It reminds me of the chorus to Bob Dylan’s Ballad of a Thin Man: Something is definitely happening here, but you don’t know what it is. And neither do I. But Scott Shane and all his data give us a pretty good idea. Scott has excellent in-depth data, complete with some eloquent business charts, in his “Trends in Venture Capital” post yesterday on Small Business Trends. He links in that post to this presentation, with even more data, from which I took this chart:
Thanks Scott, that’s very eloquent. What it shows is the total amount of investment money managed by venture capital firms, in billions of dollars, from 1982 through 2009. You can see in the chart how it shoots up during the dot.com boom, then levels and, more recently, falls to about half as much.
What’s going on is a combination of factors: the great recession, of course, but also a drought of VC companies going public, startups taking longer to reach exit, a lot of portfolios worth less now than they were three to four years ago, worries about changes in taxation, and a lot of new technologies giving startups ways to get themselves up and running with less money than it would have taken 10 years ago.
Credit Scott for drawing the chart, and the National Venture Capital Association for supplying the data.
And consider this: Decline in venture capital is not good news for startups. Of course. No way. But still, you in particular might be much better off without outside investment. Better no investment than an incompatible investor. Hooray for bootstrapping.