From time to time, I make reference to vast numbers of blog posts and the like that refer to the broken venture model (or its equivalent). Here is a recent post from Dharmesh Shah on this topic. I don't agree with all his conclusions, but it is one take on the general malaise in the venture industry and it is a good read.
Having recently had a pretty bad skiing accident that required surgery and will require a long recovery (while chasing my son down the lift line at Ninety Nine 90 in the Canyons), I have not been able to write many posts, but now that I am past the initial stages of recovery, I have had some time to think about the tech world again.
Here is one of the somewhat intractable issues that have troubled me. I know, from internal research at our firm, that the average life of a venture financed client (from the time the company becomes a client until exit) is about 10 years. I also know from discussion with a VC friend that the average time to exit for companies in his portfolio is 8 years (at least that is what he is telling people). Remember, these are average numbers, so many investments take longer to get to exit. Also remember that our firm’s numbers reflect investments from a broad variety of VCs from the top tier to the little know funds. My friend is with a top tier firm, so their results may be somewhat better than those for the industry as a whole.
OK, so why waste time thinking about this number? Well, most funds have a ten year life. Ideally during that term, the fund is fully invested and fully liquidated. Most (all?) funds provide for extensions to liquidate laggard investments. Even still, limited partners in VC funds would like to get their return in ten years – that’s the plan.
If you know that your average time to exit is 10 years, then you know that investments made in years 3, 4, and 5 (let alone anything after that) are, on average, going to run way over. This accounts, in part, for the phenomena that many VC fundss will linger long after they are unable to raise new rounds.
But, it also may have an impact on investment style. Except in the earliest years of a fund, VCs will almost always be in the position of being under pressure to look for an exit. I am sure there are many ways in which VCs try to mitigate this pressure (doing follow on investments in new funds might be one, but that is a hassle for other reasons).
I suppose it is impossible to know how much pressure this situation exerts upon VCs to favor tightly defined business plans with a clear path to an exit over grander visions? I have commented elsewhere that VCs seem to me to favor narrowly focused tightly defined business plans that address clear pain points and have obvious exits. VCs also seem to me to have become very focused on domain expertise within their investment portfolios. This makes sense, why invest in something you don’t know about? But it also leads to a certain orthodoxy in the nature of investments.
In some sense the life of a normal fund is not suited to the life of a normal company. As a result, VCs are structurally driven to favor narrowly focused investments over grand visions.
I just read Don Dodge's post on Google's goal setting. It strikes me that what works in one environment will not work in another. For every formula that drives human behavior there is an equal and opposite formula that works for someone else. In this case the perfect is the enemy of the good might be the equal and opposite formula. But, I think T.S. Eliot had the last word when he described literary criticism. He said, "the only method is to be very intelligent." To expand this concept, the only method is to be talented and driven. I certainly agree that some organizations bring out the best in people, but in the end it is the people not the formulas. In all fairness to Don Dodge, he kinda comes to this point in his post. Another blog that often (always?) has something enlightening to say on people managment is Rands.
David Wessel’s recent article in the Journal, “A Prozac Economy has its Costs,” asks: If we were able to invent the economic equivalent of Prozac – something that would take away the high-highs and the low-lows of our current economy (think the tech bubble of the late 90’s and the current recession) – would we elect for a prescription? Would we, given the choice between a dynamic, volatile economy with painful depressive phases, and a more mellow economy with fewer crises but a slower growth rate over the long term than its manic doppelganger, settle for a calmer existence? Though my understanding of economics is limited to my college-level macro and micro courses, from an entrepreneur’s and VC’s point of view, I think my answer would be: give me manic any day.
Continue Reading...The Dow Jones webinar I did with David Bell (Fenwick & West), Sarah Reed (Charles River Ventures), and Lizette Perez-Deisboeck (Battery Ventures) has provided me with a lot of eye catching numbers. I will comment on the VC fundraising numbers in this post (and maybe some others in the future).
According to Dow Jones, VC fundraising by venture funds has risen steadily, from a low of $10.3 billion in 2003, to a recent high of $41.0 billion in 2007. I say recent because in 2000 the raise was $82.3 billion. Year to date numbers for 2009 show a total raise of $8.1 billion. There is still a month to go, and maybe a fund or two will have a closing in December, but this looks like an historic low.
Based on a discussion over lunch with Rick Grinnell of Fairhaven, I believe that there will be an unusually high number of big "A" list funds that will be looking to raise new funds in 2010. In some ways this makes 2010 the year to watch. If a large number of strong players are in the market and the amount raised does not spike up it may reflect that a new, lower, equilibrium has been reached in the market. In effect, 2010 may well tell us how much smaller the venture world will become for the next half decade.
Should you jump on a plane to look for money on the west coast?
Last Friday David Bell (from Fenwick & West), Sarah Reed (Charles River Ventures), Lizette Perez-Deisboeck (Battery Ventures) and I were the panel for a Dow Jones sponsored Webinar on the subject of "The Evolving Venture Term Sheet: What VCs & Execs Must Do To Secure the Best Deal." This Webinar was built around the deal statistics published by Fenwick (a west coast law firm) and Foley (an east coast law firm). As you might expect, the numbers appear to confirm that there are some identifiable differences in practices between the west and the east.
David Bell summed it up better than I can, and I know I can’t now recreate his exact words, but the gist of what he said was that activity and valuations are picking up on the west coast sooner than on the east coast and that deal terms are slightly better on the west coast than on the east coast. In essence, the east coast lags the west coast a little bit in good times and bad. So, in bad times terms are a little less draconian on the west coast than on the east coast, and in good times terms are a little better on the west coast than on the east coast.
This observation is, I think consistent with the statistics gathered by Fenwick and by Foley. It is also consistent with anecdotal information. On the west coast there are more deals with stronger valuations than on the east coast. Also, one the west coast there are relatively fewer deals with terms like a 1x preference and full participation. It is not that there are wildly different practices, but there does seem to be a small but consistent difference.
This persistent difference seems all the more odd because the VCs (who presumably drive all this) do deals on both coasts. Battery and Charles River both have offices in Waltham and Palo Alto. It is hard to account for this difference. One facile answer is to say that it is cultural. But, that seems too easy. Also, I would think that if this were the case, west coast firms would bring their attitudes east and grab lots of good deals. Perhaps it has to do with the relative mix of industries – the east having a relatively higher percentage of biotech and life science. Biotech being relatively more expensive and requiring a relatively longer investment horizon than, say, IT, might breed more conservative practices.
While I don’t really know, I am guessing that the explanation is more along the lines of some economic factor than a purely cultural one. I think getting a west coast VC into your mix is probably a good thing, but I would not stop looking for investors in Boston.
I am on the email list for Rutberg & Co.’s Digital Media Industry Newsletter. Usually I don’t pay much attention to it, but the most recent issue caught my attention. According to Rutberg, during the month of October, there were 49 venture financings in the digital media space. Well, that sounds like a lot. But, when you look at the amounts invested there are 18 deals with investments in excess of $5 million and there are many with either undisclosed valuations or valuations under $2 million. These numbers suggest that Rutberg is lumping a lot of angel deals into their definition of venture financings.
I know from our Perspectives publication, that it can be difficult to identify what is and what is not a Series A financing. Simply searching data bases for Series A or first round is way over inclusive. We actually pull copies of the charters of the companies upon which we report and review the charters to determine if the company fits the relevant category. In any given issue, our search turns up many companies and transactions that really are not venture financings (or at least Series A etc.).
Along similar lines, some industry organizations publish number of transactions and total valuations that seem way high. I can’t get behind their numbers, so I don’t know if they are accurate, but I suspect that the definitions used include lots of deals that maybe don’t really fit the definition of a venture investment. The point of all this is that, nobody (including industry players whose published numbers purport to be definitive), really knows what the industry numbers are.
There is a frenzy after every quarter during which various blogs and others comment on the industry numbers as they come out. We are about to publish our next issue of EEC Perspectives (I will post a link when we actually publish.) Unfortunately, most of the news is not good: fewer funds raising less money, etc. Mike Feinstein's recent blog sums it up nicely.
While I don't think there is a limit to entrepreneurial innovation (good ideas around which good businesses can be built), I wonder if there is a limit to the rate of absorption (the rate at which the world economy can embrace good new entrepreneurial businesses). If there is, then this rate would define the outer limits of what entrepreneurs and the people who invest in them can achieve at any given moment.
I can't believe there is a scientific way of figuring out what the rate of absorption might be, but it might be possible to have a subject insight into it. Unfortunately for me, one of the best things that can happen to my clients is to be acquired by some Fortune 500 company. (I say unfortunately for me because they then cease to be my client.) However, in the process I get a glimpse of how the largest companies in the world integrate newly acquired companies and technologies into their existing operations.
Integrating newly acquired companies is a real challenge, even to the very largest companies. As a result even Fortune 50 or Fortune 5 companies can only do a limited amount of it. So, I suppose you could figure out what a company the size of Microsoft, IBM, Google or GE does in a year and extrapolate from that. You would have to include the possibility that some of these companies remain stand alone companies.
My hypothesis is that there are not now (nor indeed have ever been) enough exit opportunities or opportunities to exist as profitable stand alone companies to support the size of the venture capital industry as it existed in 2007 (and probably now as it exists now).
In a way this approach is just looking at the problem "from the other end of the telescope" from the paucity of returns and the incredible shrinking number of funds and amount of dollars being allocated to them.
A lot of people think cloud computing is one of the next big things. It is obviously here, and there is a lot of hype and a lot of real activity. MassNetComms is holding an event at the EEC (our offices in Waltham) on the topic. Sim Simeonov wil the be the moderator. John Considine (CloudSwitch), David Skok (Matrix), Omar Trajman (Vertica Systems) and Michael Werner (Microsoft) will be on the panel. This promises to be an informative event.
The cloud represents, I think, a significant economic opportunity not just for companies (and entrepreneurs who learn to use it) but for entrepreneurs that build it out. The event is on 9/23 and starts at 8:00. If you only attend one cloud related event this fall, it should be this one.
We had a great kickoff to the new "season" of programs at the EEC on Tuesday night, when we hosted the IEEE Boston Entrepreneurs' Network (ENET) September meeting "Launching Your Successful Company." There are many more upcoming events of interest to entrepreneurs at the EEC in September, so check out our events calendar.
The slides from the presenters will be posted to the ENET website shortly, so I won't try to summarize them in full, but some interesting take aways from the three presenters:
Continue Reading...Bill Gurley in his abovethecrowd.com blog has a fine summary of what is going on with the VC industry and where is it going. I don’t think there are any new thoughts here, but it put a lot together and makes some pretty credible sounding predictions. One prediction is that the VC industry could become half the size it currently is. He says,
the VC industry will shrink in kind. How much will it go down? It is very hard to say. It would not be surprising for many of these funds [the pension funds, endowments and foundations that invest in venture funds] to cut their allocation in the category in half, and as a result, it shouldn’t be surprising for the VC industry to get cut in half also.
Another prediction is that it will take a long time to get there. He says,
The VC industry has low barriers to entry and high barriers to exit. Theoretically, a fund raised in 2008, where all the LPs have no plans to commit to their next fund, may still be doing business in 2018. VC funds have long lives, and the point at which they decide to “not continue” is usually when they go to raise a new fund. This would typically be 3-5 years after they raised their last fund, but could be expanded to 5-7 years in a tough market.
The Bill Gurley says something that I find very counter intuitive. He says that Silicon Valley is not likely to notice much. He says,
How should Silicon Valley think about these changes? It is important to realize that there are approximately 900 active VC firms in the U.S. alone. If that number fell to 450, it is not clear that the average Silicon Valley resident would take much notice.
Why this would be the case is not at all clear to me. I would think the more likely outcome, if his analysis is correct, is that there will be a long flat period of low (relative to the recent past) investment in innovation as a result of which the innovation side of the economy will shrink or change.
What I think is that 10 years is way too long for any trend to persist undisturbed in its pure form. Outside events will intervene in unexpected ways.
VentureFizz is a web site that came to my attention though its viral marketing campaign. Having now visited it a few times and checked out a couple of features inlcuding their sections on fundings, news and blogs (which, by the way does not list this blog), I think it is an excellent addition to the information side of the entrepreneurial ecosystem. You should take a look.
It is a truth universally acknowledged that investors in tech companies get the best exit valuations in IPOs. This has been accepted as axiomatic as long as I have been practicing law. As far as I can tell, when public companies get acquired the buyer usually pays a premium over the public valuation. This premium, often referred to as a control premium, suggests that there is “extra” value in not being public. If companies typically command a premium when control is sold, why are they not valued at a discount when they go public and control becomes diffuse? I can imagine a number of rationalizations for this anomaly (that companies command a premium when they go public and another premium when they go private), one is that these companies may have been public for a while and their public values may have sunk considerably from the halcyon days following the IPO.
But the point I want to get to is that you might think that selling a private company would produce a bigger premium than taking it public. The seller could jump all the way to the final control premium price. Another thought is that most venture financed companies that have gone public in the past ten years have not performed well. Obviously we are in the Great Recession, but this observation was, I think, widely thought to be true even before the Great Recession.
One possible explanation, among many, is that IPOs were hyped and sold rather than researched and bought by thoughtful investors. In other words, as Healy Jones said in his blog Startable some time ago, the public was sold a lot of stock that really did not have good investment characteristics (it was a load of crap and people lost a lot of money investing in it). Of course, there were and are a few stars (Google for one). Having said all this, it may be (perhaps certainly is) true that private buyers such as Google, Microsoft, AOL, Zimmer, etc. are just more discerning and more able to accurately value acquisition candidates than public investors.
If you agree with the thought that most of the venture backed companies that have had IPOs should not be public, then you probably agree that the IPO market should not return to pre-Great Recession norms. How much below these norms the IPO market should/will return to is impossible to tell. But, if the so-called venture model is dependent to a material extent on a robust IPO market which in turn is dependent upon investors making poor decisions, then there really is something wrong with the venture model. The venture model needs to work based upon returns obtained from sophisticated private buyers – who seem to pay less than the public.
In a recent press release Mark Heesen of the NVCA had this to say:
"The venture capital industry will evolve significantly in the next few years as the asset class responds to a Darwinian contraction resulting from the recession, the rise of innovative industry sectors such as clean technology and the continued interest in venture capital outside the United States," said Mark Heesen, president of the NVCA. "As the survey results suggest, we will see more globalization in the next decade, not only in terms of investments but also in fundraising and exits as well. Those countries that can nurture entrepreneurs and investors as well as offer attractive exit opportunities have the most to gain economically in the next decade."
This comment causes me to think back to my trip to China of a few months ago. While in Tianjin, I visited an incubator where 930 tech companies were being incubated. I don’t know about India, never having been there, but at lease one of our competitiors is working on a scale that is hard to comprehend.
Beyond the comment about venture capital outside the United States, is the comment about offering attractive exit opportunities. Exits have been few and far between in the last year and more. In the end exits drive the whole investment model and somehow, directly or indirectly, the deployment of new technology in business and personal life drives the rate at which companies will be acquired or go public. Obviously other factors impact it as well, but I wonder if the aging of the U.S. population doesn’t slow down the rate at which, as a country, we can/do absorb new technologies. Is demographics a drag on innovation?
Consider how comfortable your grandfather, father, you, your children are with Facebook, iphone apps, or whatever. I still have not programmed the automatic garage door opener in my new car. I write this blog and I send the occasional tweet, but if the world has to depend upon me to drive adoption of the next big thing, you could be waiting a while.
Mike Feinstein makes an interesting point on his blog about VC compensation and that it how it affects motivation.
The last thing that has to happen is for VC compensation to get more aligned with their investors making money. The 2% fee and 20% carry model can provide too much current income for VCs with little regard to capital loss. That doesn't work for LPs except for well-established funds that have a high likelihood of doing well. In addition to looking for some unique investment strategies, LPs should also look for some innovative compensation models from their venture funds that align everyone's interests more directly.
This is the last paragraph of his post, but the rest is well worth the reading.
Another post with some interesting analysis is Marc Theermann on How Big is the Mobile Publishing Industry. He concludes his analysis with "That brings the total mobile publishing industry pie to $937 million for 2009. "
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One of my favorite quotes is from Steve Jobs. I believe he said, "those overnight successes sure take a long time." As I, and others, have noted, the VC investment model is based on a ten year cycle of fund raising, investing and exiting. This model works well for a lot of companies, but one size does not fit all. A quick look at my client base, suggests a couple of issues with the time dimension of the VC model. (There are, of course, other dimensions to be considered such as the amount of money needing to find a home etc.)
Continue Reading...Twitter is still the hottest thing going, and the odd thing is that I have become something of a convert. After a long time, I got to place where I realized that it is useful and has different uses for different people.
Continue Reading...The Sunday Globe had an article on the subject of green energy firms ramping up lobbying. The whole stimulus package is in the process of igniting a mad scramble for money (and not just in the clean and green spaces – as I have pointed out elsewhere, telecom is another space where the scramble has begun. Helathcare as well – no doubt.) To my mind there is some feeling that the pendulum has swung far in one direction. But, I don’t want to write about the mad scramble, at least not today. What caught my eye was a paragraph on page G-5 and more particularly the following sentence, "And the hope is that the federal government’s stimulus funding will help spark a similar kind of explosive growth [similar to the internet] for the green energy sector – even if it takes a decade or two to really pay off." It is the decade or two part that interests me.
Continue Reading...We issued the latest edition of EEC Perspectives this week, looking at the first quarter of 2009. I had the task of writing the (admitedly, somewhat rambling) cover piece titled "Get Your Pole Vaults Out," which I have pasted after the jump and welcome any comments on. As you will see, numbers were down, but New England was not hit nearly as bad. There have been a number of thought provoking blog posts about the numbers by others, for example:
Michael Greeley at Xconomy
Furqan Nazeeri at Altgate
Adeo at TheFunded
Of course, beyond the broad numbers (which you can find elsewhere), their is valuable detail in EEC Perspectives about valuations and deal terms during the first quarter.
My entirely subjective sense is that in the U.S entrepreneurs are like weeds – no economic conditions will stamp them out. This view is the result of 26 years of representing entrepreneurs in all kinds of economic conditions and in all kinds of industries. I have never had any statistical evidence to support this conclusion, until I ran across this article about the Kauffman Foundation study of entrepreneurship. The gist of the article is that entrepreneurship has been steady (perhaps rising slightly) over the last 12 years. In addition, it is spreading across gender and ethnicity (Latinos along with Asians has the largest growth rate in the recent period).
Last week Fred Wilson and I had a good back-and-forth going via comments on his post about venture capital returns . I’ve been thinking more about what I wrote concerning the proper measurement period for calculating returns and I thought I should follow up to Fred’s last reply . So, here are a couple of thoughts: (1) No matter how you calculate returns, an actual improvement will help the industry. The internal revenue code (IRC) is biased against venture capital investment in a material way. One change in the IRC would have a material impact on venture returns. More below. (2) I’m no accountant, but I believe LPs in venture funds have to account for their investments as a liability from the time they agree to invest. (3) Maybe, LPs in VC funds have sophisticated models anticipating calls etc. But that may be more scary than good.
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Below you'll find my article from the March '09 issue of EEC Perspectives, entitled The End of Gloom and Doom.
I like my gloom and doom as much as the next guy, but a whole year of unrelenting gloom and doom is overdoing it. Looking back on a year’s worth of numbers, it occurs to me that there is a lot to say that is not in the numbers.
Entrepreneurs are like weeds
If you just look at the national numbers you could come to the conclusion that there are fewer deals than last year, that the VCs are taking longer to invest and are investing at lower and lower valuations, and that all of this just acts as disincentive for entrepreneurs to start new ventures. But, anecdotal evidence is to the contrary. I polled some of my partners, and we all agree there is steady stream of new start-ups in all industries. They are not necessarily getting financing from VCs. In fact, the pattern that I see evolving is that entrepreneurs spend a bunch of time (many months) hiking up and down Winter Street to no avail. After that, they figure out other ways to keep moving forward by self-funding and going to family and friends or others with special affinity, and they make do with less. In a number of cases, they seem to me to be happier and more productive once they accept that there will be no VC money and they figure out something else. Entrepreneurs are like weeds; it will take more than a long dry spell to kill them off.
Continue Reading...A recent report released by the National Venture Capital Association and Thompson Reuters shows that the rate of venture fundraising continues to slow.
This statistic measures the amount of money raised by VC firms from their limited partner investors. The report states that 43 VC funds raised $3.4 billion in the Q4 2008. This is a steep decline from both Q3 2008, in which $8.4 billion was raised, as well as the fourth quarter of 2007, during which funds raised $11.7 billion.
For the full year in 2008, 211 VC funds raised a total of $28.0 billion, a 21.4% decrease in volume from 2007.
At first glance, this might not look too bad given the percentage losses and declines in valuation, in the economy generally and the tech sector. However, the drop in Q4 is so drastic that if it proves a sign of things to come, it could signal a real tightening of VC funds available to venture-backed companies and those seeking their first venture investment.
Continue Reading...Yesterday I moderated a panel on the subject of the venture investment climate in 2009. The panelists were Axel Bichara of Atlas Venture and Austin Westerling of Charles River Ventures. The big picture take away from this event was that the investment climate is not as bad as advertised in the press. In each case, Atlas and CRV have made a number of investments in the last year and continue to be actively looking for new investments. If I can generalize, their advice was (1) be prepared for a thorough diligence and, perhaps, a longer than normal process and (2) be realistic about valuations.
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I am pleased to announce that the next issue of EEC Perspectives is now available. Each issue of EEC Perspectives presents quarterly data and analysis on the number and size of transactions in the New England region and, with respect to numbers of transactions, nationally, and provides analysis on certain key terms of the New England transactions. We have been publishing EEC Perspectives since last May, alternately focusing on early rounds and later rounds. (Prior issues of EEC Perspectives can be found in the News and Publications section of the EEC website.) The current issue is the second to focus on Series B and later rounds. It includes a market perspective from entrepreneur and investor Vinit Nijhawan. Among other things, Vinit has some helpful suggestions about steps you can take to help yourself prepare for a later stage round in today's circumstances. The issue also contains commentary from Foley Hoag lawyers Amanda Vendig, Jerry O'Connor and me, including perspectives on the current investment environment. You can find other comments about the impact of the current economic situation in my recent blog about the current venture capital outlook and other blogs below, such as Dave Broadwin's recent entry regarding terms in down times.
This morning I attended a “CEO Breakfast” with Don Bulens, former CEO of EqualLogic (here's a video interview of him from YouTube), sponsored by The Massachusetts Network Communications Council. He commented on a couple of things that are recurring themes in this blog.
Don made reference to slide 49 from the now famous (infamous?) Sequoia Capital’s 56 slide presentation of doom. This slide has a red line labeled “Death spiral” which shows a hypothetical company that does not trim its burn rate falling off a cliff to presumed extinction some time in ’09. It also has a green line that shows a hypothetical company that trims its expenses right away, then grows at a slow but steady rate and survives the downturn. Don’s point was that the same kind of thing happened at the end of the dotcom bubble. He notes that some companies did hunker down and survive. Constant Contact was an example that he pointed to. His general advice is don't fall into the trap of thinking you will be the one who captures the market by maintaining spend -- if you don't make it to the other side you will be the red line.
Don also made reference to the difference between east coast and west coast VCs. As he put it (1) Silicon Valley “celebrates” risk taking in a way that is foreign to New England and (2) the significance of this difference of style between the two coasts is way overplayed.
I had lunch the other day with an entreprenuer/venture capitalist, Vinit Nijhawan. One of the things we discussed was the apparent difference in risk appetite between east coast based VCs and west coast based VCs. We both agreed that there is a popular perception in the Boston entreprenurial community that west coast VCs are more aggressive (in the sense of willing to take more risk on early stage companies) and more patient (in the sense of willing to build lasting companies rather than go for good, if early, exits). I noted in Vinit's blog that he wonders why more west coast VCs don't open offices in Boston. Good question, there seem to me to be many good investment opportunities that are not getting funded.
One of my themes has been how to deal with VCs. In particular, I have focused on making pitches, but, obviously, the process of getting funded involves a lot more than that, and the beginning of the process is the due diligence that a VC undertakes when making an investment decision. Here is a really good blog entry from Jeff Bussgang posted on Always On's blog. It is definitely worth a read.
There is a lot of money sitting on the sidelines right now.
According to the National Venture Capital Association, 235 venture funds raised nearly $35 billion in 2007. This is after a string of steady growth years beginning in 2002. Furthermore according to the NVCA, 130 venture funds have raised more than $16 billion so far in 2008. This seems to me to be a very high number. It provides support for the anecdotal evidence that a lot of funds, including early stage funds, have been raised in the last few years.
The National Venture Capital Association also reports that venture capitalists invested $7.4 billion in 990 deals in the second quarter of 2008. This number does not seem consistent with the general economic climate, but there may be an explanation for it that is consistent with the downturn in the general economy. As with the amount of funds raised, I suspect that the NVCA measure includes many transactions that are not "traditional" early stage venture investments.
I will do a little more research over the next few days and try to get a more granular focus on the activity level in the early stage fund space.
The NVCA clearly agrees with what we are experiencing that there is a crisis in the world of exits. According to the NVCA, there have been 5 IPOs so far in 2008 compared to 86 for all of 2007, and there were 120 total M&A transactions in the first six months of 2008 compared to 169 in the first six months of 2007.
My belief is that there is a lot of money that has been raised that needs to be put to work and will not be until either or both of (a) the general economic/financial crises is behind us and/or (b) the crisis in exits passes. When these things happen, and it could be a while, the flood gates should open because many of the funds will be several years into their 10 year life and will need to put the money work quickly.
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