Wednesday night's TEXCHANGE dinner in Austin was a strong event.
The topic was"The Changing Financial Landscape" and the panel did a great job in their discussions on Angel, VC and Institutional investments.
Josh Baer - OtherInbox (and an angel investor)
Mike Dodd - Austin Ventures
Neil Randall - Teachers Retirement System of Texas
Bill Morrow - CSIdentity
Some have said that the venture capital model is broken, but it in not broken... it has just changed with the economic situations. There are still VC's who are making early stage investments in the right companies. But there are certainly fewer investments being made right now.
Angels, too, are investing. In fact, now is a good time for angels. Angel investing is usually a more local phenomenon - although in Texas it can often go farther than just the local town. There is a statewide interest from angels and Austin companies should look to the strong Angel Networks in Dallas, Houston and San Antonio.
As money is tighter, VC's are expanding their limited partners, and this makes it easier for large funds to get access. Institutional money is out there and looking to invest.
While everyone talked about the active desire to invest, the entrepreneurs I talk with on the street who are seeking money are having a tough time. Until the M&A markets (and dare I say IPOs) come back, there is not as much money available for investors who are waiting for liquidity events.
Before funding a company, investors want to see a faster path to cash-flow positive. They used to be able to rely on others to come along in future rounds, but now they must be prepared to invest in the company the whole way. If they cannot do that, they will pass on the deal. Cautious investors with limited resources are being very judicious in the decisions they make.
My thoughts are that this too shall pass, and we will again see an era with more dollars invested. There is a desire to invest in growth, and as soon as we witness some large returns, investors will not be able to stop themselves... they will be happily investing in early stage companies. Venture (and other) investments spur the economy. Growing companies create jobs and wealth and thus are an important part of our future.
Have A Great Day.