Is The VC World Dead or Just More Selective?

April 17th, 2007 | Categories: financing, launch, markets, trends

Is it just me or has the VC world slowed down over the past couple months?

Six months ago, TechCrunch or GigaOM would report numerous VC fundings everyday. Now, they seem less frequent and more dispersed. So… is it a case of VC money (and private equity) drying up, or is it that the VC’s are simply picking and choosing their investments more carefully?

My gut says it’s the latter. Why do I say this? Well, a typical A round of financing tends to lie somewhere in the $1-5 million range. Below that it’s usually considered a friends and family round. Above that is usually considered a B round.

We are seeing less and less rounds falling within these boundaries. Perhaps, some are carefully placing smaller amounts of money in more start-ups to hedge their bets. This would explain the ‘under-the-radar’ financings that don’t get much press or media attention.

But interestingly enough, we have witnessed a few unusually large A rounds of financing take place. Forget the typical $1-5 million dollar range. Take a look at these recent investments: just raised $25 million in their A round and Spock raised $7 million in an A round (with no BETA product even). Now obviously these are special cases, but it should be noted that these types of Internet-related start-up fundings are rare. Or at least they used to be.

It should also be noted that Aggregate Knowledge, another prominent new-comer, just raised a whooping $20 million after their initial (and substantial) $5 A round.

So is VC money really dead? I doubt it. We are definitely not seeing the same bubble warning signs as the late 90’s. The days of a good domain name and a slick Powerpoint presentation are gone. Nowadays, it takes a business model, and perhaps… just perhaps… a revenue model to convince a VC your company is a worthy investment.

One Comment

  1. Dead 3.0 Says:

    Aidan, a year ago, VCs were throwing money around because they wanted a piece of the pie. This is no different than many other brand new industries/business models-VCs see their peers making investments and they want their shot at the next GOOG, MSFT, etc. As the VC community becomes more knowledgeable about the business models and the sector, they become more selective. Aggregate Knowledge (AK) is a good example… they aren’t another me-too consumer-facing advertising-driven website. Their credibility is their track record; if their system doesn’t work, they don’t get customers. It’s refreshing to see companies with a revenue model and a harvest strategy getting the funding they need. More on AK on my blog at

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