Why Venture Capitalists Aren't Investing
from the are-they-or-aren't-they? dept
It’s funny that over the past few months you hear completely contradictory stories about whether or not venture capitalists are actually investing in this market. What my venture capitalist friends have told me is that publicly they say “of course we’re investing – we’re investing like crazy”, when the reality is that they haven’t come across a startup they would touch with any amount of money. Businessweek has an article explaining why no one is investing even though many factors say now is the right time. VCs have more money than ever, there’s less competition in various markets (and for deals), it’s much easier to hire highly skilled people (though, I imagine many of those people are a bit gun shy on venture backed startups). The problems are that VCs see that the public markets aren’t an exit strategy right now, acquisitions are down, and it’s unclear when, where and how corporate markets will ever get around to spending on technology again. These things scare the VCs into making very few deals. Seems like a silly move to me, as now would probably be a good time to place a few bets on the cheap side.
Comments on “Why Venture Capitalists Aren't Investing”
No Subject Given
Mike: Most of the financings being done right now are previous investors keeping their favorite companies afloat. So don’t be deceived when you see big rounds being done – chances are that they have attracted little or no new investors. Even though Sandhill has a lot of cash on the sidelines right now, many VCs are under a lot of pressure by their investors not to jump the gun. I believe the thinking is that it is better to be a little late than too early. The catalyst for a re-surgence in private equity financings will be when we see some sustainable liquidity trends – i.e. improved IPO conditions and a pickup in M&A. Right now, everyone is praying that it is sometime in 2002. I’m not holding my breath.
New VC Deals
One stealth truth is that SandHill IS making new investments in new companies. These investments are small and unannounced, often unreported to the venture capital data companies (venture expert, venture one, venture wire). There aren’t a lot but it is happening. Technology companies such as semiconductors. Of course there is bioinformatics and biotechnology too.