Venture Capital Re-writes The Story

Two articles, one from the New York Times and the other from the San Jose Mercury News, recently evaluated the current state of venture investing.  In "Will the eternal optimism of venture capitalists survive 2009?" Chris O’Brien of the San Jose Mercury News calls 2009, "a pivotal moment for the valley's lifeblood industry."  He goes on to say:

"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 believe that on the other side of this cycle we will again see companies able to go public or be bought by other companies for high valuations."

Alan Patricof, managing director of Greycroft Partners weighed in with another viewpoint in an article that appeared on the New York Times Deal Book website.  In his article, "V.C. Investing Not Dead, Just Different" Patricof reflects on the changing nature of start-up exits and VC funds, concluding with: 

"… we as an industry have to downsize our expectation for exits as well as downsize the size of our funds. We still can produce significant returns for investors, but we cannot accommodate the size to which funds have grown in the past decade.  Venture capital is definitely not dead or even ill; rather it has just taken on a new set of dynamics. Entrepreneurs in this country are stronger than ever, and venture capitalists are the ones to nurture them!"

As a company that weathered the first tech bubble, there’s no question at Greenough that we’re facing something entirely new.  While we’ve never seen anything like this – even compared to other down cycles – we do have recent lessons to learn from and build on.  Just as VCs are looking at the investment landscape through a new pair of binoculars, we as communicators must make adjustments.  We’re speaking to a new audience, in a new climate, with a new set of priorities.