Friday, June 08, 2007

Reid Dennis

This week IBF held the 18th Venture Capital Investing Conference.

Reid Dennis, the founder of IVP, received a lifetime achievement award. His acceptance speech proved both educational and inspirational.

A few highlights follow:
  • Reid began investing in Silicon Valley start-ups in 1952, 55 years ago!
  • His first job out of the GSB paid $425 per month
  • In 1952, there were NO public electronic companies in Silicon Valley
    • HP went public in 1957 and sold 10% of the company at the IPO for $4.8m dollars
  • The first 25 electronics companies required total capital of $300k each and private individuals formed the basis of the early syndicates
  • Reid founded IVA in 1974 and IVP in 1980
  • Reid's firms, IVA and IVP, spawned many of today's top firms
    • Redpoint spun out of IVP
    • TVI spun out of IVA
    • August and Benchmark spun out of TVI
  • Reid played a key role in two pivotal moments in private equity history
    • the 1978 reduction in the capital gains tax from 49.5% to 28%
    • the 1978 change in ERISA laws that allowed pension funds to invest retirement funds in alternative assets
    • in 1975, prior to the relaxation of ERISA laws, the entire VC industry raised $10m
  • He spoke of the need to work with Washington to eliminate tax and regulatory disincentives that limit the free flow of capital to innovation and entrepreneurs
  • With the "carry tax" under discussion in Congress, he warned the audience that the golden goose is at risk if today's industry leaders do not forcefully fight to protect the industry
Bill Gates' commencement speech yesterday at Harvard spoke of the challenge in understanding complexity. He quoted George Marshall who told Harvard graduates,

"I think one difficulty is that the problem is one of such enormous complexity that the very mass of facts presented to the public by press and radio make it exceedingly difficult for the man in the street to reach a clear appraisement of the situation. It is virtually impossible at this distance to grasp at all the real significance of the situation."

I would argue that the impact of cuts in capital gains taxes, ERISA safeguards, etc on the health and vitality of the economy are similarly complex. It is hard to appreciate the link between capital gains tax policy, innovation's access to capital, and regulation on an economy's vitality. Yesterday's speeches by our industry leaders, however, warned of the peril of missing the connections and causality between policy and innovation.

Other speakers included Ed Glassmeyer, the founder of Oak Investment Partners. While he spoke eloquently on the history of Oak and the state of the industry, one story really stood out for me. It took him 4.5 years to raise Oak I.

The chance to see Dick Kramlich, Ed Glassmeyer, Gary Morgenthaler, Lip Bu Tan, Dixon Doll, Reid Dennis, etc recount history, discuss the state of the industry, and prognosticate on the future proved really inspiring.


  1. The Economist touches on the topic of private equity and tax breaks this week @

  2. Full text of Gates speech available on many sites, including: