25 July 2006

Here We Go Again...

Why am I not suprised by this?

“It appears as if the venture capital industry is slowly ratcheting up investment levels for the first time in four years, and these increases seem to be directed in a prudent manner,” Mark Heesen, president of the National Venture Capital Association said in a press release. That might have been true, but the recent trend of big money investments shows that prudence might be giving away to old-fashioned avarice.

Om Malik makes clear why the next dotcom delirium is inevitable:

Before they can go out and raise cash for new funds, many of the firms have to invest the remnant money from their circa 2000-2001 funds. Otherwise, Limited Partners might be asking them the difficult question: Why should I give you more cash when you are sitting on a pile already? A good example would be Oak Investment Partners, which raised $2.56 billion to become the largest venture capital fund ever.

In other words, there is simply too much greedy money in the system, some of it left over from the last VC feeding frenzy at the trough, which in the coming days absolutely must be spent, whether or not it makes sense. Did anyone say bubble?

2 comments:

Marshall Lebovits said...

I'll say "bubble". The entire capital system is awash in capital - private equity and commercial banking as well. In the lending world, the banks are taking on more risk and getting less spread in return. This is consistent with what I'm hearing at the private equity level. It's going to be a very interesting situation when the first wave of default notices are sent in the mail! www.marshall-showmethemoney.blogspot.com

glyn moody said...

"Interesting" is one word for it: I'd prefer "scary" myself....