Efficiency the New King of Venture Capital

The credit crunch and economic slowdown has everyone changing courses these days, and certainly venture capitalists are among the mix. The new name-of-the-game for venture capital investments are efficiency and effectiveness over potential reward.

Many venture capital offices have turned their attention to deals struck within the last few years, hoping to shore up those successes and ensure good returns on moneys already spent. Finding new venture opportunities, and the money to seed them, in this economy is proving difficult, and many venture capitalists feel that their best bet now is to focus on stabilizing their current portfolio, rather than growing it.

Many firms internationally have mentioned that the intend on doing fewer deals in the 2009 years, such as Helion Venture Partners and Draper Fisher Jurvetson. With the expectation that valuations will continue to slip throughout the year, many second and third rounds of financing will actually be performed at a loss. The key will be negotiating deals with firms where this valuation is tied more to the economy than the actual value the company offers.

Source: LiveMint

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