Sailing Through The Credit Crunch

Following hot on the heels of Nanosight’s recent successful fund raising comes news of another UK nanoparticle related company attracting a significant amount of capital. On the other hand, there are a number of high profile failures taking place at the moment, and that will only increase.

Michael Copeland at Fortune wrote an excellent and much quoted piece called “Venture firms brace for cash crunch” highlighting the problem that many funds will be experiencing when they make future cash calls on the limited partners who include banks, insurance companies and previously wealthy individuals. Add to that Sequoia Capital’s recent doom laden and much discussed presentation and you can see how the number of cash starved start ups will only increase.

A recent article in Private Equity Week illustrated very succinct why the VC model isn’t working:

“Since 2001, there has been virtually no market for VC-backed IPOs. For example, over 19,300 U.S.-based companies have received VC funding since 2002, but there have been only 351 VC-backed IPOs in the same period. There have been some ebbs and flows, but outsized VC returns were largely based on an IPO market that really hasn’t existed for nearly a decade. It is the primary reason why the median venture funds from 2002, 2003 and 2004 are underwater.”

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