Some of the themes we cover on this blog are the relative over-important feeling VCs attribute to themselves. No one lesser than VC dean Mike Moritz echoes this sentiment, mind you.
This article sheds more light on that:
In the second quarter of this year not a single company backed by venture capitalists has gone public. It is the first time that has happened since 1978, according to a venture capital industry group.
(…)
That may come as little surprise to the well-heeled individuals and institutions that give their money to venture capitalists seeking big returns. Some of these investors have criticized venture capitalists for failing to provide substantial returns on a broad basis since 2000.
Reading the press releases and the vast majority of VC blogs, you would think that indeed, patience is required, because while VCs put on their pants one leg at a time (like you and me), unlike you and me, they are “changing the world”. Bull-f****n-shit. Here’s why and one VC is candid enough to admit it:
But Paul Kedrosky, an investor and the author of Infectious Greed, a venture capital-centric blog, said that there were deeper, more systemic problems for venture capitalists in addition to the cyclical challenges. He said part of the problem was that the industry was backing companies that lack widespread investor appeal, like YouTube clones and dating and social networking sites.
“There is nothing that the industry is producing that investors want,” Mr. Kedrosky said. “The stuff they’re investing in is idiosyncratic — it’s fun and appealing to them but Wall Street doesn’t care.”
“The Valley is operating in its own little world, and the capital markets don’t care about the things that are getting the Valley excited.”
Well said. You mean Twitter and Slide aren’t going to change the world. Man, I must have missed that tweet. The stats don’t look good, either:
Over all, the market for public offerings has been in a funk. So far this year there have been 36 offerings, down from 130 during the same period last year, according to Renaissance Capital, a research firm based in Greenwich, Conn.
“Deal volume has fallen off a cliff,” said Paul Bard, head of research for Renaissance.
The public offerings this year raised $27 billion, but Visa’s offering accounted for $18 billion of that. Mr. Bard said there was likely to be a sharp drop in the amount raised this year from last year’s $60 billion.
Mr. Kedrosky said the problems were particularly acute for venture capitalists — and that leaves them with some answering to do to their own investors.
“Here’s an industry struggling in a big way to hang onto its investors, let alone find new ones,” Mr. Kedrosky said. “They’ve been hanging on by their fingernails.”
The lack of a good way to cash out just makes things worse, he said. “There is no venture industry if there is no I.P.O. market.”
VCs like to live in the comfortable confines of spreadsheets, I sure hope one of them tried to run the numbers and tell me how he or she deserves their own investors’ money when you consider their track record, and the prospects of the broader IPO market.
I’m sorry… If you ask me, I just don’t see a hockey stick trajectory for your kind of business… Pass.
Can’t wait for this entire industry to be disrupted into oblivion, or at least, evolve to actually provide value beyond a check (as in: Want to invest in our company? sure, here’s a desk, get cracking, Sir… don’t just pontificate from the golf course, pal).
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June 29th, 2008 at 3:21 pm
I’ve said it at Mesh, Techcrunch, Money:Tech and every blog since 2006 … The Valley has put waaayyy too much emphasis on “cool” and not enough on “real”.
The ripple effect of this has been the creation of a generation of “entrepreneurs” that have wasted the last 3 years of their life building a bunch of crappy “cool” ideas that the rest of the world doesn’t care about.
What is worse, the entire blogosphere has equally wasted its time watching and reporting on these cool tools.
In short, the entire ecosystem is busted. VC’s need to start focusing on and funding real business, entrepreneurs need to start building real products and the blogosphere has to start reporting on real businesses.
Until this happens, expect Silicon Valley, Techcrunch and all the useless start-ups to slowly die within their self-made vacuum.
In the meantime, my 7-digit revenues and 7-digit profits continue to wait for a VC that doesn’t live in fantasy land.
Regards,
George
June 29th, 2008 at 3:30 pm
Well put… but if I were you, I’d avoid the VCs. Are you crazy? Why bother if you are already generating those kind of numbers?