Friday, February 06, 2009

sjmercury: O'Brien: Will the eternal optimism of venture capitalists survive 2009?

"You've got to admire the eternally sunny outlook of Silicon Valley's venture capitalists. It's their unflagging faith in the future that has kept this region the world's undisputed center of innovation for several decades.
But the coming year is going to test that faith. In fact, 2009 looks to be a pivotal moment for the valley's lifeblood industry.
First, though, let's stop and acknowledge how deep that belief system runs by looking at the latest venture capital statistics. Generally, you don't have to look at any numbers to know that 2008 was one of the bleakest years the economy has experienced in decades. And that was true for venture capital fundraising and spending.
Let's look, though, to a more telling statistic: the amount invested in early stage companies. In VC parlance, this is known as the "seed" round. The amount of seed capital invested rose 15 percent in 2008 to $1.5 billion for 440 companies, up from $1.3 billion in 2007 for 450 companies.
What does that tell us? "That's a good bellwether for the sense of confidence VCs have in the future," says Steven Bengston of PricewaterhouseCoopers in Silicon Valley.
That number says that in their heart of hearts, VCs believe the current downturn is just the latest in a regular series of cyclical downturns, some which are worse than others. But still, a cycle that we will eventually pass through. And given the typical three- to five-year horizon for such investments, they..."

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