Tuesday, July 29, 2008

The VC energizer bunny

It keep going and going...

Despite talk of a tech bubble earlier this year, despite the difficulty of getting to an IPO, despite the credit crunch and it's effect on cash availability for some young companies venture capital investment dollars continue to flow in - as reported by the San Francisco Chronicle.

Diagram via CNNmoney.com

However, while Silicon Valley continues strong, the strength is not consistent by geography. The Washington Post reports that local investment in the Washington area fell 15% year over year "It's really a question of staying the course and surviving," said Roger Novak, general partner of Novak Biddle Venture Partners in Bethesda. "This is the worst we've seen."

It is taking an average of 8.6 years for a venture-backed company to go public, compared with four years a decade ago, and venture capitalists think that's unlikely to improve soon.

As the time horizon stretches out you can see that the total number of deals is down in Q2, and there is a swing towards later stage deals which should have a more secure path to liquidity, albeit at a lower multiple. But this means venture firms are staying with companies for the long haul and placing bigger bets into an uncertain economy - and I do believe that the good ones will reap the benefits because valuations are more rational these days.

At some level Silicon Valley VCs are like the energizer bunny. They just keep on going (thankfully for our local economy). I can attest that as we hire engineers, which we are doing in San Mateo right now, it's as competitive a hiring market as ever. Fiercely competitive. There appears to be no shortage of well funded, exciting companies for good engineers to go and work for.

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