Here's a brief story in the Financial Times about the US Venture Capital industry, affectionately [sic] known as "Sand Hill Road" to those of us who deal with it.
The story quotes Michael Moritz of Sequoia Capital to the effect that, because there are so few "exits" now for venture-funded companies, the VC industry as a whole will suffer a severe shakeout.
(A venture-funded startup has to pay back its backers with some kind of a "liquidity event," in which the investors' stock is swapped for something that has a public market value. Either you go public in an IPO, or you sell yourself to an already-public company.)
If you were paying attention back around 2001 and 2002, you remember the exact same thing happened then, as the Internet bubble busted. A lot of VC firms disappeared then, but the big names held on, even closing new funds, and then more or less sitting on their money.
The story quotes Michael Moritz of Sequoia Capital to the effect that, because there are so few "exits" now for venture-funded companies, the VC industry as a whole will suffer a severe shakeout.
(A venture-funded startup has to pay back its backers with some kind of a "liquidity event," in which the investors' stock is swapped for something that has a public market value. Either you go public in an IPO, or you sell yourself to an already-public company.)
If you were paying attention back around 2001 and 2002, you remember the exact same thing happened then, as the Internet bubble busted. A lot of VC firms disappeared then, but the big names held on, even closing new funds, and then more or less sitting on their money.
Continue reading Whither the Venture Capital Industry?.
