The View from Winter St.

On Wednesday night I attended another Xconomy event at Willmer Hale. As I’ve posted before, the folks at Xconomy do a great job, and the events are worth the entry fee. We were treated to a fireside chat with two leaders of the local investment community – Terry McGuire and Peter Brooke (although Terry was self deprecating in correcting Bob Buderi’s introduction of the two legends: “there’s only one legend on this stage, and it’s Peter Brooke!”). I’m normally not a big fan of the “fireside chat” format, but this was the exception. Terry did a fabulous job of keeping the discussion moving on many topics of great interest to the audience. Peter was affable, relaxed, candid and engaging. He shared some stories and insights in just the right balance.

A few key takeaways for me –

I share Peter’s dismay that so much investment money is going into consumer product projects like video games and other forms of entertainment. On one hand, it’s comforting to know that we have the privilege and wherewithal to devote time and effort to fun, but it’s more evidence of what I’m always complaining about – we focus too much on potential returns than on solving the world’s problems. I know, I know. As an investor, that’s precisely what one should be focusing on. But again, I wonder if we have our priorities in order.

I was intrigued by Peter’s comments about protectionism. He seemed very willing to share our ‘secret sauce’ with others in terms of investing, but I’ll bet he would not be in favor of diminishing the strength of our intellectual property system. The SACGHS (Secretary’s Advisory Committee on Genomics, Health and Society) recently released a draft recommendation exempting healthcare providers from infringement claims on DNA-based patents, and that no such patents be awarded in the future. Having served on the rare disease sub-committee of the predecessor organization (SACGT), I was incredulous that such a recommendation could be made, and it has in fact, stirred considerable debate. (By the way, how they could single out DNA patents as distinct from other diagnostic methodologies is beyond me, and will perhaps be the topic of another blog posting.) Strong IP protection is at the core of the innovation economy (which Terry proclaimed is alive, well, and working just fine, thank you). Thus, Peter’s comments against protectionism were intriguing.

I had a chat with Terry about the related issue of no-compete agreements. Massachusetts has been criticized for its enforcement of these agreements, in sharp contrast to California, where it is virtually impossible to enforce a no-compete. The approach in California has often been cited as one of the key success factors of Silicon Valley. Without naming names, Terry indicated that there is not universal agreement among his VC industry colleagues. This will be an interesting debate.

Terry cited a few key factors on the horizon that have the potential to have a severe impact on the VC industry, including the popular debate about capital gains vs. ordinary income treatment of management fees. Peter mentioned the need for banking reform (intermingling of commercial banking and investment banking in the same organization, for example). Well, if you’re looking for me to take sides on the treatment of management fees, forget it. On the other hand, I’ve posted here my thoughts on banking, and I agree wholeheartedly with Peter, who has forgotten more about investing than I will ever hope to know. Still, it’s nice to know that he agrees with me ;-)

The next Xconomy event is November 4 on Pharma’s Bet on Boston Innovation. I’m looking forward to it!