Seed Money Drying Up For Newest Startups

from the is-that-so-bad? dept

Well, it comes as no surprise to anyone these days that venture funding levels continue to drop. It seems like a new study comes out every other week saying exactly that. However, the latest report shows that it’s particularly difficult for early stage companies to get their first round of funding. The funding rates for such companies are at their lowest in six years. However, the actual figures do make me wonder. According to the report only 36 companies in the San Francisco area received first round funding last quarter, raising a total of $327 million. What’s surprising is that means an average of over $9 million a company. I’m assuming these numbers are probably skewed by a few companies that received a ton of funding, but it still seems like an awful lot of money for not very many companies. At the same time, I wonder if this is really a bad thing. Early stage companies often do better by not focusing on venture capitalists for their funding needs, and instead bootstrapping it or working with angel investors. This forces them (allows them to be?) much more creative, without having worry about the vultures sitting on their boards. Update: Just as I posted this story, I came across another one, saying that as many new startups are having difficulty raising cash from VCs, they’re turning to government programs instead – showing, again, that entrepreneurs don’t necessarily need VC funding to get going.

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