Has the Bubble Burst for VC Funding Firms?
Today’s New York Times is reporting that highly respected VC firm, Sevin Rosen, is sending money back to its investors and closing its latest fund. The reason? “The high-risk, high-return venture capital business may have turned into all risk and no return.”
â€œThe traditional venture model seems to us to be broken,â€ Steve Dow, a general partner at Sevin Rosen Funds, said in an interview.
The Times reports : “In its letter, it bemoaned what it described as ‘a terribly weak exit environment,’ a reference to the dearth of initial public offerings and to a market for acquisitions at valuations that it considers too low to deliver the kind of returns that venture investors expect.”
And this is more forward-projection than now-based : “In many ways, Sevin Rosenâ€™s decision is based not on where the market for public offerings and acquisitions is today, but on where the partners in the firm think it will be in five or more years, the typical life of a venture fund.”
When a bubble reaches the stage that the feet on the ground start sending back cash rather than invest it, can the bubble still be called a bubble, or a deflating balloon?