Sunday, June 05, 2005

Is the Venture business permanently a seller's market

Bill Burnham has that thesis that's worth a read...

While deal flow undoubtedly remains an important part of venture capital, changes in the venture industry are making deal flow far less important and rapidly making deal flow-centric business models unsustainable for all but a few venture firms...Net, net the cold reality is that the venture business is now clearly and permanently a seller’s market.

Bill does a nice job of laying out the changes that have taken place in the last 20 years that lead to this thesis. Though we hadn't thought about it in these terms, it validates the approach my firm has taken. As most of our clients are post-angel and pre-institutional from a funding perspective, it's common for us to play a "matchmaker" with VCs and private equity firms. Our value-add, beyond having the contacts, is understanding the expertise of the funders. As has often been said, it's always better to have "smart money" whether it's angels or institutional investors. They not only can provide operational guidance, but they can also help find future funders/acquirers.

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