Venture Capital Investing Plummets

Keyword: Business plans for venture capital

Venture capital investment is hitting rock bottom. Nationally, VCs invested $3 billion into U.S. companies, down 61 percent from the $7.7 billion invested in the first quarter of 2008. It was smallest quarterly sum since 1997, and the sharpest decline on record.

As we've reported here many time before, VCs have got money. There are huge funds, just sitting there, waiting to be invested. So what gives?

JUST PLAIN SCARED

This is probably the biggest reason for the low investment. The economy hasn't hit a plateau of any kind yet, high or low, and no trends have been set. It is still up one week, and down the next. While VCs used to be able to ride these crests and pitfalls, now they are just scared. Even VCs have limited funds. Oh, yeah, they've got a lot more than you and me, but those funds are still limited.

LACK OF OUTSTANDING PROJECTS

One after another, VCs lament the mediocrity of projects out there. Have our entrepreneurs really gotten that mellow, or have they just forgotten how to present it? Our guess is the latter. We KNOW there are great projects there. We know, too, that most entrepreneurs are schooled in "proper" business plans for venture capital style writing, a kind of writing totally lacking in creativity or energy. It is the creativity and energy that need to come back in.

LACK OF STRONG LEADERS

This one has some validity to it. The past few years have really swung a whollop and knocked the stuffing out of a lot of people, our entrepreneurs included. Nobody is going to back a "Who, Me?" entrepreneur. It really takes someone who can say, "Yes, the company folded, but look what I learned."

The strong leaders will be able to put together coalitions of backers and create dynamic advisory boards. They will look to alternative funding sources and find a million ways to use funding to really make the company profitable. This sort of leader has indeed been in short supply always, but even more so the past few years.

THIS GOES FOR BANK LOANS TOO ....

Very few companies are venture capital candidates who will need business plans for venture capital. Most -- well over 95% -- go for bank loans or private funding. But these precepts hold true for them too. There's not a lot you can personally do about the economy, but you CAN create and lead a dynamic company. And you CAN present it as such. In fact, you MUST. Or there will be no financial backing at all.