture, so far, has continued to be strong in the tech sector, particularly in the life sciences, excluding one or two outliers, and despite a difficult overall economy. The IPO window has been a problem for investors, but Navigator’s portfolio wasn’t likely to offer up an IPO contender anyway. The fact is, Navigator was stung by the bugs that have plagued many a doomed business: imprecise predictions and faulty assumptions. Built on the premise that it would benefit from Draper’s cutting-edge research, Navigator’s portfolio contained few Draper-born technologies. And while its plan called for investments to gain liquidity in three to five years, the reality was seven to nine.

So, perhaps Navigator’s end represents the first toll of the corporate-venture death knell, which rings each time an economic recession rolls around. Or perhaps it’s merely an example of one fund that couldn’t steer its own course.