How VCs Are Coping With the Downturn

Even as VCs look to stimulate interest among strategic buyers, they have another issue to solve: Many of the VC backers are pension funds and endowment funds. And these funds are now overexposed to the VC investments, because of a relative plunge in the value of other investments that have pushed stated VC holdings above mandated thresholds. That means pensions and endowments can no longer be counted on to provide fresh capital to VCs and may even look to withdraw some current investments.

The net takeaway: VCs would certainly like to see the major tech players relieve them of some of their major holdings and boost their cash positions.

Next, I will look at the emerging trends in the wireless space, how it may shape the IPO market when it reopens, and how Google intends to become a wireless giant.

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Know What You Own: In the telecom space, the players with the highest market capitalization are AT&T(T Quote) and Verizon(VZ Quote).

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First, I discussed how the current downturn has thrown a wrench into the venture capital/IPO cycle. Now, I am looking ahead to the themes that will dominate in the next wave of IPOs. To get a read on the future, you need only look at the actions of Google (GOOG Quote) over the last few years.

More than a year ago, Google embarked on a high-profile effort to shake up the process of awarding wireless bandwidth in the valuable 700 MHz spectrum. Though its bid was unsuccessful, Google ultimately forced Verizon (VZ Quote) to overpay for a winning bid.

But that wasn't Google's true aim. Instead, by heavily lobbying the FCC, Google increased the heat on Verizon to open up its network.

In the last week, the wireless environment has opened up even further, as the FCC has ruled that "white space" -- the spectrum traditionally allocated by broadcasters between channels -- can also be used for wireless broadband use. The signal strength for white space is far stronger than Wi-Fi, and implies that you'll soon tap into networks well beyond your home or office floor -- and it might not cost a dime.

This is all great news for Google and a host of upstarts that hope to get a slice of the fast-rising mobile content business. For VCs that are backing business models based on mobile applications (including mobile digital advertising, a truly local business) and social-networking sites, these moves are a godsend.

Conversely, this could be real trouble for Verizon, Time Warner (TWX Quote), Comcast (CMCSA Quote) and others that have been able to charge $30 to $50 a month for broadband access.

In this context, you can start to envision Google's grand plans for Android, and feel the excitement of any VCs that bet on disruptive opportunities created by an open wireless environment. The huge popularity of Apple's (AAPL Quote) iPhone also instills confidence that the stars may once again be in alignment for tech -- once we get past this downturn.