The Venture Capital Conundrum

From the NYT:

Venture capitalists’ confidence has sunk to a new low, according to a report released Wednesday by Mark V. Cannice, founder and director of the University of San Francisco Entrepreneurship Program, who surveys Silicon Valley venture capitalists every quarter.

“Venture funds are frozen with uncertainty,” Dag Syrrist of Vision Capital told Mr. Cannice. Another investor, Joe Mandato of De Novo Ventures, said his confidence level was 3.5, not because of lack of venture money or good deals, but because of the uncertainty over how to cash out of investments.

Update - this is brilliant - the truth about the tech funding market, in a far funnier form, from Whiner Jenkins (hat tip SAI):


Whiner Jerkins All Hands 10/13/08 - Get more Business Plans

More seriously Without visibility of a route to exit, its harder to justify investment. We suspect that the more fundable startup businesses therefore will be:

- ones that can wash their own faces, ie have a sustainable business model

and / or

- are doing things that may be attractive for larger players to pick up

Me-too's operating on Free / Other People's Money models will therefore really struggle, we suspect, unless they can show real traction as well as attraction to a major players revenue models.