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Wednesday, May 18, 2005

Venture Capital : Gloomy Days Ahead?

(Via Bweek) At the TiEcon 2005 conference Promod Haque, of Norwest Venture Partners felt that over the next five to ten years there are going to be half as many venture capital firms in this business, and there are going to be half as many companies being created. Haque contends that there is a supply-demand imbalance between the amount of money earmarked for funding startups and the appetite for startups' products. There are simply too many companies created and not enough paying customers, he says. Haque feels that over the next ten years, you're going to get 30-year bond yields on venture capital investments ay fetch returns equivalent to 30 year bond yields. It's also because a glut of capital leads to valuations getting bid up even for viable companies. And Haque believes that We're in the middle of a mini-bubble again.
John Malloy, a managing partner at BlueRun Ventures (formerly Nokia Ventures), said the problem is a concentration of capital, not an oversupply. Concerns about too much venture money in the U.S. have led VCs to look for developing foreign markets like China and India, turning them into hot-spots that may soon be overrun with capitalThough spreading money around may cool down markets where capital is concentrated, it may not help returns if there aren't enough places in the world to make feasible VC investments. Interesting guys!!

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"All views expressed are my personal views are not related in any way to my employer"