I was on the road last week and didn’t have a chance to get to this. The NVCA came out with the latest venture investing numbers. The good news is that there are investments being made, the bad news (if you are an entrepreneur) is that most of the investing is going to the later stage deals.
I find this very interesting. I hear from a lot of VCs that the early deals are the most interesting, it’s just that finding the right ones or getting in at the right time is proving to be trickier these days. It takes a lot less money to create a start-up right now and it’s easier for entrepreneurs to show some traction and growth on pennies before pulling down a big funding round. The entrepreneurs starting these companies now either have an established network, or don’t want to take on a first round from a VC. What typically ends up happening is that the next time they go to raise a round of funding, they’ve proven themselves, have more customers or users and their valuation is higher. This makes it more expensive for the VCs to get in and then the deal becomes less interesting or too expensive. So while it’s easy to blame Sarbanes Oxley, etc. but I think that valuations are playing a pretty big role in early stage financing – or lack thereof.