A VC - Latest Comments in A Deeper Dive Into The First Quarter VC Investment Numbers

Re: A Deeper Dive Into The First Quarter VC Investment Numbers

fredwilson — Thu, 23 Apr 2009 12:14:09 -0000

Thanks shai. That sounds right to me

Re: A Deeper Dive Into The First Quarter VC Investment Numbers

Shai Berger — Thu, 23 Apr 2009 11:51:16 -0000

I just saw data that indicates Web 2.0 investments have actually quite been quite healthy so far this year.

If you strip out Clean Tech, Biotech and hardware investments, Research Capital Corp indicates that hardly any drop in investment activity at all. More here: http://www.shaiberger.com/?....

- Shai

Re: A Deeper Dive Into The First Quarter VC Investment Numbers

Tyler Newton — Wed, 22 Apr 2009 11:07:55 -0000

My experience is that Silicon Valley VCs fund more into their companies because they have bigger funds. Nearly every Silicon Valley company that I see is way overcapitalized relative to revenue and has a bloated cost structure as a result. SV has been surviving this decade by flipping companies into the big public Silicon Valley companies (that the VCs may be on the boards of) at inflated valuations. The more I see of the Silicon Valley VC game, the more I realize that the reckoning will be (or should be) fierce indeed. The bubble of leftover raised funds from the 2000-2001 surge is winding down and the number of Silicon Vally VC funds will likely shrink dramatically in the next 2-4 years.

New York VCs are more frugal and will likely fare better through this downturn.

Re: A Deeper Dive Into The First Quarter VC Investment Numbers

fredwilson — Tue, 21 Apr 2009 06:22:10 -0000

A cramdown is an equity round where the past investors get highly diluted

Re: A Deeper Dive Into The First Quarter VC Investment Numbers

Dorian Benkoil — Mon, 20 Apr 2009 22:16:14 -0000

cramdown, as in a bandruptcy court's order to reorganize?
Or is there some other meaning in the VC world?

Re: A Deeper Dive Into The First Quarter VC Investment Numbers

Dorian Benkoil — Mon, 20 Apr 2009 22:14:04 -0000

agreed

Re: A Deeper Dive Into The First Quarter VC Investment Numbers

Keith — Mon, 20 Apr 2009 20:57:52 -0000

That would be the numbers don't "jibe", not "jive", unless they're hip, and dancing, and from many years ago.

Re: A Deeper Dive Into The First Quarter VC Investment Numbers

fredwilson — Mon, 20 Apr 2009 19:15:44 -0000

Maybe

But NYC is a pretty downtrodden place right now

I just think it’s a different market in terms of what we invest in here

Re: A Deeper Dive Into The First Quarter VC Investment Numbers

fredwilson — Mon, 20 Apr 2009 18:13:37 -0000

I don't think what Geithner has in mind is that onerous

Re: A Deeper Dive Into The First Quarter VC Investment Numbers

Powerpeace — Mon, 20 Apr 2009 17:58:24 -0000

It looks like New York is more optimistic than everyone else. I might offer a conclusion that New York is also the advertising capital. People who understand marketing are confident they can make things happen.

Re: A Deeper Dive Into The First Quarter VC Investment Numbers

CoryS — Mon, 20 Apr 2009 12:16:27 -0000

Happy to get the intro - sent an email to you.

Understand the risk/reward, just questioning who invests in the higher capital projects as it is easy for companies and investors to back off innovation that take 5+ years to pay back. Is the answer the government via universities into start ups? [loaded question]

Re: A Deeper Dive Into The First Quarter VC Investment Numbers

anumberone — Mon, 20 Apr 2009 12:07:23 -0000

Interesting analysis. Another factor that may be coming into play is Silicon Valley has seen signs from the Feds in expanding their anti-business regulatory approach that may soon apply to them.

Take a look at this article - http://blogs.wsj.com/ventur... - "Equally misguided are signals from Treasury Secretary Timothy Geithner that venture capital firms may be forced to submit to onerous Securities and Exchange Commission reporting requirements to ensure that we aren’t “a threat to financial stability.”

Re: A Deeper Dive Into The First Quarter VC Investment Numbers

fredwilson — Mon, 20 Apr 2009 10:26:33 -0000

Neither of us is right or wrong

You need both

I just think from a rate of return perspective, software is much better risk/reward

Do you want an intro to amee?

Re: A Deeper Dive Into The First Quarter VC Investment Numbers

CoryS — Mon, 20 Apr 2009 10:20:00 -0000

We can agree to disagree on innovation investment as we've debated software v. hardware before. I'd say that a better car isn't made better solely by software or a website, but you can accurately retort that the software or website can do a whole lot.

Would love to connect your AMEE team to the energy products team we've got at my company: http://blackanddecker.com/E...

Re: A Deeper Dive Into The First Quarter VC Investment Numbers

fredwilson — Mon, 20 Apr 2009 09:21:51 -0000

Demonstrate capital efficiency is the important thing

Silicon valley is still the biggest VC market by a significant margin

Re: A Deeper Dive Into The First Quarter VC Investment Numbers

fredwilson — Mon, 20 Apr 2009 09:21:46 -0000

The sector that crunchbase covers best is the sector that I think was least affected

Re: A Deeper Dive Into The First Quarter VC Investment Numbers

Loic Le Meur — Mon, 20 Apr 2009 09:21:28 -0000

very good point! thanks Fred

Re: A Deeper Dive Into The First Quarter VC Investment Numbers

fredwilson — Mon, 20 Apr 2009 09:15:42 -0000

That is impacting the VC business in the IT sector for sure

Re: A Deeper Dive Into The First Quarter VC Investment Numbers

fredwilson — Mon, 20 Apr 2009 09:03:30 -0000

We report capital returned to partners in every quarterly report to our investors

It is the single most important metric in our business

And I am happy to say we are doing quite well in that regard

But capital has to be invested to be returned

So capital invested is also an important metric

And it is certainly important to entrepreneurs

Re: A Deeper Dive Into The First Quarter VC Investment Numbers

fredwilson — Mon, 20 Apr 2009 09:00:32 -0000

Great post

I left a comment on it

Re: A Deeper Dive Into The First Quarter VC Investment Numbers

fredwilson — Mon, 20 Apr 2009 08:57:20 -0000

Loic - it was Eric from Wellington, who I met at LeWeb, who said something on our panel last year that is important and fundamental to early stage VC investing and has informed the way we look at this downturn

He said that he did a study going back to the 1970s of every year in the venture business and the startups that got funded each year.

That study showed that each "vintage year" produced about the same number of billion dollar exits and it was not correlated to anything.

So that means that each year is a lottery ticket and you gotta be in it to win it.

Pulling back is not a good idea in this business

Re: A Deeper Dive Into The First Quarter VC Investment Numbers

fredwilson — Mon, 20 Apr 2009 08:51:12 -0000

This is one of the investments we made recently

http://www.amee.com/

you don't have to invest billions to create important change

in fact, I would argue most important change is created by investing very little

Re: A Deeper Dive Into The First Quarter VC Investment Numbers

CoryS — Mon, 20 Apr 2009 08:47:13 -0000

So, you're saying that more websites for consumers is a better investment path than clean tech investment during this downturn? I guess that's the difference between a VC looking for a low capital, high return (as Umair would say = decayed strategy) v. building a LT sustainable technology and with it a new industry.

Funny, or not so really, that when oil prices goes down, so with it goes clean tech investments. Been this way for over 30 years.

Re: A Deeper Dive Into The First Quarter VC Investment Numbers

fredwilson — Mon, 20 Apr 2009 08:30:19 -0000

We are doing exactly that as I mentioned in my post.

Not really more money, but certainly more deals

Re: A Deeper Dive Into The First Quarter VC Investment Numbers

toddsavage — Mon, 20 Apr 2009 08:27:34 -0000

Maybe Fred or other VCs on this blog can help me understand something here. Why wouldn't you invest more money into more deals during a downturn, as opposed to the data showing the most money and most deals being done at the peak? I am a contrarian (have been buying stocks over the last 3 to 6 months and bought a new home last year) and like to buy when things are way down. As a VC, wouldn't you be "licking your chops" and putting capital to work when valuations and multiples are way down and then sell when multiples get much better? The economy is cyclical, right? If your argument may be that the economy actually might not recover, then who cares if those investments do badly because we are all screwed anyway, right? Someone help me here...