Grim Numbers Point to the End of the Venture Capital Era

Mercury News (08/25/10) O'Brien, Chris

The latest study from the National Venture Capital Association (NVCA) found that 10-year returns on venture capital investments turned negative at the end of last year and plummeted in the first quarter of this year, while 90 percent of surveyed venture capitalists expect industry contraction through 2015. Mercury News columnist Chris O'Brien says this trend signals a venture industry in free fall, and NVCA president Mark Heesen says that fewer innovative companies are being founded amid the increased difficulty in obtaining venture capital. The platform for the venture sector's financial model was having a substantial number of their portfolio companies hold initial public offerings (IPOs), but the IPO market has been in a holding pattern this past decade, and a revival of IPOs this year has not happened. The combined trends of fewer startups and wide-ranging consolidation translates into an impediment to job creation, and O'Brien concludes that "with venture capital in retreat, we must look elsewhere for a new model for startup funding to kick-start [Silicon Valley's] next era of innovation and the kind of job creation we desperately need."

Full article: http://www.siliconvalley.com/ci_15892001?n...