Last Monday, the partners at Bessemer Venture Partners in Menlo Park, Calif., decided to fund two young technology startups. The week before, the firm's partners voted to invest in two other tech-related companies still in the embryonic stages, according to partner Chris Risley.
Two years ago, a single venture firm bankrolling just four startups in two weeks would have been considered lethargic. Six months ago, by contrast, there were no deals at all. The VC climate during the past 12 months can be likened to the deep freeze of a nuclear winter. But Bessemer's upsurge in activity is emblematic. A range of players, from entrepreneurs and VCs to the lawyers who serve as a young company's trusted counsel, say there are signs of life on that edge of the universe where VCs and entrepreneurs dream of creating another eBay. Blades of grass, it seems, are growing from out of the rubble.
"You're starting to hear about people getting funding for new companies," says Karl Jacob, formerly an entrepreneur in residence at Benchmark Capital, who sold one startup to Microsoft and now heads Keen.com. "Skepticism is still at an all-time high, but I don't think there's any doubt we're starting to see more VC investments in early-round companies."
There's every reason to be skeptical about any statement portending a sunny future for venture capital. The university endowments and pension funds that provided billions of venture dollars in hopes of a tenfold return will be lucky, in many cases, to recoup their original investments. And the turnaround many CEOs predicted for the second half of this year hasn't materialized. If anything, the prospects for the next six months are worse than what was seen in the first half of the year.
Another reason for skepticism is that VCs as a breed are congenital optimists. VCs are in the business of believing; their every pronouncement of good times ahead should be received with a healthy dose of wariness.
This time, though, other players are saying that firms might be tentatively dipping their toes into the high-risk waters of early-stage financing. Lawyers, for example: Scott Dettmer, a founding partner of Gunderson Dettmer, a Silicon Valley law firm, has served as consigliere to scores of fledgling companies. In recent weeks, he's noted a "thaw in the venture community." Entrepreneurs are once again seeking legal advice, freshly minted business plans in hand. He and his partners are being asked anew to review the details of early-stage venture deals - a fact he attributes to a return to fundamentals among entrepreneurs.
