Posted on Thursday, 11th December 2008 by Cheyne
Techcrunch is reporting that venture capital firm Accel are to announce two new funds that amount to about $1 billion. In this economic downturn, most VC firms have greatly toned down their number of investments and are focusing on ensuring that their portfolio companies are conserving cash as much as possible for this ‘economic winter’.
While it is obvious that the current economy is not a positive thing for any business, lets look at some of the positives that could come out of this if you were a VC firm continuing to make investments.
a) VCs can get larger equity in a company for cheaper as a result of less funding competition.
b) A recently funded company could be able to acquire other businesses for considerably less due to lack of other suitors.
c) There is currently a lot of talent out there without a job and looking for something to do, such as take a chance at a new start-up for stock options or start their own company.
d) Work is cheap. People who have recently been laid off are unable to command huge salaries.
Accell are to use this new money to invest in later stage rounds, which means that they will be able to acquire a nice chunk of an already established business for a lot cheaper than they would have a year ago. It’s a big risk, but that’s the VC model. Accell have the opportunity to come out of this downturn very successful indeed.
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