Conflicting Stories About Health of Venture Capital

On Sunday, The San Diego Union Tribune ran an article lamenting that venture capital firms “are feeling pretty anemic these days.”  The article discusses the ecosystem where small companies seek venture capital to grow their businesses.  Venture capital companies seek to have their portfolio companies go public or be acquired.  When that doesn’t happen, the VC’s can’t return money to their investors.   To complete the lock-up, those who fund the venture capital firms, stop investing.  Thus, small companies are having a difficult time getting venture capital funding.  Sad news for an economy so dependent on the success of small businesses.

If it weren’t for the fact that the misery trickles down, many entrepreneurs would be without compassion or even amused at the idea that venture capital firms are having a hard time raising money.  The irony is inescapable.  However, since we are all living in the same ecosystem, we comment but dare not laugh.  There is however a silver lining.

In a separate article, only 4 days later, CNN Money reports that “The IPO Market Roars Back.”   The article reports that “In the last six months, 20 venture capital-backed companies have had IPOs. That’s eight more than went public in all of 2009, according to the National Venture Capital Association.”  Twice that many are have IPO filings in the works.

Even the smallest of entrepreneurs should be celebrating this news.  The success of the IPO markets will eventually bring new money to venture capital firms, which will make venture capital funding for your business a viable strategy.  The dollars that are starting to pour into IPO’s will soon trickle into startups.