Saturday, November 16, 2002

Too Much Ventured Nothing Gained - Fortune

VCs are a hurting bunch. New companies feel their pain.

"It hasn't been this bad since 1968," [Dick Kramlich of New Enterprise Associates] says. The venture capital drought that followed lasted nearly a decade...

Whether the definition of venture capital gets stretched or not, Kramlich sees a nasty shakeout that's only now getting started. Kramlich predicts that by mid-decade, at least a third of them will be gone.

The biggest losers could be the entrepreneurs who depend on venture capital to fund their startups. If new, innovative companies have a tough time raising funds, economic growth will be hard to come by. "Long term, we could lose our edge in a lot of the technology we pioneered,'' says economist Jesse Reyes of Venture Economics.

Bon French, head of Adams Street Partners in Chicago, a venture capital investor, says the funds raised in 1999 alone are so sick that three-quarters will return zero or less. That's bad news for the pension funds, foundations, endowments, and rich individuals that invest in venture portfolios.

Part of the long-term economic woes.

No comments: