Sarah Lacy is currently working on TechCrunch senior editor. It is also a prize-winning journalist and author of two books of critically acclaimed, "once you're lucky, twice you're good: the rebirth of Silicon Valley and the rise of Web 2.0" (Gotham books, April 2008) and "a brilliant, Crazy, cheeky: how the top 1% of entrepreneurs profit from global chaos. ? Read More
Dow Jones VentureSource released their second quarter numbers for venture industry today, and there's a reason that they do not dominate the headlines. They are pretty boring: in General, investors put $ 8 billion in 776 transaction in the second quarter, a decrease of 5% in terms of invested cash and 2% in terms of transactions in the United States. The average amount raised per transaction was $ 5.2 million, up from 4.6 million dollars full year earlier. Yawn, right?
However, the fact that the figures are so unpopular that makes them interesting. It reinforces the fact that people like me claiming months: a handful of hot companies not bubble make.
Business venture has always been outrageous one-sided: 95% of the profits come from 5% of the transaction. But while this remains true in the late 1990s, the total number has increased astronomically. Here is what happens in the bladder: a rising tide lifts all boats.
This is clearly not happening here. Public markets: LinkedIn decreased in price on his level, but held at healthy price around $ 100 per share, as you would expect from a 10-year-old, still developing company with some compositions of the market, which does not float many shares to begin with. Pandora is trading around $ 18 per share, close to its 52-week low than its 52-week high. Smaller issue as Zillow has cooled dramatically with its huge opening of pop, but about 30% higher than its original price. And again, Zillow is a mature business. There are some crazy volatility in the first days of the stock, no question. However, it seems more widespread effect market from any of them, and each of them quickly settled into a more rational price territory. Not what you see in the bubble.
Let's look at the secondary market: the focus is still the big names of the five or six social media. A real opportunity for the market to take off a liquidity for the company "below the fold"-so to speak. Companies that have established a solid $ 100 million in revenue or so businesses that are too small to go public and employees who need some liquidity. There are simply not raging speculation grandmother not Middle America, buying shares in these names. Indeed many of these companies just now trying to wrap their head around how they could best use secondary markets to their advantage. Therefore, secondary markets remain relatively small phenomenon in the world of finance.
And now, we've got new numbers from the world of enterprise backup to the same mood. When you dig a little deeper, described next. Healthcare Dealmaking down 12% and invested capital is 17%. Investment in biopharmaceuticals where destroyed with drop 25% of the transaction; investments in medical devices were flat. Software related companies were on the brightspot in health care, but deals equaled only by 5%.
Similarly, took the cash going into clean tech nose-dive in the second quarter. Sector raised $ 556 million for 29 deals, less than half of cash that the 30 clean tech companies raised in the second quarter of 2010. Finally, it is in this year John Doerr will produce these predicted cleantech Netscape moment as IPOs. Doerr is one of the smartest investors in the industry. You have to think in raging bubble, his prediction could easily prove true. Instead, the category looks colder than ever. Many VCs seem to be wondering whether the cynics were right back in the early to mid-x when they said that cleantech is capital-intensive and long-term winnings in the ecosystem of modern venture capital, dominated by the instant gratification of the consumer Web.
Even the enterprise software sector with some bonafide hot names and recent liquidity-had a slight drop in overall performance. One hundred and twenty-five companies raised $ 1 billion, a 15% increase in the capital over the past year, but it was 3% drop in overall transaction solutions.
Now consumer services do well? Of course. But this is easily skewed by a few simply mega-funding. Indeed the figures showed that the increase was mainly in cash, not in general transactions. Capital raised by consumer companies jumped 51% in the second quarter of 2010, but the transaction outcome was only 7%.
When you dig deeper subcategory that includes social media, entertainment and consumer Web only saw pop 25% cash raised more than a year ago and saw a slight decrease in the transaction. In aggregate consumer Web company raised less than $ 1 billion in the quarter. Clearly a bit big mega finance are driving these numbers and there's not even enough of them to remove the top line numbers.
I've said it before, I'll say it now and I'm probably going to keep saying it: a handful of Surging companies with a heady valuations are not macro economic phenomenon. It is only in the worst case, a handful of really overvalued companies. The only thing you have to offer that Silicon Valley is located in the bubble are headers, because the number just still does not exist.
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