IVCA Profile Q&A: Mark Glennon, Managing Director of Ninth Street Advisors, Recipient of the 2010 Fellows Medal

IVCA Profile Q&A: Mark Glennon, Managing Director of Ninth Street Advisors, Recipient of the 2010 Fellows Medal

November 10, 2010

The IVCA interviewed Mark Glennon in anticipation of the event.

IVCA: Congratulations on the award of the Fellows Medal. As a founding board member and treasurer of the IVCA, how important is this organization for the overall venture capital and private equity community?

Mark Glennon: The IVCA's biggest accomplishment, in my personal view, is that it has raised the profile of venture capital as a jobs creator. Venture capital is rocket fuel for jobs - “ sixty to eighty percent of VC money goes straight to payroll for high-paying jobs that teach innovative skills, and the IVCA has delivered that message. That's a message that policy makers can understand and in which the VC community should take pride.

IVCA: As an investor yourself in cutting edge dotcoms and tech companies, what do you advise regarding the analysis of what ideas will catch on in the ever-crowded internet domain?

Glennon: Trust the data, not your own instincts, and embrace information asymmetry. By that I mean look for evidence that the business model and unit economics have traction. Proceed when you get confident about that evidence but when others don't have your facts or have overlooked them. Ideally, focus on ventures that others without your data would even ridicule, but where a clever entrepreneur has been able to prove up some approach that works.

IVCA: What type of evidence works best for proving that the business model and unit economics have that traction?

Glennon: For today's Web 2.0 companies, it's all about lifetime value of a customer and customer acquisition cost. That's what most everybody focuses on, and if you can get a handle on those two numbers the rest is much easier. I could not generalize about other sectors, but actual sales data is the first thing that comes to mind as something that would apply almost across the board. I mean, is anybody really buying this and at what price?

IVCA: Since the marketplace is ever-evolving, with tech companies rewriting a lot of the rules, what has changed most significantly since you were an economics major at Northwestern University?

Glennon: What hasn't changed? Pretty much everything has changed. Sadly, one thing that hasn't changed is that economics as an academic discipline has largely failed. Most academic economists then and now have very little to show for their work, particularly as educators, and I regret that I learned little about the economy from studying economics in college. If I am smarter now, it's from things I learned outside of college economics. I wish economics were taught better, and I think the mess we are in now largely stems from ignorance about economics, which is pandemic in America.

IVCA: In your opinion, what type of basic economics can make its way into grade school and high school level education, to make it both relevant and accessible for those students?

Glennon: All types of lessons in economics could be woven into the fabric of how we teach social studies, government, current events, history and math in ways that are highly engaging and relevant. Macro issues would be particularly easy because young people are frightened about their economic future. They want to understand what happened and they will pay attention. Why not have a class discussion in a social studies or government class, for example, about free CTA rides for senior citizens, asking how much it really costs per family, what seniors benefit and why we have the policy?

In math, things as simple as the difference between a million and a billion dollars seem not to register with people when the context is public money, and that ignorance gets exploited. On Illinois pension issues, for example, I have heard both political parties talk about solutions in the hundreds of millions of dollars, even though the problem is in the hundreds of billions. Math problems about exponents, costs per family, compounding interest and lots of other things could easily be built around big, relevant economic issues like pensions that would teach not just the math but the economics as well.

IVCA: You've practiced law, you've taught law. How does the legal system and legislation work in partnership with venture capital and private equity to assure both fairness and room for funding to do its work?

Glennon: They don't. The legal system is unfair, unnecessarily complex and often irrational, and we have descended into a - œBleak House-  like Charles Dickens described in that book. The patent system is especially dysfunctional. Some sectors, like parts of cellular technology, have become such rats' nests of IP litigation that they are not investable. The jury system in Cook County is a farce - “ the average Cook County juror is unqualified to decide commercial disputes, and jurors apply law ultimately made up by political hacks.

Smart startups can work this to their benefit because the burdens of a broken legal system fall more heavily on large, conservative enterprises, and nimble startups can navigate their way through gray legal areas. For example, MCI was mostly a litigation company when it started but it won the court battles over long distance telecom, and Google's central idea of summarizing and linking copyrighted material was initially pretty audacious under copyright law.

IVCA: What changes do you see in the venture capital/private equity Industries that everyone needs to be aware of? How do you think these changes will effect the overall industry?

Glennon: Smaller rounds and capital efficiency are clearly the trend. Today, lots of startups show credible projections that can get them to break-even on one to two million. Ten years ago, much heavier funding was required and expected. This trend is good for smaller funds and angels, but makes it harder for large, big name funds to deploy their money.

IVCA: You are a mentor at Excelerate Labs. What have you learned through this mentoring that has either surprised you or gave you a better perspective on the current incubator marketplace?

Glennon: First, young people - and most of the Excelerate entrepreneurs seem to be in their twenties - “ are infinitely smarter than me and most other Baby Boomers were at that age. Their business and tech skills are really superb. Second, the generosity of senior, successful entrepreneurs who serve as mentors has been extraordinary. If you add up the dollar value of hours contributed by those folks as mentors, I am sure it would be in the hundreds of thousands. Excelerate was a huge success and there are many ways we can build on it.

IVCA: Finally, what makes you optimistic about the venture capital/private equity cli-mate in Illinois and also the overall economy?

Glennon: This horrible economy is good for startups. Great talent is here on the cheap, rents are low, incumbents are going bust and most everything is being disrupted. My formative years were in Austin, Texas in the late 1980s when they had a vicious recession because Texas' oil and banking sectors collapsed. Loop 360 in Austin was famous for empty office building, but soon became known for smart, new companies that launched there when times were tough but cheap. Austin had no choice but to embrace a new way. That realization will soon be forced on us in Illinois - “ I hope!