I spent the week in the Valley last week. I hadn’t really been there with a VC hat on. I’ve spent most of my career thinking about public companies as a Sell Side analyst and as a strategist running corporate development for a public company.
Anybody who knows me, knows that I’ve been really excited about the large steps forward that the New York venture scene has taken over the past 18 months or so. However my view has tempered recently by both the recent data on the deal environment and by my trip.
The recent data points
- The National Venture Capital Association put out data that showed that NY did fewer deals and at lesser volume in Q4 than in Q3 and that Boston really is the number two locale for venture in terms of deals and volume in 2011. This is clearly a step back for NY or, more likely an inflated sense of the steps forward.
- The return on venture investment declined for the fourth consecutive year (see below). This is probably cyclical, but there is undoubtedly damage to be done to the number of VCs and the amount of investments to be made. In fact, a plurality of U.S. venture capitalists believe venture investment and fundraising will decline in 2012.
This is probably bad news for the 54% of U.S. 18-34 year olds who want to start a business as per a recent Kauffman Foundation survey because it means funding will be harder to get.
What this means to me if you are an entrepreneur is ‘get funded while you can’. Prioritize your company’s future existence over the value of the business. Or as Mark Suster would say, “when they are passing the hors d’oeuvre try, take two and save one for later”.
I went for a predictive analytics conference, but also to reconnect with folks I have done business with in the past. So I went to the conference. It was fine. While I was there, I learned about another conference called Launch. I was able to get into that conference with the help of a company I know here in NY. BTW thanks guys for saving me a grand. There were 40 brand news companies there at least. It was cool to say the least.
On my way there, I past the venue that Apple was introducing the latest iPad. There were a gaggle of tech journalists there covering the event.
And then the next morning, in the convention center next to my hotel, there was a Game Developers Conference with thousands in attendance. All this in a 3 block radius of San Francisco over 18 hours. And that’s just what I knew about.
The point is the shear size and scale of what is going on in Silicon Valley is so vast that it will be a long time before NY deserves to be thought of in the same way. I’m not saying I was diluted into thinking there wasn’t a big gap, I’m just saying once you see it up close you realize how much work and effort needs to be done to build a ecosystem of funders and fundees that is truly self-sufficient and provides built-to-last value.
My point here is do what you can to make hay while the sun still shines!