The Wall Street Journal reports that the financial crisis is forcing many VC funds to focus on their best investments, and turn off the taps on their less-promising start-ups. Some VC firms, such as Claremont Creek Ventures in California, are giving “A, B or C” grades to their companies’ performance to help them decide whether certain start-ups get additional capital or are left to sink or swim.
According to data from the National Venture Capital Association, there were 741 venture capital firms in 2007, and many industry experts expect that number to shrink throughout 2009. With IPOs scarce and few sources of credit, VC firms have to save their cash for the most promising investments. And now, many of the companies in these VC firms’ portfolios must compete against each other for funding. It’s “survival of the fittest” according to one expert.
Comments on this entry are closed.