In an article published today (Venture Capital to Suppress Its Appetite for Risk in 2013), the Wall Street Journal reports that venture capitalists have dramatically lowered their appetite for risk, reducing the power of Internet entrepreneurs who are seeking funding.
The article notes that:
- In light of disappointing stock-market performance of Facebook, Zynga and Groupon, VCs are investing less in consumer Internet companies.
- During the past year, valuations have gone down significantly.
- On a quarter-over-quarter basis, the number of deals, the amount invested and the percentage of “up” rounds all have declined.
To some extent, however, declining interest in consumer Internet presents opportunities for companies in other sectors. The article states that Big Data, next-generation storage and cloud computing have gained investors’ interest.
Meanwhile, according to the article, some entrepreneurs have not yet received the valuation memo: While 78% of CEOs predict a jump in their companies’ valuations next year, only 38% of VCs are making that prediction.
Dana H. Shultz, Attorney at Law? +1 510 547-0545? dana [at] danashultz [dot] com
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