Thursday, October 1, 2009
The Great VC Ice Age Is Thawing (for Now)
I would argue that the shut-down of September 2008 was equally severe yet there are signs that this “VC Ice Age” has begun to thaw.
I would argue that the shut-down of September 2008 was equally severe yet there are signs that this “VC Ice Age” has begun to thaw.
Many are speculating that the year two thousand and nine represents a fundamental turning point for the venture capital industry. Some are arguing that the industry is in dire straits after years of poor performance. Others have argued that the math simply does not work for the industry’s current size.
SplashCast Corp., which lets people watch television shows within social networking sites, has been unable to raise new funding and has decided to shut down.
David Hornik–a partner at August Capital Management LLC, which boasts raising the year’s biggest venture capital fund with its $650 million balanced-stage fund–weighs in on the challenges facing the VC industry, including what Union Square Ventures co-founder Fred Wilson has called “The Venture Capital Math Problem.”
The big news out this week in the venture capital market is the launch of Andreessen Horowitz, a new $300 million venture capital fund co-founded by Marc Andreeseen, a tech visionary who founded Netscape Communications, the startup that triggered the Internet tsunami. Raising $300 million for a first time fund is an incredible achievement in today’s depressed capital-starved economy. How did Andreessen and his long-time business partner and co-investor Ben Horowitz pull it off?
The competitive edge of the United States economy has eroded sharply over the last decade, according to a new study by a nonpartisan research group. The report by the Information Technology and Innovation Foundation found that the United States ranked sixth among 40 countries and regions, based on 16 indicators of innovation and competitiveness.
The numbers are startling; one technology IPO last quarter, only six in 2008. Is innovation dead? Did Google/Microsoft/Cisco consume all the promising start-ups? Did Sarbanes-Oxley render IPOs too hard and costly? Yes, if you believe columnist, conference and collective wisdom. They’re wrong.
One of the differences between big companies and start-ups is that big companies tend to have developed procedures to protect themselves against mistakes. A start-up walks like a toddler, bashing into things and falling over all the time. A big company is more deliberate.
These days, the more you talk to folks about Silicon Valley’s venture capital industry, the more negative the message is becoming. And for good reason. There’s no more patience. Last time, circa 2001, the entire VC industry got a “get-out-jail-free card” after the Internet bubble burst.
Think long term. Long, long term. In the short term, there will be pain in Silicon Valley. Start-ups will have to survive 2009. Layoffs will be in fashion: “You didn’t do a layoff? What’s wrong with you?” Venture capitalists will be hit just as hard. Their investors–the endowments, the pension funds and others–are hurting.
Silicon Valley was all a flurry late last week after reports that some respected venture capitalists woke up from their rosy daydreams to the fact that Wall Street’s meltdown is going to have a big impact on their future.
A shakeout in the venture capital industry appeared to take hold in the third quarter of the year, even before the latest decline in the stock market began. And we’ve also learned one more reason why Sequoia Capital may have reacted as quickly as it did with its terrifying R.I.P. message to companies.
The opening party of Boston-based Northbridge Venture Partners’ West Coast office in San Mateo, Calif., could not have come at a more awkward time.
One afternoon last May in Menlo Park, Calif., a venture capitalist named Ray Lane led me from his office to the parking lot, where an automobile had been delivered a few hours earlier by flatbed truck.
All tech start-ups need just a few ingredients to germinate: sophisticated money; first-rate technology universities; and a few template successes (a Google or a Facebook, and so on) to encourage founders to get off their duffs.
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