Change is a force you just can’t fight. To be sure, just take a look at the venture capital market, which has undergone an astounding transformation over the last few years.
The VC game may still be played on the same field, with many of the same participants, but these days it is being played under a new, stricter set of rules. During the peak of the market it was the brash, young entrepreneurs calling the shots, commanding outrageous valuations for their start-ups. Now that the market has come back down to earth, VCs are running the show – and they have the leverage, or capital, to do so. As one Silicon Valley VC put it, “it’s back to the golden rule.” In other words, he who has the gold makes the rules.
In this month’s cover story, Senior Editor Carolina Braunschweig takes a look at how today’s deals are being structured so investors, not the start-ups, are sitting in the driver’s seat. Hardly uttered in the late 90s and early 2000, terms like full ratchet anti-dilution rights are becoming increasingly common, as VCs want to hedge themselves against poor company performance and/or an uncooperative exit market.
While VCs are taking actions to make sure they don’t get stung by bad investments again, they are still facing problems with their existing portfolio companies, many of which are unable to monetize their investments in today’s down market. In our feature story this month, Associate Editor Charles Fellers examines some of the exit options for VCs and their portfolio companies.
In the spirit of change, Venture Capital Journal has instituted some of its own changes to deliver more in-depth coverage of the VC market. In this month’s issue, you’ll find two new editorial features – an LP Profile section as well as an Opinion column penned by Udayan Gupta, the author of Done Deals: Venture Capitalists Tell Their Stories. And as part of our monthly data section, we have merged the IPO Monitor into the IPO/Recent Issues section to present readers with a more concise presentation.