Editor's note: the following guest post, Nick Ducoff, CEO and founder of Infochimps.
Series a financing are on the decline. They peaked at 283 in 2007 and at the rate of crack barely 100 [1] this year (all data from CrunchBase until the end of June, it was not perfect, but better from me, see chart). They also declined in relative terms, representing almost 40% of all shares of the Fund in 2006 and less than 20% since the beginning of the year. I believe there are two main reasons for this: 1 seed and growth) series 2) Ho-Hum land environment since 2008.
Seed rounds (including projectiles Angel, but excluding debt) is less than 10% of all shares of the Fund in 2006, but accounts for more than 20% when they peak in absolute and relative terms in 2009, when Super Angels "shook up button venture capital. Incubators Y Combinator, Techstars as and 500 startups (with their demo day yesteraday) churning startups, and tools such as AngelList made it easy for Angels get access to early stage deals. In addition to the game, further expanding the base of early stage investments actively VCs. There was so much competition at an early stage, last year there was even talk of a conspiracy!
This is why Business Insider article on Monday called venture capital: no longer business small investments in early stage companies inspired me to dig in and see for yourself what happens. VCs are less likely to lead or participate in subsequent rounds, if the company is the clear winner in its class. In addition the VCs had to support their alleged winners more because exits were fewer and farther between. Even with the growth of a seed series (nomenclature of which is not used uniformly), seeds, and a series of transactions collectively accounted for almost half of all equity financing in 2006, and currently represent less than one-third.
So where has all the money? Companies that make it in Serie B, tend to live, and unfortunately for the VCs, they live longer and more before release. Silicon Valley "the undertaker" summarized it beautifully, "when it comes to series b round, you'll see people actually trying to pull the coach through the next Depot. That is why a series of C-E, which only accounts for about 20% of all shares of the Fund in 2006, are on PACE to be double that this year.
The author of the unthinkable: who survives when disaster strikes — and why, Amanda Ripley, said: "[the] brain works of pattern recognition, and when it is in a very frightening situation, he sorts through the database for the script. This is one of those times. The stock market is down 10% from the peak of the latter, the angels, who have a splash in the investment of seed were skittish and VCs are doing exactly what is expected to protect their children are more likely to survive.
However, institutional investors have long-term time horizons and to invest in early stage deals to keep their transaction stream. Even when things seem to be at their worst in 2008 there were more seed and series a investment as a percentage of all equity financing had not been achieved to date in 2011. The pendulum will swing back. It's supposed to.
Nick is the CEO and co-founder of Infochimps.com. Previously he was a lawyer on the Andrews Kurth and co co-founded various startups, including JDspace.com. Nick blogs at http://nick.vc and has ...
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