Inside VCJ: Shake-out Commences, American VCs Go Global –

No one said the end of the bubble was going to be painless, but some are going to feel more pain than others do just look at the fallout in the e-commerce sector.

The victims of the public market turmoil are slowly but surely popping up in various forms, with results ranging from bankruptcy to consolidation. Just in the past few weeks, Craftshop.com filed for bankruptcy (story, page 33); Boo.com and Toysmart.com closed up shop for good; and on the consolidation front, Pets.com acquired the assets of Petstore.com. Only the strong will prevail, as it becomes the survival of the profitable.

Amid the end of the frenzy, venture capitalists are coming to their senses and re-assessing their portfolios, especially since initial public offerings are much further down the road for their portfolio companies. VCs will need to nurture the companies longer, which means more of their money and more scrutiny. The market is taking it’s natural course, working to weed out the good companies (profitable, or at least the potential to be) from the bad companies (unprofitable).

Amid all the difficulty, the record-breaking VC returns in 1999 are almost an afterthought (story, page XX), but this month’s data analysis explains that 1999 proved to be a pinnacle year in the VC market with records being shattered across the board.

Whether you care or not, it’s safe to say that most people are aware of the current state of the U.S. VC market. But what’s happening in other regions of the world? This month’s cover story and country profile shed some light on VC activity in Israel (story, page 37), and Romania (story, page 47), while our viewpoint article provides some helpful advice for overseas venturing (story, page 35).

Finally, as part of our monthly data, we have altered the format of the IPOs/Recent Issues section to include a breakdown of venture financing rounds held by companies prior to going public.