Every economic wobble sees technology’s ciabattering classes put down their salad-stuffed sandwiches and decaf mochas to forewarn of threats to venture capital (VC) investment. And so has it gone since the sub-prime mortgage bug finally bit. OK, as a public service, here’s the skinny.
We surveyed 20 VC firms and corporate venturing arms and got the unanimous response that there is an excess of capital looking for a home. Yes, if current financial market problems tip the US and much of the world into recession, everybody will suffer. But if anyone wants to talk up a VC crunch, it just ain’t happening. Nevertheless, there are those on the other side of the fence, palms outstretched, who claim there is growing risk aversion even among business angels. To be fair, such comments come from executives at funded as well as fund-seeking companies. So where’s the problem?
Addressing EDA specifically, fellow scribbler Chris Edwards hit on something that may apply more widely in his blog, Hacking Cough (blog.hackingcough.com). He said that way too many start-ups are trying to engage journalists by coming to market with little substance in ‘stealth mode’ and hawking ‘messages’ over technology. Based on my own DAC ’07 experience, I would agree.
However, where I diverge slightly from Chris is in the suggestion that potential clients get more detailed insights. Tool buyers I know say that while this observation has some truth, the ‘insider’ views they get are just as often merely a different mix of smoke and mirrors.
The problem may well be ironic. Not that long ago, electronics VCs would be left screaming with frustration after funding pitches about technologies whose proponents had no real idea of an end-use or application. Thus Marketing 101 became a hot study in San Jose. However today, dare one say it, things may be skewing in the other direction. You get the idea and bring that to market – problem is you have not sufficiently realized it. With apologies to Dorothy Parker, there’s not enough ‘there’ there.
My suspicions have grown after talking to too many anemic EDA and silicon start-ups – sure they were always around, but now there seem so many. They aim to take things so far, then (given the retraction of the mid-to-low cap IPO market) hope for a trade sale and allied R&D cash to complete the dream. Sorry to say, but the trade buyers ain’t that dumb. Remember the dot.bomb, guys? So, while Wall Street undergoes its correction (yet investment dollars remain homeless), perhaps the Valley needs one too.