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U.S. Venture Capital Firms Look to Shrink Investment Funds ... Focus More on Early Stage Companies
Colleagues,
As reported in the New York Times ... The biggest names in the venture capital industry are concerned about low returns and are blaming several factors: funds that have grown too large, the M.B.A.’s that have invaded the industry and older partners who have lost touch with what is new in technology...
... Many in the industry predict that a third to a half of the 882 active venture capital firms could disappear, if only because poor returns will force underperforming firms to shut down. It is already happening: Investment in venture capital funds shrank to $4.3 billion in the first quarter, from $7.1 billion in the same quarter a year ago...
... Instead of figuring out how much start-ups actually need, too many firms calculate how much they have in their funds, divide it by the number of partners and the number of boards they can sit on, and come up with a sum to invest in each start-up ... That often means forcing $3 million into a company that needs $300,000 ...
... Overfinancing results in too many firms backing too many start-ups that do the same thing, some critics say, and it inflates the valuation of companies so that investors get smaller returns when they eventually sell...
The good news is that Web start-ups do not need as much money today ... Greycroft has a $75 million fund, invests $500,000 to $3 million in each start-up and does not always demand a board seat. Neither does Andreessen Horowitz, which will invest as little as $50,000 in a start-up from its $300 million fund...
Read on at: http://www.nytimes.com/2009/07/07/technology/start-ups/07venture.ht...
ENJOY!
CC
As reported in the New York Times ... The biggest names in the venture capital industry are concerned about low returns and are blaming several factors: funds that have grown too large, the M.B.A.’s that have invaded the industry and older partners who have lost touch with what is new in technology...
... Many in the industry predict that a third to a half of the 882 active venture capital firms could disappear, if only because poor returns will force underperforming firms to shut down. It is already happening: Investment in venture capital funds shrank to $4.3 billion in the first quarter, from $7.1 billion in the same quarter a year ago...
... Instead of figuring out how much start-ups actually need, too many firms calculate how much they have in their funds, divide it by the number of partners and the number of boards they can sit on, and come up with a sum to invest in each start-up ... That often means forcing $3 million into a company that needs $300,000 ...
... Overfinancing results in too many firms backing too many start-ups that do the same thing, some critics say, and it inflates the valuation of companies so that investors get smaller returns when they eventually sell...
The good news is that Web start-ups do not need as much money today ... Greycroft has a $75 million fund, invests $500,000 to $3 million in each start-up and does not always demand a board seat. Neither does Andreessen Horowitz, which will invest as little as $50,000 in a start-up from its $300 million fund...
Read on at: http://www.nytimes.com/2009/07/07/technology/start-ups/07venture.ht...
ENJOY!
CC
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