Theresia Gouw Ranzetta, Managing Partner, Accel Partners

(This is not a legal transcript. Bloomberg LP cannot guarantee its accuracy.)

THERESIA GOUW RANZETTA, MANAGING PARTNER, ACCEL PARTNERS, IS INTERVIEWED AT BLOOMBERG TV

JUNE 22, 2011

SPEAKERS: DEIRDRE BOLTON, BLOOMBERG NEWS ANCHOR

THERESIA GOUW RANZETTA, MANAGING PARTNER, ACCEL PARTNERS

07:33

DEIRDRE BOLTON, BLOOMBERG NEWS ANCHOR: Silicon Valley is heading east. Venture capital firm, Accel Partners, is no exception. Accel's an early investor in Facebook and Groupon. Theresia Gouw Ranzetta is spearheading Accel's push into New York. She's joining me right here in the newsroom.

Theresia, welcome to "Inside Track." Why New York City? Why now?

THERESIA GOUW RANZETTA, MANAGING PARTNER, ACCEL PARTNERS: Thanks for having me, Deirdre. So you know, frankly, when we looked around at it late last year, January of this year when we officially announced the opening of our office, we were frankly surprised that we were the first Silicon Valley firm to open an office here.

The amount of activity in...

BOLTON: Although some would say not and Matrix would say they got here first and a few others.

RANZETTA: So they've been here. But Matrix is really a Boston firm. So of the big Silicon Valley firms, so those of us out in Palo Alto and Menlo Park on Sand Hill (ph), we're surprised that there hadn't been more.

We've just been looking at the activity here, both in terms of our own portfolio. We have, you know, over a dozen, I think, it's getting close to 20 different private companies here in the metro New York area.

And some of them we've been in for quite some time, going back to diapers.com (ph), which of course, is now part of Amazon to SC (ph) and LearnVest and Glam and many others.

BOLTON: So what's different then about what's going on in New York right now than maybe even two or three years ago? What justifies your presence here?

RANZETTA: So I think that there's been a tremendous increase in not only the quantity but the quality of startup activity here in New York, particularly in several key internet sectors.

Certainly, there's always been a lot of strong advertising in digital media but now, e-commerce, particularly social commerce and also mobile applications. And I think the other big change is a combination of two factors around tech itself.

So one is, you know, the emergence of cloud technologies and the ability to sort of build the front end of the user experience on top of the back end, maybe Amazon EC2S3 (ph), really enables New York entrepreneurs who are closer to the customer, maybe come from a retail background, build the next generation social commerce experience to build on top of that back end infrastructure.

And the second really critical point is, you know, as the dollar showed last year with New York here (ph) bringing (ph) a lot of additional (ph) sectors that were thought to be more tech-heavy like Boston up north.

The tech talent is really starting to come to New York. I know several of our companies have attracted people from, you know, MIT grads, from Boston. One of my companies is pulling somebody from a very large tech company on the West Coast.

So it's really coming here to New York.

BOLTON: So Theresia, one thing I'm curious about for the VC community here is, you know, if you're going to start a business, you don't as much money as you used to. And maybe an angel investor is all you need.

What is the role for VC? How are you dealing with that challenge?

RANZETTA: You know, we partner a lot with Angel investment firms. So I would say that last year, Accel, across the country, and I think almost half of them were here in New York.

We did actually 17 seed investments alongside Angel groups, the smallest one being less than a hundred thousand dollars. So we embrace that trend. We think that a lot of consumer internet companies can get started with less money as I was saying before about the cloud technology.

So I think the opportunity for venture firms is to be continue to be involved as early as possible, to be partner with...

BOLTON: Even if it means partnering with the angels.

RANZETTA: Absolutely.

BOLTON: All right, hold that thought. We're going to take a quick break. We're going to have more with VC maven, I guess we can call you, right, Theresia Gouw Ranzetta coming right back.

07:37

(BREAK)

07:40

BOLTON: As promised, we are back right now with Theresia Gouw Ranzetta. She is spearheading Accel's push into New York. This is a venture capital firm.

And Theresia, before we took this quick break, we were talking about the fact that you are partnering with Angel investors, which may actually come as a surprise, right, to some people who are in the industry because sometimes, venture capitalists and angel investors are seen as opposing, competing forces.

Has the angel investment community been welcoming to you?

RANZETTA: You know, actually, the angel investment community, in particular, in New York, has been very welcoming to Accel and any of the other visitor (ph) here, because we really play a symbiotic role.

The angels get there at the very beginning, maybe before there's even a product and work with the entrepreneurs at that point. But really, VCs will invest a early as that. But we tend to be with our companies five years to 10 years.

So all the way through either a public offering or an acquisition.

BOLTON: Does it assure you somehow that the IPO market is looking better and better because that's been a problem for VC in the past few years, that there's really been no place to exit.

RANZETTA: Yes, no, it certainly has been a very good time. We've been fortunate in the last four quarters. Accel has had seven IPO offerings. And we have four more in registration now. I can't think of anything close to distance, you know, 98, 99.

BOLTON: And you don't think there's a bubble?

RANZETTA: I think there are pricing bubbles in certain sectors. But I think that the desire by public market investors to tap into the tremendous growth, in particular, that social media and mobile companies represent is real.

BOLTON: Are there any bubbles that you can point to? I heard you say, you know, you think there's a few. Is it about a certain business model or is it company-specific?

RANZETTA: I think it's more company specific and really what I'm speaking to, it's more pricing-oriented. So the difference is these companies really are generating significant revenues - several hundred millions, the ones that are going public.

And most of them are either profitable or cash flow positive, very different than '99. But bubble to me, since I look at the price, is really relating more to the price. The PE or PR is really pretty quite high right now.

BOLTON: So you still have to be looking at value, what this company can actually earn and not just in the next two years but maybe five or 10 years out.

RANZETTA: Yes, I mean, I think right now, some of these companies are getting outside (ph) rewards for the growth because they're growing so much faster than the public comps. But I also think that it's flowing back down to serve business models even at the early stage.

BOLTON: Theresia, before we let you go, I want to talk about one hot area. You have Webroots, Imperva, Trustee (ph) - all of these companies are involved in Web and data security. It seems like this field is just going to explode over the next few years.

I mean, we've heard of breaches at such large companies as Sony, as Citi, the IMF was hacked. How much is this field in your view going to grow?

RANZETTA: I think that there, unfortunately, is going to continue to be a lot of growth because as more and more valuable financial information, company information and country security information is all on line, the more valuable the information, the more the bad guys are going to spend on getting to it.

And that means that the good guys have to invest in third party companies to help them be secure.

BOLTON: So you feel like the growth is exponential?

RANZETTA: Unfortunately, I think we can count on bad guys trying to get at your money. So I think the growth is exponential.

BOLTON: All right, sounds like if you want to start a business, look to Web security. Theresia, thanks very much for the time. Theresia Gouw Ranzetta joining us there. She is a Managing Partner at Accel Partners. This is a VC firm that has recently come east right here to New York City.

07:43

***END OF TRANSCRIPT***

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