Splintering of VC Firms; Seed Stage Companies Continue to be Under-served
(note: this the third of a series of 4 VC predictions for 2007)
By Jo Tango, Kepha Partners
1. Web 2.0 growth slows: On-line advertising price points have started to flatten as has ad volume. The last time this happened in 2000, it created a massive correction in revenue, and hence, expectations and valuations.
2. Splintering of VC firms: More individuals and sub-groups will spin out of established venture platforms to start their own firms. I predict that in 2007 1 major Boston firm will completely splinter, as will 2 Silicon Valley firms.
3. Increased segmentation of VC landscape: two distinct segments will continue to emerge among VC firms. There will be "venture bankers" who pursue late-stage opportunities and legitimately try to fill the void that Summit and TA have created when the latter started pursuing LBOs.
There will be a sub-group of "venture builders," who continue to focus on early stage.
4. Seed-stage/start-up opportunities will continue to be under-served: Even among early-stage venture firms, seed deals are a small minority of the opportunities. Even the early-stage firms have significant capital under management, which forces them towards larger deals.
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