BUSINESS BLOGS
BUSINESS BLOGS
category: business
15 Oct 2008

Despite the gloom and doom front:

In a study released Wednesday by the University of San Francisco, Mark Cannice, founder of USF’s Entrepreneurship Program, found that venture capitalists’ confidence is at its lowest level since the university began surveying venture investors in 2004. In total, San Francisco Bay Area venture capitalists’ confidence in the third quarter was measured at just 2.89 out of a scale of five, down from 3.07 in the previous quarter.

investors are still investing, or at least looking to invest.  An email we got yesterday:

This is *********** from ***************, investors in ******** and *************. I was hoping to get in touch with you at some point this week to discuss potentially investing in Mojo Supreme. Is there a time that would be convenient for you to chat?

Mojo Supreme is the umbrella company that owns WatchMojo.com, this blog and many other goodies.  Last year we were not sexy, mainly because we were not phonetically-challenged. But the fact that last week we got 2-3 emails from VCs asking if we wanted to acquire the assets of portfolio companies, and this week we continue to get emails from VCs looking to invest in something new shows that investors will continue to invest despite the gloom and doom, but they might change their tune.

Here’s my theory:

To paraphrase Barack Obama, this latest doom and gloom era is the final chapter on a disastrous policy by VCs to invest in, hmm, crap.  What you will now see is a shift from their bad policies and investment criteria which has essentially wasted the money of otherwise unassuming investors who thought these VCs knew what they were doing.

I like to think of something VC Paul Kedrosky said about the recent Web 2.0 investment craze, that they were idiosyncratic and absolutely irrelevant and value-less to Main Street, let alone Wall Street, who actually needs to tell the story to other investors in an eventual IPO… which takes to why VCs are so wary of their own prospects:

The current misery is being fueled by two factors: the deterioration in the overall economy, and the lack of initial public offerings and mergers and acquisitions activity, found Cannice. The deteriorating economy has slowed down business activity for the startups that venture capitalists invest in. In addition, the dearth of IPOs and M&A means that venture capitalists can’t cash out of their investments in those startups.

What were some of those false myths:

- “UGC is monetizable”.

False.   Social media is revolutionizing publishing, for sure, but it has been an epic fail with regards to advertising in two major ways: marketers do not want to touch it, and it had led to an influx of new, unsellable inventory.

- “VCs stay with a company through thick and thin”

Bullshit.  The proof is in the pudding this week, where more and more VCs are telling CEO to cut costs, and cut fast.

- “Silicon Valley is the hub of innovation”

I’d like to point you to Slide, Facebook, Crapstr, etc.

- This time things will be different.

It never is… for those who don’t learn from history are doomed to repeat it.