The size of the US VC industry in terms of active funds continues to contract - to just over 300 firms in 2011 compared to over 700 in 2000. According to E&Y, the primary reason is that less capital is being targetted for VC investment. Despite strong deal flow for venture capital firms, market volatility has had an impact on the ability of even the best firms to raise new funds. As a result, firms are beginning to increasingly look overseas.
Entrepreneurs are passionate about their business. Sometimes overly so. Read this terrific article on how to avoid several common mistakes that will ruin an otherwise successful pitch meeting. From FastCompany, by FC Expert Blogger Josh Linkner, 12/6/11
Venture capital performance continued an upward trajectory as of the first quarter of 2011, the improvements were seen across all time horizons, with the exception of the 15-year numbers, and were driven by the strong one-year venture capital return of 18.5 percent.
Over a six-month period, Mr. Andreessen tapped his formidable network of Silicon Valley connections to snag stakes in Facebook Inc., micro-blogging service Twitter Inc. and deals-site Groupon Inc. Other investments include social-game developer Zynga Inc. and Internet-telephone company Skype SA. In the process, he helped to ignite Silicon Valley's latest Web boom and the burgeoning market for private-company shares.
This is an insightful blog post by Chris Dixon (www.cdixon.org)... "Having raised a number of VC rounds personally and observed many more as an investor or friend, I’ve come to think there are a set of dominant best practices that entrepreneurs should follow..."
Overall, Cooley's data pointed to a year marked by slow but steady improvement in the financing environment. In 2010, deal volumes reached a level not seen in the last five years. Median pre-money valuations increased across all deal stages and saw a significant increase in "up rounds" versus flat/down rounds. Up rounds represented 60% of all financings in 2010, a level not seen since 2008. Additionally, the percentage of recapitalization transactions fell in 2010, though the number of tranched deals remained flat from prior years.
Deal activity was down from Q1, but there were positive signals as well.
One of the primary complaints about venture capitalists is that the "value add" they promise when they submit an LOI is akin to a campaign promise. In today's market, VCs haven't been able to exit many of their investments, so instead of serving on 3 or 4 boards, they may be serving on 6 or 8.
Silicon Valley venture capitalists often invest in the youngest start-ups. But now some venture-capital firms are partly outsourcing that investing to others.
The venture capital industry rode high up to and during the dot-com boom but has suffered a vicious cycle of losses since the bubble burst. U.S. venture-capital funds raised each year from 1999 to 2007 have posted median annualized returns ranging from a 0.3% gain to a 7.7% loss, says research firm Preqin. Not surprisingly, fund raising has now come to a near halt.
April 9, 2012
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