The most pragmatic reason VCs give for the uptick in venture activity: They have more time to hear pitches, to hold tryouts. The same VCs who just 18 months ago were boasting that they sat on more than a dozen boards have spent the better part of a year mired in damage control.
"VCs have been on the sidelines not so much because we've been scared to invest, [but because] we've been so busy baby-sitting," says Lise Buyer of Technology Partners in Palo Alto. By now, however, the plug has been pulled on many time-draining companies. Distressed firms have been repositioned, workers laid off. For many companies, surviving the downturn is a matter of keeping their fingers crossed.
"I have to believe this period when people have been so busy cleaning up their portfolios is coming to an end," says Erik Straser, a partner at Mohr, Davidow Ventures in Menlo Park. "You'll see more problem children dying off this fall, but for the most part the dirty work has been done."
Rents are down, so once again it's possible for a young firm to find a decent office. The services of the ancillary professionals - the lawyers, recruiters and marketing pros so hard to reach 18 months ago - are available at reduced rates. There are a great many talented free agents floating around, either because of layoffs or because a company they helped found failed.
One positive after-effect of the market crash is that VCs have regained a sense of discipline that has made them more sober about picking investments. "There's a premium again on preserving capital," says Brad Koenig, an investment banker who heads Goldman Sachs' technology group. "There's again pressure to keep the head count and other expenses low until key metrics have been reached."
Also, the dramatic drop in the stock market, especially the Nasdaq, has weeded out those who arrived in Silicon Valley in search of a quick strike. "The armchair entrepreneur is gone, the guy who had a half-formed idea and wanted to see if he could get money," says Dave Cremin, a partner at Los Angeles-based Zone Ventures. Those who remain tend to be the technologists in the startup game because they think they've hit on a real breakthrough that could lead to a strong company.
