Venture Capital Funding to Become More Scarce

Down public markets can obviously have a negative impact on a venture capitalist’s exit opportunities (see the fact that this year we experienced the first quarter since 1978 in which we did not have a venture backed IPO), but the argument has always been that VC’s are somewhat insulated from fluctuations felt on the floor of the bourse as investments are made with a medium, to long-term strategy in mind. However, as Fred Wilson of Union Square Ventures points out in this interview, many don’t view the market events of the past several weeks as your everyday run-of-the-mill downtime. Rough times always have the psychological effect of causing most people to become more conservative in their financial decision making and this will be witnessed in full force in the coming months. This could be a good thing as many casual investors and part-time angels will clamp shut their wallets, thus weeding out many in a field that had grown too large. The sophisticated investor knows this is a long-term asset class and won’t flinch in the face of adversity.

So for all the prospective entrepreneurs, the world will continue to turn. Good ideas will still get funded. Common sense shall prevail. A good deal will get done in even the tightest of times.