By Carl Grant, Senior Vice President of Business Development at Cooley LLP

Depending on who you ask about the current state of the economy, you’re bound to get a different answer. This is especially true when it comes to the health of the venture capital (VC) market, which folks on the same editorial staff can’t seem to agree on.

We’re talking about the Bible of the business man, the tome of the day-trader…the illustrious Wall Street Journal. Less than two weeks apart, the Wall Street Journal featured two separate articles about the state of the VC market with starkly different headlines and outlooks.

The first, written by Keenan Skelly on July 8 was titled, “Venture Capital Doesn’t Look So Bad At The Half After All.” This was followed shortly behind by another VC-centric article by John Jannarone entitled, “Venture Capital Could Shrivel Away,” which was run on July 19.

So…who’s right? Does VC look good, or is it shriveling away?

If I had to side one way or the other, I’d say that the positive outlook is the correct one. The fact is, the VC market has peaks and troughs; ups and downs. It’s the nature of the industry – the top funds attract the largest amounts of capital and persist, while others fail to attract capital and cease to exist over time.

Go back to 1999-2000 and look at a list of venture funds in business in the D.C. metro area. ECentury Capital, Mid-Atlantic Venture Funds, Blue Water Capital. All of these companies are gone. But while these companies floundered, new venture funds sprouted up. Valhalla Partners, Novak Biddle Venture Partners and New Atlantic Ventures are great examples of local VC firms that were created during the same timeframe.

The weeding out of VC firms seems harsh, but it’s necessary and important in the larger VC ecosystem. Smaller, start-up VC funds fill an important niche in the regional business community.

Small emerging-growth and start-up companies looking for $500,000 in capital will find it difficult getting such small investments from the large, established VC firms. However, newer and smaller VC funds are often likely to be in a position to invest in these companies.

A great example is The Carlyle Group, which was founded in 1987. In the mid-90s, it had a smaller and relatively new VC fund, that was in perfect position to invest in then start-up Blackboard, Inc., which is currently the leading provider of web-based educational software and services to postsecondary schools in the United States. Carlyle, which now has more than $90.5 billion under management, focuses almost exclusively on buyouts and would not be able to fund a company like Blackboard today.

If venture funds did not take chances, they would not be a source of capital for the emerging companies driving innovation in today’s hottest industries. These chances and gambles don’t always pay off, and it’s natural for VC firms to fail because of it. Fortunately, as venture funds fail, new ones are formed to take their place – providing capital to tomorrow’s successful companies.

So, which article is correct? Is the VC market fine or failing? If history has taught us anything, it’s that navigating venture capital is choppy and has claimed many a sailor, but brave individuals are always ready to explore and chart its shores. The VC market is, and will remain, strong.

Disclaimer: The postings on this site are my own and do not represent Cooley LLP’s positions, strategies or opinions.

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