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Whither the Venture Money?

Posted on 20 July 2009 by mdavis

vc$There’s been plenty of negative buzz surrounding start-up funding lately. Bruce Biglow at Xconomy has written several pieces looking at the declining number of San Diego VC firms as well as the dwindling dollars invested in IT, wireless, and software firms.  With a drop of 72% in IT investments in the the first quarter, and 90% of deals done by out-of-town VCs (and that was in 2008, before the recession really took hold), things appear difficult for local start-ups looking for funding.

Fortunately, angel investors, such as Tech Coast Angels are still active and recognize the role they can play in keeping San Diego innovation alive. As Mike Elconin of Tech Coast Angels told Bruce, “In addition to syndicating with other angel groups, we’re joining in some deals with corporate investors, enabling the funding of larger deals.”

And then there’s the news that VCs get better performance from portfolio companies located outside of the investors’ home town. Of course, one obvious explanation for such a finding is that investors are more slective when investing outside of their own city (or sloppier when investing locally), which doesn’t really point toward an open spigot from outside VCs.

With no crystal ball available to tell us when the drought will end, it may pay to just follow some advice.

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