This is going to hurt.

A lot.

Washingtonpost article on the problems faced by investors when 0 exits happen.

No return on capital, means no returns to LPs.  No more money to recycle back into new funds, or cash available for capital calls.

This can also mean the herd will get culled quickly.

I’m not sure how many of the vintage 1999-2000 funds are still around, or how those partners are doing at this time.  I’m going to guess that many of them will not have a fund II.  Folks who are trying to set up a fund I right now are going to have problems.  When even good deals don’t get done, bad deals will disappear.

In these times of tough red ink, it may become easy to know which companies to invest in. 

Just wait.

The companies that are still kicking after 18 months will probably be around for 18 more.

It’s draconian, but for anyone sitting on cash at this point, there may be little incentive to cut a check today.  Given the high risk/reward of VC, the marginal cost of having cash sitting in the bank, isn’t that bad.

An former boss used to joke that during the bust years, the BEST thing to have done was go to the beach.

As a money manager, during that time, if you just took the 50 mil, put it into T Bills, and came back, you’d have had better performance that most everyone, and been in the top quartile of managers, just because you sat on cash.

But our job is not to sit on cash.  We’re supposed to go out there and find opportunities to make money.  But just because we find them, doesn’t mean we’ll be in a hurry to spend.  Not until it makes sense.

This is not going to be a fun time for anyone in the industry, from entrepreneur to investor.

Time to pick up your tools and build again.

为什么VC被踢出IPO了呢

The Q2 goose egg for VC-backed IPOs has every pundit and prognosticator coming out of the woodwork to weigh in on what’s “really” going on.

The NVCA polled VCs and found investors attributing the whiff to a variety of short-term shocks such as the credit crunch and Sarbanes-Oxley.

But the story of an increasingly anemic IPO market goes back more than a decade. In 1992, a VC might expect as much as 65% of his or her exits to be via IPO. That number fell steadily to 10% by 2005 and has continued to fall since.

The VC industry is laboring under a set of outdated assumptions, a structure optimized for conditions no longer applicable and an unwillingness or inability to embrace the tectonic change it is undergoing. The hand wringing about various short term shocks (such as skittish investors) that sunk the second quarter’s IPOs misses any serious discussion of the long-term systemic shifts that many VCs have failed to act on.
I offer five forces that underly the observable change in modern venture capital:

• The technology industry has matured to the extent that startups are viewed as outsourced R&D by big companies.
• The consolidation of technology verticals via either winner-take-all competition or multi-billion dollar acquisitions has decreased the number of would-be customers and acquirers for focused technology offerings.
• The over-availability of growth capital promotes competition among startups for scarce resources such as technical employees and early-adopter customers and raises development costs accordingly.
• Attractive investments may be increasingly found through creative deal sourcing and structuring rather than sexy technologies, big markets or “hot” entrepreneurs. Similarly for successful exits.
• Successful firms have formalized their succession planning to preserve their virtuous cycle, making specialization an increasingly attractive strategy for first time funds.

What else goes on this list?