Venture capitalists tend to be an optimistic lot. Keep in mind that they routinely invest millions in risky ventures (many of which have no profits or even revenues). But just like every other sector in the financial sector, VCs are also running scared.This is according to a survey from National Venture Capital Association (NVCA). A whopping 92% of the respondents believe there will be slow activity in 2009.
Basically, it will be tough for existing companies to get capital. And, of course, it will be even tougher for new companies to snag VC funds.
OK, but what about hot spots, such as cleantech? Things look grim there, as well. For the most part, such deals require huge amounts of capital investments. But, with the credit crunch, it's going to be tough to get debt financing. Of course, the plunge in oil prices is no help.
All in all, VCs see little hope for any category. Instead, a company needs to have an extremely compelling value proposition, such as a Facebook. If not, then company founders need to anticipate longer time-frames to get capital, tougher terms and lower valuations.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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