Here is an article from WSJ`s venture blog.
“Venture capital is having a mid-life crisis, according to a post from the University Pennsylvania’s Wharton School. ”The venture community (in Silicon Valley) is showing signs of middle age — moving more slowly and cautiously than before, and hitting fewer home runs than it did in younger, leaner days,” the post says. Because venture’s performance is less robust, investors need to look at venture capital in a new way. The post has advice from David Wessels, an adjunct professor of finance at Wharton: ”Go back to 1990s and venture capital was about starting a company, making it large enough to have an impact on its own and taking it public so it would be Wal-Mart or Procter & Gamble in 20 years,” he says. “Lately, it’s becoming a surrogate for internal R&D. Start-ups set out to build a product from scratch, prove it has legs with a small market and get swallowed by a larger company.” So why invest in these illiquid, high-risk funds? “For diversification,” he notes. “You’re betting on stable returns and the opportunity to already be in the game in case something develops that will be the next big thing.”
Middle age aside, VCs are optimistic about their business, according to a survey by executive search firm Polachi Inc. of Framingham, Mass. A year ago, respondents said the industry was broken, but this year finds them more upbeat. They’re still worrried about exits, though.
Venture capital term sheets continue to be a source of frustration for many entrepreneurs. Investor Mark Suster, a former entrepreneur, weighs in on the topic on his blog, Both Sides of the Table. While things have improved as more information about term sheets circulates, VCs and entrepreneurs continue to see company valuations differently, he says. “I don’t feel that as a VC sneaking in nefarious terms into a term sheet that the entrepreneur doesn’t understand is a good way to build a long-term relationship nor to build a long-term reputation but this does happen and more frequently than we all would like,” Suster writes.”
Read the full article here.
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