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Around the Web 10.09.08: Beam us up, Scotty. Silicon Valley's on red alert
L.A. Times Tech Blog —
... -- Wait a minute, venture capitalists telling start-ups to cinch their belts might want to listen to their own advice. BusinessWeek ...
Expect to see start-ups and VCs hit standoff over valuations
VentureBeat —
... to hard to lower valuations even at this level.
Third quarter statistics on valuations won’t be out for another couple of months. And even then, those stats won’t reflect what happened in the current fourth quarter, which is when the real pain will be felt. It may be next year before we can give a serious assessment of the true fallout for start-ups. Expect to see more companies go out of business too, as VCs in some cases decide not to invest at all.
Sarah Lacy has some interesting thoughts on the future of the VC industry, by the way. ...
VC Investment Drops in Q3, But the Real Trouble Is Still to Come
GigaOM —
... — even through the crisis — the squeeze brings the entire venture model into question. Without exits, VCs can’t return cash to the limited partners who are their investors, and will then see those investors turn elsewhere. That means the venture world could get a lot smaller over the next five to 10 years. ...
VCs Must Woo Unhappy Investors, Too [GigaOM]
GigaOM Network —
... , but as the Wall Street Journal details, they are also defaulting on their capital calls. Because this time around, the entire LP portfolio is taking a hit, which means a recovery in VC investment will also require a recovery in all other investments. While we wait, expect the total number of VC firms to shrink — something many in the industry have been arguing for, anyhow. ...
The Venture Industry Needs to Slash Its Investments [GigaOM]
GigaOM Network —
... If he’s right — and others have made similar arguments — then startups will find less capital overall. That’s not to say that VCs will stop investing in companies (they can’t), but that with fewer VCs and less money, it’ll be hard to get a deal done. The ...
YouNoodle Scores: What Startups Can Learn from Wars
TechCrunch —
... it was a clubby industry making modest bets on companies within a 30 minute drive of Sand Hill Road. But as more money has flooded into the industry and tech has matured, finding the big home runs has become exponentially harder. Simply put: When you’re investing halfway around the world or trying to find the next Google amid a sea of me-too companies, let’s put the machismo aside and admit the industry needs some metrics, some methodology and some help. Check out the latest returns if you think I’m being too harsh. ...
Why the Smart VCs Are Boarding their Jets
TechCrunch —
... Venture capital judges itself on a ten-year cycle, and the riches of 1999 are about to fall off the index. The industry as a whole is in danger of performing about at the level of the S&P 500 or below. If it wants to survive, it’s time for a reboot: Get back to boutique, the way smart seed funds have done, or figure out global. Only a few firms will thrive in between. ...
Venture Capital Down 50%. It’s Not Just the Recession, Folks.
TechCrunch —
... Returns, on the other hand, did go down. And they never really got back up, given the amount invested. But the industry is graded on a ten-year time horizon so that didn’t matter much. Once returns from 1999 and 2000 fall off that scale, it will. Returns will look at or below the S&P 500 for what is supposed to be a niche, high-risk/high-reward asset class. It takes forever to correct because fund cylces are so long, and the asset class is so illiquid. But it won’t go uncorrected, and the witching hour is getting close. ...
Details on Marc Andreessen’s New Fund (Plus Five Other Interesting Things He Said)
TechCrunch —
... So, that’s how they raised $300 million in the worst fundraising environment in 40 years, here’s why: Andreessen says there are only fifteen companies started each year that matter. By “matter,” he means they’ve got the potential to generate $100 million year or more in revenues, and those companies wind up making up 97% of the aggregate industry returns. The firm wants the flexibility to invest as much as they want in those fifteen names, whether it’s $500,000 or $50 million per deal. Considering the two have run big teams and small teams over their ...
Vinod’s New Fund: A No Brainer Investment
TechCrunch —
... In case you’ve missed it– the industry is in serious danger of 10-year returns dipping below the S&P 500 once stellar returns from 1999 and early 2000 fall off. What do most industries do when they’re under that kind of threat? Play it safe and hope they do just well enough to slip under the radar. Good deals are almost never made out of survival mode, especially in a business like venture capital where it’s the insane homeruns not the basehits that repay your investors. Simply put: Too many VCs are investing like they have too much to lose. ...
Venture Capital’s Q3 Temperature
TechCrunch —
... Here’s the bad: VCs essentially have two “customers” and both are cautious buyers of what VCs are selling right now. One are the LPs, who despite the recovering public markets are way over-allocated in illiquid venture capital funds and—whether they believe in the asset class long term or not—they’re being forced to sell stakes or at a minimum ...
The Dark Side of the Late 2009 M&A Surge
TechCrunch —
... That pain was felt by venture capitalists as well. I’ve argued for a while now that once the gains from 1999 and 2000 fall off the ten-year index of VC returns, we’re going to be looking at an industry that has returns at or below the S&P 500. Given we’re coming out of a “decade of zero,” that’s a pretty bad thing. Especially for an asset class that is ( ...
