30 West 3rd

Very Early Stage Technology Investing

No End in Sight…

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The San Jose Mercury news summarized the most recent NVCA venture investment report for Q2 earlier this week.  No good news in the latest report, available at the NVCA site.  This year will be a record low year for venture investment.

To find activity and investment levels equal to Q2/2009 you have to go back to 1997.  We may be at the end of an age that started in the late ’90’s and continued through last year, including the .com bubble, where a disproportionate of institutional capital was deployed in venture.  Exit opportunities are limited for existing funds.  New funds are very difficult to raise.  While fears of systemic collapse have passed, the fundamentals for the venture industry remain terrible.

As a consequence, companies seeking venture investment must be ready to compete for dollars like never before.  This means less attitude, more aptitude is required to raise money.  Companies seeking A Round investment in software or digital media should be seeking scaling money, not concept development/validation money.  Realistic expectations about valuation, terms and governance are mandatory.  In this environment investors have little patience for the naive, blue-sky founder with unrealistic expectations.

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Written by Mike Venerable

July 23, 2009 at 2:03 am

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