It's been a rule of thumb over the years that venture capitalists need to make at least one big deal a year to run their business.
Keep that in your mind as you read this.
With the recession in the US, I have observed a clear change in trend of venture capital investors - at least among the companies I worked on and based on the news I've been reading.
- VCs have been pulling fund out of some of their investments.
- While known for giving chances to failures/under-performances, Silicon Vally VCs have been stringent. It does not mean that they have stopped funding all the so-called under-performing companies. But the (re)financing trend has been significantly reduced in the first half of 2009 compared to the first half of 2008.
- VCs seems to be holding a lot of cash. This probably is a result of 2 factors above, but also surprising given the current economic situations.
It's a general gossip and belief now that VCs will be very active this 2nd half of 2009 to make one deal to make profitable year utilizing their current portfolio. They will be very selective in their financing and it will be very concentrated to selected companies under their portfolio.
In the first half of 2008, only one Internet site went to public - Open Table. I was very surprised to see one, and not that of high profile. I've heard of them, but they were never under my radar. Maybe because they were not our client and I never had a chance to use their service to reserve a fancy dining place since I could just check on Yelp and make a call.
I do have a number of clients that are clearly pre-IPO, but it seems like they were advised by the board and underwiters to wait. Exactly what's going on, I do not know.
It will be interesting to see how VCs behave in the rest of 2009, and which of these VC-funded companies involved in large M&As and IPOs.
PS: There were a number of M&As in the first half of 2009, but companies located in Silicon Valley were not really invovled in large deals... So that has to wait, too.
Keep that in your mind as you read this.
With the recession in the US, I have observed a clear change in trend of venture capital investors - at least among the companies I worked on and based on the news I've been reading.
- VCs have been pulling fund out of some of their investments.
- While known for giving chances to failures/under-performances, Silicon Vally VCs have been stringent. It does not mean that they have stopped funding all the so-called under-performing companies. But the (re)financing trend has been significantly reduced in the first half of 2009 compared to the first half of 2008.
- VCs seems to be holding a lot of cash. This probably is a result of 2 factors above, but also surprising given the current economic situations.
It's a general gossip and belief now that VCs will be very active this 2nd half of 2009 to make one deal to make profitable year utilizing their current portfolio. They will be very selective in their financing and it will be very concentrated to selected companies under their portfolio.
In the first half of 2008, only one Internet site went to public - Open Table. I was very surprised to see one, and not that of high profile. I've heard of them, but they were never under my radar. Maybe because they were not our client and I never had a chance to use their service to reserve a fancy dining place since I could just check on Yelp and make a call.
I do have a number of clients that are clearly pre-IPO, but it seems like they were advised by the board and underwiters to wait. Exactly what's going on, I do not know.
It will be interesting to see how VCs behave in the rest of 2009, and which of these VC-funded companies involved in large M&As and IPOs.
PS: There were a number of M&As in the first half of 2009, but companies located in Silicon Valley were not really invovled in large deals... So that has to wait, too.
