Venture capitalists have started warning their portfolio companies to watch every dollar since additional capital will be much harder to come by, according to an article in the Boston Business Journal.
In addition, VCs are advising startups to trim overhead and even “mothball” their operations – reducing a company to its core management team and intellectual property – in order to ride out the current capital crunch and recession.
Later stage companies will find it tougher to raise new rounds of capital in today’s economic climate. Although many VCs have capital to invest, they are concerned about the amount of reserves they have set aside for their portfolio companies, and are doubling or tripling their reserves from the typical 10 percent. Venture capitalists are also spreading the word that every startup needs to be cautious and run lean.
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