“VC shutdown underway? One entrepreneur told me her deal with Intel Capital fell apart after they lowered valuation from $5 mil to $1. Ouch.”
10 hours ago
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Thomas Hawk, mikepk, Charlie Anzman and 20 other people liked this
I think we have not reached the bottom until now. Worse luck! - Marcel Janus
wow, crazy. tell her to contact me if she needs any development - Jason Pratt
I am trying to remain personally optimistic, but I don't believe the bottom has been reached. - Louis Landon
This is what I love about being a student and working with other students. I can do everything much cheaper. $1 mil would probably fund my current business for 2+ years easily. - Daniel Zarick
It'll get worse before it gets better. Next two quarters will be tough. - Patricia
@Louis Landon Me too. I still hope thing will get better. - Marcel Janus
Eventually, things will get better. - Patricia
how people/firms/investors respond in bad times is much more telling of their character than how they respond in good times. they're doing it because they think they can get away with it. that window will close. - Bryce Roberts
Look, things are really bad and getting worse. They will eventually get better as Patricia says, but it will be hard for very many people. No one is really insulated, but there's no point in panicking or worrying about what you can't fix. However, we all should try to understand WTF happened and learn from it. I just shared a speech today by Charlie McCreevy of the European Commission in my timeline that everyone should read. It's simple and clear. - IRWebReport.com
better worse better worse better worse better worse better worse ... been going on forever, every up has a down ... why complain about the inevitable? - Gregory Lent
I don't doubt that VCs are having a tough time, but Intel Capital wanting to lower the valuation to $1 doesn't mean Intel Capital is having a tough time. It means some of the previous investors who participated in the rounds leading to the $5 mil are no longer putting in more money, and Intel wants to squeeze them out. They don't want to carry nonperforming investors. Those other VCs might be shutting down, I guess. - Denton Gentry
You kinda get the feeling that the 'world' is on hold until someone, anyone, suggests a REAL solution. Crazy stuff - Charlie Anzman
I have to say I agree with Denton. Value of a company is still consistent with the market. At the end, you're only worth what somebody's willing to pay. - Patricia
I also agree what Denton and Patricia have said. - imabonehead
I recently had one of those 'holy shit' idea moments, and I am wondering if I'll even be able to get seed capital. - Michael R. Bernstein
In many ways this is just a sign of a smart VC is it not? I'm hearing that most VCs are going to be lowballing valuations in 2009, using the economy as the 'excuse'. Extend your runway if you can and wait until the funding environment isn't as unbalanced. - AJ Kohn
I can understand if the lowered value was just 1M but from 5 to 1? That's gotta suck - Canada's Web Shop
Well the other thing is that VC isn't always the ideal expansion route. Everybody gets excited about, because it can be useful and it can be the right thing - but as somebody mentored by quite a few successful serial entrepreneurs, and a few VC, everybody says the same: don't do it unless you have to. The barrier of entry and costs of web business are so low. I went three years self funding, then started to look at financing options which I didn't end up needing. In a nutshell, it's not the only way to skin the cat in financing a startup. - Patricia
AJ, if I invested in a startup now, I would invest much less than a year ago. I think the risk in the economy is enough of a reason to give a lower valuation, since there is higher risk you won't get your money back. - Chris White
@Chris: Absolutely. I'm not saying there's not a real risk. The risk/reward ratio is steeper in this environment. But VCs are going to over-correct IMO, both to protect against risk and maximize reward. - AJ Kohn
As someone working on his own startup right now I can say categorically that if you are looking to raise VC money you are nuts. There IS NO potential for massive growth right now... there is no expendable income in the economy. Bootstrap - find partners and customers... sell what you can and try and survive. That is all. - Brian Roy
Another data point here is that very serious suitors of Genalyte, the company I work for, pulled back. We're now in survival mode, but that's not to say we aren't able to get some interest from some of the bigger players. My industry is biotech, and although the sector is down like everything else, we've not have a industry-specific bubble and crash yet. I think there's tremendous potential for growth in our sector for technologies that present significant cost savings over competitors. - Mr. Gunn
As CEO of a startup, I gave up on Venture Capital in September. Anyone paying attention could see the signs of slowing investment since the spring. But September slammed the door. What worries me now, though, isn't the VC markets. What worries me is the credit card market. AMEX is slashing credit limits, which will hurt small businesses and slow innovation far more than any VC slowdown. Real innovation happens on the back of credit, until a case can be made to risk-averse VCs that there's a real business opportunity. When credit is gone, our economy is like an engine running without any oil. - Chris Kenton
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