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Money sitting on the sidelines
Have you seen your local VC? It seems they
are hiding in their office or in the board
rooms of their struggling portfolio
companies. There was still $14 Billion
raised by funds in the first quarter
(VentureOne), so where is all the money?
PricewaterhouseCoopers and VentureOne stated
that investments fell from $26.1 Billion
(Q1 2000) to only $10.1 Billion (Q1 2001).
Funding in every Internet related sector
dropped significantly, approximately
50 percent.
Venture investors have shown more care and
diligence in their investment decisions.
The investment average for Internet startups
fell 11 percent to $9.8 Million (Q1 2001)
from the previous quarter. Internet related
companies also dropped to only represent one-
quarter of total venture funding.
So where is the money? It is sitting on the
sidelines.
Venture investors still have capital that
they HAVE to invest. Many of the venture
funds raised in the past two years have 4-5
years to invest their capital. So that
leaves only two years for VCs to invest a
substantial amount of capital.
What are they waiting for?
1) VCs are back to doing real due diligence
and taking their time again.
2) VCs are waiting to see which sectors will
turn back into good investment
opportunities.
3) Everyone is waiting for the IPO market
to open back up.
4) Investors are just unsure and very scared
from the destruction of the past year.
Investors are waiting for a sign, something
to boost their confidence and look towards
new investments.
Gone are the days of trade show booths,
first class travel, and business dinners.
Now are the days of survival.
Next time: Corporate venture – still hanging in there
Agree? Disagree? Please email your viewpoints and comments to comment@FundingPost.com we will discuss your comments here.
Read previous Venture commentary here.
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