The Changing Venture Capital Landscape

October 12, 2013


​Fenwick & West corporate partner Barry Kramer spoke with China Business Network Weekly for an article titled “Free Money” on the changing venture capital environment in Silicon Valley.

As translated, Kramer told CBNWeekly, “The environment in which venture firms operate has changed significantly in recent years, with the growth of micro-VCs, accelerators, angels, crowd funding, investor matching sites like AngelList and secondary exchanges.”

“10 years ago you may have needed millions of dollars to start a venture company. Now you just need couple of thousands of dollars to finish the prototype.” he added.

Since Fenwick’s inaugural quarterly Venture Capital Survey was published 10 years ago, a co-author of the survey, Kramer says that venture capital players now face new challenges.

“But now VC is facing a difficult situation: their return in the last 10 years was not good,” Kramer said. “Look at the U.S. fiscal problems, the European debt crisis and the reduction of listed companies’ IPOs; all those will make them feel the macro environment is not optimistic. They have to be more cautious.

“But in micro environment the early investment is in full swing and has a good return. If they don’t take more risk, they may miss good opportunity to make money.” he added.

Kramer said that the “Series A Crunch,” which is the terminology given to the developing trend where out of many companies that receive seed financing, very few will enter a Series A round, is “not necessarily a bad thing.”

“[The Series A crunch] means more and more people learned something from failure,” he said.