Venture Capital–The Reality
Mainstream media, in its search for bad news, seems intent on trying to lead readers into thinking that Venture Capital today is all but non-existent…and that any entrepreneur who is looking for VC money is on a fool’s errand. However, let’s look at the reality of Venture Capital investments.
Obviously, there are fewer IPOs during the present turmoil and condition of the stock market, but this simply means that Later Stage companies will have to wait a while longer before cashing in on their big “payday.”
The good news is for startups. Investment in Seed Stage companies increased substantially in 2008, with a 19 percent jump from the prior year. There was also about the same investment in Early Stage companies during 2008 as there was in 2007.
Money invested in Clean Technology grew more than 50 percent in 2008, and investments in Internet-specific companies remained at about the same level as 2007. VC investments in the categories of Energy, Media and Entertainment, and IT Services grew during 2008, while several other categories remained about the same level as 2007.
It is true that; overall, the total amount of VC money invested was down about 8% in 2008–due largely to a decline in Later Stage and Expansion investments. This is likely due to everyone waiting out the stock market before they crank up the IPO machine again. Total number of deals in 2008 was only down about 4%.
So, with the President arranging for more capital to become available to loan to small businesses, Congress pumping up the economy, and Venture Capitalists continuing to invest at close to their normal rate, there should be no reason for entrepreneurs to put off starting a business, or growing a business. Put aside the fear and get on with it!
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