A ‘Silver Linings Playbook’ approach to venture capital

Silver liningThe venture capital industry is getting rightsized, with less capital raised and deployed, smaller funds, fewer active venture capital firms, and more regulation. The exit climate has picked up, but is still not at the level required. And valuations are overall more rational, with some exceptions at the later stages or in consumer-facing momentum companies.

However, with the confluence of not one but four big market drivers (discussed below), and the rise of a new technology cycle,  we think this is still a great time to be a venture capitalist or entrepreneur.

Recent VC industry data released by the NVCA confirmed the reality of a welcome flight to quality and rightsizing trend. Key findings include:

  • In 2012, the VC industry raised $20 billion vs. the almost $100 billion in 2000;
  • 92% of this capital went to existing managers (vs. first-time managers) and 48% went to 10 large firms;
  • Overall, about 522 firms are estimated to be active, and some believe this number even lower closer to 100 defined as firms that have made at least 4 investments over the last year;
  • The median fund size for 2012 was $150 million, and the overall deal pace has come down to slightly over 750 investments per quarter;
  • Although some momentum companies are being bid up, valuations are trending lower overall according to Dow Jones Venture Source data.Continue Reading

Finding the next AWS, VMWare or EMC: Five areas where cloud startups can make it big

gigaom-cloud

In a world where, in the blink of an eye, anyone with a credit card can access what is essentially the largest computer in the world (in the form of AWS), today’s enterprise data centers are starting to look like mainframe systems of a bygone era: clunky, complex, inflexible, risky and expensive to develop and operate.

To keep up, enterprises have had two real choices: deploy their apps and services in third-party data centers, or implement private clouds. Public clouds, while attractive in their utility and cost, have not been a good option due to a lack of control and guaranteed service levels. But a third choice has emerged: the hybrid cloud.Continue Reading