From the monthly archives: April 2009

In the wake of a report (pdf) on venture capital activity, a number of industry watchers are pondering the crisis in funding. The press release announcing the report set the tone for the coverage by proclaiming "VC Investment plummets to 12 year low". The New York Times said investment rates have "dropped to lows not seen since before the dot-com bubble".

In the first quarter of this year, VCs invested $3b, which is down by about half what they invested in the previous quarter and down by 61% from Q1 of 2008. That’s pretty scary drop. But it’s hardly a surprise. This trend was apparent the day Sequoia released its now infamous "RIP Good Times" slideshow in October, which struck fear in the hearts of every VC firm. (Did it discourage any entrepreneurs? Probably not, we’re a pathologically optimistic breed.)

It’s also no surprise that money available for early stage deals is disappearing the fastest. Stacey Higginbotham writes: "…it’s looking especially bad for early-stage companies, with only $900 million invested in early-stage deals this quarter, and the rest going to follow-on rounds and later-stage deals. In the last year, almost three-quarters of the total capital has gone into later stage-deals as VCs continue to fund their older portfolio companies while they wait for an exit." I commented on that trend in December.

So where is the good news promised by this post’s headline?

Factor out regional trends…

Fred Wilson, VC and uber-blogger, dove deeper into the numbers and saw some interesting regional trends. Silicon Valley firms ramped up their investment the most in ’06 and ’07 and so their pendulum is swinging further back now. That impact is exaggerating the industry-wide average.  He writes:

What you see is that the total amount raised in Silicon Valley … dropped to an annualized rate of less than $5bn, a 50% reduction. At the same time, the total amount raised in New England… dropped to an annualized rate of below $2bn, a drop of 1/3. And in the NY Metro market, we saw a small decline, but nothing to get excited about…

.. and factor out sector trends…

Aside from the regional trend, there’s a strong sector trend. According to that report, clean tech investments dropped 84% but Internet investment saw only a 31% decline. The key: Internet investments are capital efficient, meaning it takes less money to get a new product to market. That’s what VCs are looking for in difficult times.

Another data point comes from David Shore, head of the Technology group at Research Capital Corporation. He said, if you carve out green tech, biotech and hardware, you see very little decline in both number of deals and amount of money. Here’s a chart drawn from their database of "Web 2.0" investments over the last year:

1

 

Certainly you can see a big drop in Oct’08, but it seems like a strong recovery so far for 2009. (Keep in mind that April isn’t done yet, so that last bar on the right is still going to grow.)

… and it’s not so bad.

Going back to Fred Wilson, he concludes: "So while the data doesn’t lie, it also doesn’t tell the full story. There is money out there for good ideas, particularly ones that are capital efficient and located somewhere other than Silicon Valley."

 

Good news for Android fans: You can now use Fonolo as a native app on your handset!

With the Fonolo4Android app, you can browse through the phone menus of the 500 North American companies in the Fonolo database, and Deep Dial to any point. The service and application are free so the only cost is the (small) data transfer to your phone and the talk time (if you don’t have an unlimited talk plan). You’ll need an Android phone of course (such as T-Mobile’s G1) with a data connection. You’ll also need to create an account at fonolo.com, if you don’t already have one.

Some screen shots:

Picture 2b Picture 4b Picture 6b

The application was written using the Fonolo API by a group of students led by John St. John. More about them here. They’ve also made the code available, so you can modify the application, or take inspiration on writing your own Fonolo app. It’s actually been available for a couple months now so I should have posted earlier. Thanks guys!

Not all of the functionality available through our web interface is available through the Android app –  for example, you won’t be able to do call recording, or add notes to your calls. This is a limitation of the current API that we hope to fix in the next version.

 

image I was pleasantly surprised to find out that Fonolo has been included as one of the “Top 25 Canadian IT Up and Comers”. This was part of the recently announced Branham300 list of top Canadian technology companies. The Branham300—the most comprehensive listing of publicly traded and privately held IT companies in Canada—is published annually by the Branham Group, a leading “Go to Market” consultancy exclusively focused on the technology sector. Thanks!