The end of exits?

The 2k crisis almost killed the IPOs for tech startup. None of the Web2.0 big guys have been able to IPO since the installation of the SOX regulations (I am not making any judgment here). The current crisis which is refered as “liquidity crisis” is probably killing the “mergers and acquisitions”. What’s remaining to exit when you’re a VC?

Most of the “buyers” cash will decrease in the next semesters. Additionnaly, don’t expect any company to be able to borrow enough money to acquire anyone, which means the number of M&A will probably shrink to a minimum: no more YouTube deal.

The only remaining option is probably shares buy back from the startups. It means that the startups will soon have to buy back their VCs shares. Most of the time, VCs don’t invest their own money and they have to pay back their investors at a maximum of 10 years. My assumption is that this will slightly increase (12 years), but also that the VCs expectations for startups’ profitability will skyrocket to pay back the investment with dividends and/or buy-backs.

So, yes, it’s cheaper to create a nice web business, and, as Fred Wilson says, the need for money is not linear anymore, but this money will probably also be more “expensive” in terms of expectations and will probably lead to lower post-money valuations.

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Guilhem 6 months ago 1 point
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Right analysis, money will become more expensive and rare. VCs are gona watch twice before making an investment and will ask for higher % in shares and tougher exit possibilities...
That shows the need of credible business models while entering into the fund raising process, too.

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