From the Editor: Beyond the Numbers –

It’s not as bad as we make it out to be. “We” being the media. Now this isn’t a mea culpa of any sort, just my attempt to paint a clearer picture of what’s going on. From my vantage point, I get the sense that the precipitous drop in seed and first-round deals isn’t as bad as we’ve made it out to be.

Here’s the thing: We base our reporting on data submitted by venture firms to Venture Economics. So the accuracy of our stories is only as good as the data. And guess what? Venture firms are far less likely these days to announce new deals. In my own little world, I know from partners at Benchmark, Kleiner Perkins and Sequoia that each firm has done several new deals that are operating under the radar. Likewise, several VCs at NVCA’s annual meeting told me that they had done new deals but hadn’t announced them.

Why not? “What’s the point?” replied a partner at Benchmark. Hmmm. I couldn’t give him a good answer, except to say that it would give me fodder for more stories. I mean, it gets a little boring writing about someone’s fifth round. Seed rounds are where all the really interesting stuff is happening.

VCs are far less willing to share the details of new deals not because they love secrecy. They’ve simply gotten more pragmatic. Back in the dot-com days, they felt obliged to issue a press release about every single new deal because marketing was considered critical to a startup’s success. I distinctly remember those days and the “noise level.”

Now that the business is getting back to normal, VCs realize that there is nothing to be gained by blaring news about a new deal. In fact, they might inadvertently undermine their own efforts: Once you announce to your competitors that you’ve identified a promising niche, they will almost certainly start a me-too company, sucking up talent that your startup might otherwise hire when it’s more mature. By putting your startup’s management team in the media spotlight, you also risk distracting them from the work at hand.

Instead of working on PR, VCs are quietly working with fresh startups on the fundamentals. The general public will find out about those deals at least the successful ones once they go out for a B round, the Benchmark partner told me. At that point, it’s more important to have some buzz because you’re trying to attract new money. Also, the startup will actually have something to talk about, like working technology or revenue. Hey, there’s a novel idea: Call the press when you really have news, not just vaporware.

I should clarify that I don’t believe that everything is fine and dandy in the world of VC. I have no doubt that fewer A rounds are being done because there are still too many VCs with overstuffed portfolios. So, things are bad, just not as bad as we’re making them out to be.

The upshot of all of this is that I think we’re going to see a small wave of innovative startups with strong fundamentals coming out of stealth mode in about a year. In the meantime, my colleagues and I will have to work harder to find out the names of those startups and what they’re up to.

By the way, if you’d like to shed some light on one of your competitor’s stealth companies, don’t hesitate to