Venture Capitalists Have Flashbacks as Institutions Dump Stakes
Universities and pension managers are dumping their holdings in venture-capital funds, depressing values by as much as 50 percent as the financial crisis extends to private companies.
Investors have venture-capital stakes valued at more than $2 billion up for sale, double the $800 million this time last year, said Hans Swildens, principal at Industry Ventures LLC, a San Francisco-based firm that buys venture stakes.
The glut may lead to a chilling in the venture-capital industry that rivals the slowdown between 2000 and 2003, when investments fell 81 percent, Swildens said. A decline in demand for startup investments may push their value lower and slow the development of new products.
``2009 will feel like 2001,'' Swildens said in an interview. The current environment feels like the third quarter of 2000, he said. ``Everyone knew the market had changed.''
Stakes in venture-capital funds are changing hands for as much as 50 percent less than their original value, said Bondurant French, chief executive officer of Chicago-based Adams Street Partners LLC, which advises clients on private-equity investments. Investors are willing to shoulder a loss because they have few other ways to liquidate their holdings, he said....MORE
And from Greenlight:
Green technology companies are already feeling a pinch from the world credit crisis, but, if history is any guide, the problem will get worse three years from now.
That’s the word from Richard MacKellar, managing director at Chrysalix, an early-stage energy venture fund and one of the first VCs to invest in clean tech. (MacKellar will speak at Greentech Innovations: End to End Electricity on November 17.) The problem is that VCs operate on a different timeline than the rest of the economy. A large number of firms already raised a significant amount of capital in 2006, 2007 and the first half of 2008. They now have to place this money somewhere. As a result, startups will continue to receive funding. The money spigot may not be turned up on high anymore, but VC millions will still find their way to the market.
But three years from now, new startups and those who are emerging now will need another infusion of capital. By then, a good portion of these existing funds will have been used and limited partners may still feel conservative. Thus, getting cash will be tougher....MORE