This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

VC Funding Down Amid Economic Worries

Investors are also wary due to skyrocketing valuations and an environment that some say has allowed any entrepreneur with a laptop and an idea to score funding.

"VCs are going at a slower pace because of a view the market got too hot and that people were just throwing money at ideas," said Jon Soberg, senior vice president at Blumberg Capital.

Adding to the heat and hype, of course, was the quarter's splashy rash of social media IPOs and S-1 filings, like the public debut of LinkedIn (LNKD - Get Report) and Pandora (P - Get Report) and filings of daily deals site Groupon and social gaming company Zynga.

In fact, while the second quarter was the strongest three month period for IPOs since 2000 with 22 VC-backed companies launching offerings, investors are wondering if the current economic woes may prevent companies from pursuing IPOs.

"We are still in the early stages of an upturn, but there will continue to be many downs as well as ups," said Bob Pavey, a partner with Morgenthaler Ventures. "And some of the downs will be painful."

Another result of the down cycle is that some smaller tech firms are having a difficult time raising capital today. "There's a lot of competition for certain deals, but there are only so many opportunities to invest," said Maha Ibrahim, a general partner at Canaan Partners. "There's a dearth of investment with mid-stage companies that maybe haven't shown enough progress to warrant a huge round."

Some tech watchers said they're surprised by a lack of confidence from the venture industry.

"It now takes as long to drive through Palo Alto, Calif., than it did during the bubble," said Steve Blank, who teaches entrepreneurship at the University of California, Berkeley and Stanford University, referring to the Silicon Valley tech hub. "You can't even hire a competent engineer [on the West Coast] and in New York -- this isn't a downturn."

--Written by Olivia Oran in New York.

>To follow the writer on Twitter, go to http://twitter.com/Ozoran.

>To submit a news tip, send an email to: tips@thestreet.com.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
LNKD $208.11 0.17%
P $14.92 -1.60%
AAPL $125.54 -0.71%
FB $87.42 0.15%
GOOG $522.31 -0.21%

Markets

DOW 17,658.99 -71.12 -0.40%
S&P 500 2,067.13 -9.65 -0.46%
NASDAQ 4,987.84 -21.3740 -0.43%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs