One additional factor that might embolden some venture capitalists: The balance of power has again swung away from the entrepreneur and back toward the VC. Kim Malone is CEO and co-founder of New York-based Juice Software. In chats with her company's venture capitalists and with fellow entrepreneurs she knows from business school and social circles, she notices a newfound willingness of VCs to brave the early-stage waters. But in no small part that's because the prices and deal terms they can exact are so favorable to the VCs' position.
"The valuations from an entrepreneur's point of view are horrible," Malone says. "You really have to be willing to take a bath in terms of valuations if you want to sign a deal right now."
Of course, not every venture capitalist believes the time is ripe again for early-stage investments. Matrix Partners in Waltham, Mass., for instance, is not quite ready to dive back into the game. "There is still way too much money in the venture industry," says Paul Ferry, one of the firm's founding partners. "There are still too many companies that look like other companies. ... There are too many copycats, which mucks it up for everybody."
Others are not convinced that the renewed hopes are anything more than wishful thinking on the part of the venture community. "People are talking about investing," says Kevin Werbach, editor of Release 1.0, a widely read technology newsletter. "But from where I sit, there aren't that many new deals. VCs are still shell-shocked and scared."
Maybe for good reason. Venerable investment banker Sandy Robertson is among the better-connected players in the world of technology finance. While Robertson sees a slight rise in early-stage financing, he's not convinced this newfound optimism will help anyone but the most highly prized venture firms.
"With so much money out there - larger by a factor of 10 compared with five years ago - only the top-tier venture capitalists will see the best deals, the deals built around real engineering breakthroughs," Robertson says. Still, those top-tier firms had shut themselves out. Now the doors are open again - if only a crack. 7
Vishesh Kumar and Silvia Cavallini contributed to this report.
