I am now, have been and will be wrong

This is going to hurt.

 

A lot.

 

 

No return on capital, means no returns to LPs.  No more money to recycle back into new funds, or cash available for capital calls.

 

This can also mean the herd will get culled quickly.

 

I'm not sure how many of the vintage 1999-2000 funds are still around, or how those partners are doing at this time.  I'm going to guess that many of them will not have a fund II.  Folks who are trying to set up a fund I right now are going to have problems.  When even good deals don't get done, bad deals will disappear.

 

In these times of tough red ink, it may become easy to know which companies to invest in. 

 

Just wait.

 

The companies that are still kicking after 18 months will probably be around for 18 more.

 

It's draconian, but for anyone sitting on cash at this point, there may be little incentive to cut a check today.  Given the high risk/reward of VC, the marginal cost of having cash sitting in the bank, isn't that bad.

 

An former boss used to joke that during the bust years, the BEST thing to have done was go to the beach.

 

As a money manager, during that time, if you just took the 50 mil, put it into T Bills, and came back, you'd have had better performance that most everyone, and been in the top quartile of managers, just because you sat on cash.

 

But our job is not to sit on cash.  We're supposed to go out there and find opportunities to make money.  But just because we find them, doesn't mean we'll be in a hurry to spend.  Not until it makes sense.

 

This is not going to be a fun time for anyone in the industry, from entrepreneur to investor.

 

Time to pick up your tools and build again.