Make no mistake, venture capital has been falling consistently, despite all the positive spin the media hype machine used last year — tumbling and spinning numbers, comparing apples to oranges. You read about this last year on the Diligent Venture blog and again briefly here. And here’s where we are now:
U.S. venture capital investment has fallen for three straight quarters and is now at the lowest level since the third quarter of 2010 Read more …
Worse still, there hasn’t been any significant, positive change to the fundamentals to indicate that the situation will get significantly better any time soon. The JOBS Act was pitched to the public as some amazing, silver-bullet legislation that would reinvigorate investment. After passing it, all we’ve seen is consistent decline in venture capital.
Part of the blame lies with the Securities Exchange Commission (SEC), which can’t find the time or resources to publish the rules that are required to implement the JOBS Act. In fact, the SEC has already missed its deadlines for producing such rules. SEC Misses Two Key JOBS Act Deadlines.
But this is not just a U.S. phenomenon, so we can’t simply blame the SEC or the United States economy. Check out the parallel bad news on the other side of the world:
For only the second time since 2008, more than half of Israeli venture-capital funds — some 51% — made no investment in the quarter. Israeli Venture Capital Funding Slips
Are VC funds eyeballing the global slowdown, deflation in commodities, dragging sales reports, and deciding to wait and see?
"Taking legal risks & choosing “acceptable risk” is necessary to get ahead. A lawyer shouldn’t be a “dream smasher.” #lawyered #sxswi"
"Thus, now we are facing a “nuclear winter” (!) where thousands of companies will go out of business."
— Crappy Startups Can’t Raise More Money
"Median valuations for seed financings in 2011 reached $2.9 million, more than 60% higher than the previous year and the highest total since the dot-com frenzy of 2001, according to industry tracker Dow Jones VentureSource, a unit of Wall Street Journal owner News Corp."
"Seeking an acquisition from the start is more than just bad advice for an entrepreneur. For the entrepreneur it leads to short term tactical decisions rather than company-building decisions and in my view often reduces the probability of success. It can lead to sub-par “guns for hire’” rather than a team excited about a larger vision. It leads to a job not a lifestyle."
"Corporate deals are going increasingly to later-stage startups and tend to be higher in value, which indicates that corporate venture capital firms are taking fewer risks."
— New York No. 3 in corporate venture capital
"The problem with many accelerators right now is that they’re not focused primarily on education or making money as the output/result. Instead, they’re focused on “community building” – particularly in non-startup hubs. I see this as a mistake, because you can’t manufacture communities this way; you need to focus on building successful (and big!) companies that exit, and return some of the cash and know-how back into the ecosystem."
"On a whole, there are very few high tech models that lend themselves to successful (long-term) bootstrapping in today’s highly competitive market. “The best companies use funding to scale rapidly and own the market,” he says, “it’s not a tradeoff."
"How well the founders know each other matters. How they interact and work with each other matters. Whether they have complimentary skillsets and personalities matters. This set of questions is very important. Any fissures in the founding team will be amplified later on."