B2C Fallout Could Rival Savings And Loan Scandal
from the ouch dept
Some people are now saying that the fallout in the venture capital community concerning bad investments in B2C e-commerce plays could rival the savings and loan scandal. This is the ultimate in pessimistic viewpoints, and the article has plenty of VCs who claim it’s certainly not that bad. It’s still a scary scenario, however.
Comments on “B2C Fallout Could Rival Savings And Loan Scandal”
True in some respects
There will be a “train wreck” of a couple of hundred Internet VCs who started out two to three years ago, but those funds account for only 10 percent of the total venture capital under management…The failure of B2Cs and B2Bs ultimately means that VCs will have to go back to basics, spending more time on deals and being satisfied with historical rates of return.
This is where I what I see happening over the next few years. Yes, as has been iterated many times on this site, especially by yours truly, the marketplace was saturated. Yes, people are waking up. And most definitely yes, there were some very stupid ideas out there, though one good comment in the story is that many had good ideas that would have been a lot better becoming part of another business instead of being a stand-alone. Also, I may be wrong, so please correct me if so, but didn’t businesses in the “old days” (ie 10-15 years ago) have to make a go of it a bit more on their own, using personal funds and bank loans, both of which cost them more? On reflecting on that, I suppose many of these companies do, then sell out right away, but were VCs around then, and did they act the same way they do now? These aren’t questions of scorn, moreso RFCs.
Re: True in some respects
There were VCs around, but it was a very different business. There were much fewer VCs, and they tended to have a different reputation (that is, they weren’t the “rock stars” they are now). It was basically a small club. They didn’t do much to promote themselves at all, and in many ways were looked down upon. They did fund companies, but generally capital intensive companies like semiconductor companies that needed to setup fabs and stuff. The expectation was for returns in the 20 to 40% range, and that a large majority of your investments would fail. They didn’t expect to flip their companies nearly as quickly, either.
VCs wont be hurting
The VCs are not going to be the ones left holding the bag. They funded a bunch of B2C startups, they went public, the VCs flipped enough of their holdings to make a killing while the stock was artifically high, and now the only people who are going to suffer are all the investors who bought into these companies soon after they went public.
Ok, the VCs will probably feel a little hurt on the companies they still have in their portfolio that they can’t take public any more because of lacking minor details like a sane business plan or profits, but that’s minor.