Interesting FT viewpoint on the Venture Capital market

Here at Capital2 we try to work with upcoming technology companies across EMEA. These smaller, dynamic organisations are the real drivers behind the entire ‘technology’ market as they bring innovation, new ideas and cutting edge techniques to the wider sector.
However according to the FT article pasted below which appeared on www.ft.com on the 28th August, the Venture Capital market (which supplies the funding for these start-ups), could be in a precarious position.
So, what coul dbe the fall out from this?? Read the article and see!!
Venture capitalists are professional optimists – they have to be. How else could they keep investing in new businesses where the obstacles to success would seem insurmountable to most people?

But sometimes reality just has to be faced, and the reality in front of the VC industry right now is not pretty.

Bill Gurley of Benchmark Capital sums it up here: half the industry could be swept away by the current downturn (though as an optimist, he clearly thinks he will end up in the fortunate half).

I confess to being one of those who has (wrongly) anticipated this moment for years – since the tech bust that began the decade, in fact. So why didn’t it happen before, and why will it come now?

The way Gurley, whose past investments include SecondLife, OpenTable and Shopping.com, describes it, the venture capital business is really little more than a cork bobbing about on the turbulent sea of private equity. Forget VC investment returns, which in aggregate have been pretty woeful for years: that didn’t stop the money from continuing to pour in, as institutions continued to “rebalance” their portfolios towards illiquid investments.

I had thought that the glaring over-capacity in VC in the wake of the tech bust would force a shake-out. But in a private market where valuations represent estimates and it can take many years for the final reckoning to arrive, I guess that belief now looks a little naive.

What matters now, as Gurley points out, is the wholesale flight from illiquid investments that has set in. The endowment world has been traumatised by its excessive fondness for private equity and presumably won’t make that mistake again (well, not for a while, anyway). The managers who committed the error have moved on and the next bunch will discover a new fondness for liquidity.

How much does this matter to the technology start-up world?

I continue to believe that a significant reduction in available capital needn’t prevent good businesses from getting backing, or hold back the overall level of innovation in the economy. Silicon Valley revels in the glorious waste that comes from having many entrepreneurs chasing the same business opportunities, on the grounds that this Darwinian mess will eventually yield a handful of successful companies.

But how many online video sites or thin-film solar start-ups does the world need, and why should the funding of marginal players do anything to increase the chances that the best companies will rise to the top? (They would rise to the top anyway, with or without the garbage.)

So, bring on the shake-out.

There’s just one thing, though. Given the nature of the business, Gurley reckons it could take five years or so. It’s probably better not to hold your breath waiting for this one.

Social Networking and Job Searches

Interesting stuff from Reuters.
LOS ANGELES (Reuters) – Job-seeking in this 21st century recession may just have gone viral and mobile.

Since the start of the recession in December 2007, about 6.7 million workers have been laid off according to latest statistics — at a time the popularity of social networking sites such as Facebook, LinkedIn and Twitter have exploded, drawing millions of users per day.

As these sites continue to alter social and cultural landscapes, they are also transforming the job search process, enabling more and more people to connect with potential employers, promote their own skills, set up support groups and search for job leads and contacts.

“Mobile technology and social networking has shifted the whole job search paradigm,” said Susan Joyce, editor of Job-Hunt.Org, a site offering online job search tips. “You don’t need to stay glued to your phone or computer at home anymore.”

With mobile devices playing a bigger role in the social networking phenomenon, any job hopeful with a Web-connected or smartphone can now compose resumes, view job listings and contact prospective employers on the go.

Joyce suggests creating a resume through popular networking site LinkedIn — a business networking site that lets users create a profile, list skills, work history, employment goals and contact details — is among the more secure ways to compile a resume online.

It can be done via Research in Motion Ltd’s Blackberry device or Apple Inc’s iPhone, she added.

“The LinkedIn Profile is really the resume of the future,” Joyce said. “The ‘resume’ on LinkedIn is really the standard LinkedIn Profile, but it’s very popular with recruiters looking for good candidates.

“You could build your whole LinkedIn presence from any Web-enabled phone.”

There are any number of job-search applications — downloadable programs for your phone — available for the iPhone, for instance, including one piloted by recruitment consultancy Harvey Nash. Others pool information on jobs in travel and in education, among other sectors.

GETTING CREATIVE

With jobs still scarce, many hopefuls are getting creative about getting noticed. Many have begun using Twitter — a microblogging service that allows users to send 140-character messages at a time — to get the word out.

A career is unlikely to be launched on Twitter alone, but candidates are increasingly “tweeting” or posting messages to outline their skills, experiences and career goals. They are pasting links to their resumes on the micro-blogging service.

People can also use Twitter to follow recruiters or companies of interest and learn of networking events.