Are the current economic conditions affecting the availability of investment capital?
Posted by Dr. Earl R. Smith II in Questions, tags: advisor, advisory board, board of directors, CEO, chairman, coaching, consulting, director, Leadership, leadership assessment, leadership development, leadership styles, Life Coaching, management assessment, Personal Growth, spiritualityThere are lots of stories out there describing how much scarcer venture capital and angle funding are becoming. The credit crunch seems to be affecting both the decisions of investors and potential clients of new companies - making it harder to arrange adequate financing. I was wondering if any of you had directly experienced a slowdown and how it is going to effect you’re planning for financing new ventures?
Dr. Smith is a proven senior executive, successful entrepreneur, published author and public speaker. He serves on boards of directors and advisory boards or as a strategic advisor to CEOs. Dr. Smith specializes in leadership development and advising management on leadership styles which make them more effective leaders. He also works as an executive and/or life coach in the areas of personal growth and spirituality.
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Bala Krishnan wrote:
is this because there is an asset abuse in the system and relentless asset building without proper analytical support - asset value erosion and the subsequent caution. too much of money in the system and caution to the wind. i think productive and cautious asset picking is always a better option for the entire world.
Jeff Snell, ABI, CBI wrote:
Absolutely. Although substantially smaller deal size (these averaging $2MM) traditional SBA lenders have rolled up the welcome mat and locked the doors. Two transactions that would have been a ‘walk in the park’ a year ago have been scuttled in the past 30 days as a result of extremely tight lending requirements.
Essentially, the lenders torque the buyer and seller requirements until one or the other can’t accept the terms. Then they feel like they have done their part.
Looking at equity in the 35% range with seller financing on full standby for the length of the SBA backed note (ten years in one case).
At our firm we are having to reset expectations on our clients part and discuss with buyer prospects that they will need to be better prepared financially to qualify.
Links:
* http://www.enlign.com
Susan Shwartz PhD wrote:
You might check NVCA and altassets.com as well.
John S. Rajeski wrote:
Good day Dr.,
VLAB, SD Forum and/or Venture Alert are good mediums for tracking this information.
Regards,
John S. Rajeski
Koen Batsleer wrote:
Actually, I do not see a big influence on the ‘VC’ or ‘BA’-market, since theses markets are not affected by the actual crisis, on the contrary : in several ‘new’ markets (energy, communications, ..) the market is hotter then some years ago.
Their is certainly a decline in the ‘bigger’ VC-markets and in de MBO-markets, where VC’s are also active in. Their, the credit-limitations by banks realy influence the number of deals in these markets, as well as in the M&A-market.
Greetings from Belgium,
Koen
Mike Parrott, CFP® wrote:
It would appear that way - more for the angel groups than the VCs. I believe capital is still being deployed, but the sources have raised the bar to mitigate their risk and have slowed the deployment to more-carefully review their options. The “hot” areas of investing have also changed. This makes it a lot harder for those deals that are in out-of-favor sectors. The links provided with this answer will give far more details (if you’re interested).
Links:
* http://www.nvca.org/pdf/08Q2_VCinvestMTReport.pdf
* http://wsbe.unh.edu/files/2007%20Analysis%20Report_0.pdf
balasubramaniam krishnan wrote:
dr. smith,
I write more as an investment banker and a ex rater. I think the existing oil over pricing too is having a global asset binge and over pricing of assets. we in india just cannot buy oil at over 100 dollars and depend on capital flows and exports to cover up. It in fact has financially undermined our oil companies. we have still a large number of people in the middle income group that will affected due to the inflation caused partly by oil and rest by this over pricing of products. that way competition has not helped and i think oligopoly exists.mark up has been higher on products recent years in India and it has in fact excluded a large population of our country get the benefit of economic reform.
regards and keep in touch