For entrepreneurs seeking venture capital funding, there’s good news—and there’s bad news. The good news is that  it’s easier now than at any time in the last ten years to get relatively small amounts of seed money. The bad news is that it’s harder to obtain “A Round” or additional series funding after that.

That was the consensus of  three Boston area venture capitalists who spoke at the Cambridge Innovation Center on  Wednesday, May 2.  Moderator Ben Hron of  law firm McCarter -English, which sponsored the event, asked the VCs  how the 2008 economic downturn  has impacted the VC industry;  where things stand now,  and what they foresee for the future.

Impact of the recession
A changing industry
Jo Tango, founder and partner of Kepha Partners, which invests in early stage companies, said that for many VC firms, this is a period of innovation. “We call it VC 2.0,”  he quipped to the audience of  entrepreneurs.  The VC industry, which started in about 1980, used to be dominated by approximately 20 major firms; today, there are more smaller, more specialized VC firms, he said.

David Beisel, co-founder and partner of  NextView Ventures, a dedicated seed-stage venture capital firm focused on Internet startups, said that the downturn has “facilitated a  maturation process,” which he likened to what happened in the beer industry in the 1990s.

That is, “You had to be either one of the biggest, like Anheuser-Busch—or a microbrewery.” Mid-size companies like Genesee fell by the wayside.

Likewise,  today,  he said, “VC firms are no longer trying to be all things to all entrepreneurs; they’re taking a dedicated approach.  Recently, four or five firms raised more than $1B but mid-sized firms are struggling.”

CA Webb, Executive Director of the New England Venture Capital Association, said that considering this a time of “introspection and innovation” is “optimistic…The reality is that the industry is taking a hard look at itself. Some say that the ‘sky is falling,’ because there’s less money being invested; this means that some firms will shut down. Those that succeed will need to articulate clearly just what they are willing to offer and to whom.”

Tango pointed out that “Innovation [in the VC industry] creates a challenge for entrepreneurs because VC firms are “all over the map,” and “it’s difficult to know which one is right for [a particular startup]. It’s easier now to get seed money–but terms are often more difficult to distinguish.”

Current trends
In asking the panelists for their views on the current venture funding situation, Hron shared Q1 2012 statistics showing  a large number of deals but a drop in total funding compared with previous quarters– in indicating fewer “megadeals.”  “Should entrepreneurs should be optimistic because of the number of deals or pessimistic about the size of the deals?” he asked.

Fewer large deals
Tango responded that one reason for the decline in large deals has to do with the number of deals VCs have previously closed.  In the current economic climate, he explained, it’s difficult raise a stream of money. In a recent study of five VC Web sites, his firm found that many VCs are already sitting on the boards of 10-17 companies in which they have invested. “If you’re fundraising…if you’re already on 15 boards, you need to spend your time fund raising,” not sitting on additional boards.

Smaller investments
Beisel described what he called a longer term trend:  in some sectors, especially digital media, companies don’t need to raise as much money for initial funding as in other sectors–so at earlier stages, the venture community is reacting by not writing $5M checks but rather $1M or .5 M.

In Webb’s view, “seeding is now like the old Series A funding: there is a lot of seed money to go around but Series A is now looking like the old series C “(IE–difficult to come by).

Follow-on funding can be problematic.
Tango agreed –describing a firm that backed 20 companies with seed money but told him it will provide only 2 % of those with Series A funding.  He added that the situation is even more complicated because even at the “seed stage,”different VCs require different terms.

In fact, he recommended, “Ninety per cent of startups should be bootstrapped (funded by self, friends and family) because other investors expect that they will get their money out within a few years. “With VC funding, you’re becoming a fiduciary…taking on ‘credit card debt’ that you will need to pay back.”

In Beisel’s view, before taking any money from VCs, an entrepreneur needs to know how outsiders view the firm, the reputation of the VC firm, which partner will be best for the company, and whether the firm usually adds to series funding or “will you be one of the 98% that get dropped?”

Health care vs. other  investment
Citing a decline in financing for health care ventures in Massachusetts compared with increased financing for Internet and mobile technology, Hron asked if investors are seeking short-term gains as instead of  taking the long view required for biotechnology and pharma payback.

Webb responded that one reason for the slowdown in health care company funding is that the US Food and Drug Administration is taking longer to approve products so the horizons for investors are longer. As a result, investors are shifting toward healthcare technology, “big data” and products that will bring a quicker return.

In Beisel’s view, “Over the last ten years the returns for health care investment have not been that great; health care is now even more challenging. But VCs won’t shift to other spaces; the money just won’t get raised.”

Long -term trends
According to Hron, the data suggest a rise in VC investing in Washington State, Texas, and Illinois. “Are we seeing the rise of a national VC community or is this a blip?” he asked. “And will VC investors look at companies nationwide?”

Tango and Beisel agreed that large investors are looking at companies nationally and internationally–especially in the Internet space.

They also agreed that it’s unlikely that VCs will spring up in Kansas or in “third-tier American cities,” as Beisel; put it.  In Tango’s view, “they will still be centered in Boston, NY and California.”  Beisel pointed out that that VC firms are on the rise in nations like Argentina and Eastern Europe.  According to Webb, “Capital clusters around academic institutions: You won’t see much density elsewhere.”

Crowd sourcing
Regarding the  recent passage of legislation allowing corporate fundraising through crowd sourcing, panelists expressed concerns about possibilities for fraud and entry of organized crime; and also  that unsophisticated investors might not know that seasoned professionals expect to lose money on most  investments—in hopes that a few will have big payoffs.

Asked by Hron if VCs will look askance at companies raising initial funding through crowd sourcing, Beisel said  that it’s fine to get seed money wherever you can but a “real company” will need institutional investors in order to grow large.

In Tango’s view, “Your source of funding depends on what you want to accomplish: Do you just want to get money…or are you looking for series of VC rounds, advice and support?”

PANELIST BIOs

David Beisel – David is Co-Founder and Partner of NextView Ventures, a dedicated seed-stage venture capital firm focused on investments in internet startups.  Previously he was an investor at both Venrock and Masthead Venture Partners, where he served on the boards of BlogHer and Gazelle.  Prior to joining Masthead, he co-founded Sombasa Media, an e-mail marketing company which was successfully acquired by About.com and subsequently became a division of Primedia (NYSE: PRM), where he served as Vice President of Marketing.  He is also the founder of the Web Innovators Group, a quarterly entrepreneur-focused event which attracts nearly a thousand attendees.  David blogs atwww.GenuineVC.com.

Jo Tango – Jo is Founder and Partner of Kepha Partners, an early-stage venture capital firm.   Previously, Jo spent was a General Partner at Highland Capital Partners, where he worked for nearly nine year, and before that he spent five years with Bain & Company.  Jo has invested in the e-commerce, search engine, Internet ad network, wireless, supply chain software, storage, database, security, on-line payments and data center virtualization spaces.  He has been a founding or first institutional investor in Azuki Systems, Bit9, ExaGrid, StreamBase Systems, Vertica Systems (acquired by Hewlett-Packard), Virtual Iron (acquired by Oracle) and VoltDB, getting involved nearly always at the company inception phase. Other investments include Ask Jeeves (Nasdaq: ASKJ), Digital Market (acquired by Agile Software), and NextCard (Nasdaq: NXCD).

C.A. Webb – C.A. became the Executive Director of the New England Venture Capital Association in January 2012.  Members of the NEVCA include more than 700 venture capital professionals from over 100 firms that collectively manage more than $50 billion in capital.  C.A. has spent her career in entrepreneurial roles with mission driven, early stage and high growth organizations. Her work has focused on breakthrough business models in a diverse array of industries including retail and packaged goods (Whole Foods Market), consumer internet technology (Care.com), sustainability (Preserve Products), historic preservation (Trinity Boston Foundation), public education (Boston Collegiate Charter School), and publishing (Fast Company magazine

It’s not that often that a nationally-known journalists public admit to suffering from  post traumatic stress disorder (PTSD), but last week at Harvard’s Nieman Foundation, Today Show Co-Anchor Ann Curry  did exactly that.

In delivering the Joe Alex Morris Jr. Memorial Lecture on foreign report,  Curry described both the importance and trauma of foreign reporting–saying that while she and her crew sometimes wonder if  their coverage of wars and international disasters make a difference, she believes that by calling attention to wrongdoing and suffering,  journalists do help make the world  more empathic place.

In the lecture, Curry, who has made 72 reporting trips to 48 countries since 2000,  told an audience of journalists that that  any correspondent covering such areas who says s/he  doesn’t have PTSD} ” is either lying or doesn’t realize it.”   For journalists, the disorder is often first evidenced “when you don’t care,” any more.  Signs  and symptoms include emotional rigidness, avoidance, and an uncharacteristic lack of empathy, Curry said.

Curry and her team members “talk things out” when they’re experiencing  those signs and some undergo counseling, she said.   As a foreign reporter, “You need to be an emotional athlete to deal with trauma, with emotions…to see past the differences in languages, to look at people as if they’re your own mother, brother, sister, your own child. When you don’t do that, you’re not effective as a reporter, you appear elitistist…It’s  crucial that you care, that you try to understand the experience and point of view of the people you are writing about, she said.  ” Because if you don’t care, your viewers won’t care, either.

“When my team gathers, we often ask ourselves, why are we doing  this,” Curry said.  ”They can’t pay you enough to take the physical and emotional risk this requires.”  Not only are crews frequently threatened with violence, but “you’re leaving your family; there’s the maddening reality that it’s a battle [with news organization]  to get there. But there’s the sense of mission, the hope that some good will come of what you do. It’s an act of faith in the future.”

Curry said that she has a mission “to report on stories no one cares about”  sand asked, “If more reporters had paid attention to what the Nazis were doing in 1941, would so many people have died?”

In answer to a question posed for former Nieman Curator Robert Giles, Curry  said that in the current economic downturn, the US audience is less interested in foreign coverage than it had previously been–and that with cutbacks in news organizations, it’s more difficult now to convince news directors to send teams abroad.  Where once NBC had crews on the ground in many places,  she said, “now we travel  abroad from here.” But despite the difficulties, she will continue to cover difficult stories–in part because, if she and others don’t, aid organizations will not receive funding donations from the American public.

Curry brought tears to my eyes when she described  a 16-year-old Congolese girl who saw her parents killed, was chained to a tree,  raped, and when she couldn’t walk, was left for dead. Men from her village carried  her to a hospital. She was pregnant, and the baby died.   Two years later, in  2008,  when Curry interviewed her in an operating room and touched her hand; the young girl said she didn’t want revenge. “Instead she said ‘All I want is to rise out of this bed and thank the people who saved me and cared for me. I want to praise God, and I want to feel a mother’s love again.’

“Now, the cause of women in the Congo has been taken up by people in the US; there are  4K races to protect people from the violence,” Curry said. “As a reporter, you want to feel that some good has become of what you’ve done.”

But, she pointed out, wars and violence do not end.

In another village, in the Sudan, Curry said, men strafed a village, then lit arrows on fire and shot them at thatched roofs. When people ran out of their burning homes, the men shot at them,  shouting epithets.  Curry said she interviewed one woman– a mother– and her children. “She was just one of tens of thousands…

“After five trips to Sudan, ” she added, “I do sometimes wonder whether any of this works makes that much difference to people back on the ground. Sudan is the new Darfur, she said. People are living and dying in displaced person’s camps…”

Rather than become discouraged, Curry said,  ”We need to step back and look at the value of reporting with a wide view, through the scope of human history.  And you can’t help but realize that human empathy is growing.

“Where once, rape was a fact of war,  rape is now an international war crime.  The idea that it is wrong is wildfire. Information, truth,  lit this match, igniting wildfires across the world.

“I have no doubt that we’re evolving into a world of greater empathy.  If you can work through the PTSD, if you can raise your sword and report these stories,  you allow truth between nations and I encourage you to lift your sword.”

After the talk, the ever-versatile and inspiring Curry, who had donated her $1000 honorarium to Doctors Without Borders in Somalia, left –wearing the highest pair of heels I’ve ever seen–for a flight to Indianapolis, to cover the Superbowl.

Anita M. Harris

Anita Harris, a former national journalist, is president of the Harris Communications Group, a strategic communications firm in Cambridge, MA. \

The Morris Lecture honors Los Angeles Times foreign correspondent Joe Alex Morris, Jr., who covered the Middle East for 25 years before he was killed during the Iranian Revolution in 1979. Two years later his family, friends and colleagues founded the annual lecture by an American foreign correspondent or commentator.

 Local AFL-CIO Insulators, Tin Kinockers and Pipefitters from Cambridge Local  use a large inflatable rat to make clear how they feel about the use of non-union, non-Cambridge workers by PH Mechanical for work currently underway at 302 Third Street in Kendall Square.  “They don’t conform to community standards; they are unlicensed, and they have no apprentice program,” said one union member who declined to give his name. He said he expects that Cambridge City Council will be discussing the issue at its next meeting, possibly this evening.

Photos C. Anita M. HarrisInsulators, Tin Knocker, & Pipefitters Local AFL-CIO unions protest use of non-union workers at 302 3rd St.

—Anita M. Harris

Anita Harris is a writer in Cambridge, MA.  New Cambridge Observer is a publication of the Harris Communications Group,  a marketing and public relations firm based in Kendall Square, Cambridge.