What a difference a year makes. This time last year, venture capitalists were in the midst of dotcom mania. VC firms were funding Internet companies with reckless abandon and then prematurely ushering them into the public markets. Fast forward one year and the market is a very different place. Last year’s B-to-B and B-to-C investments have gone awry, perhaps giving today’s VCs a twist on the acronyms: back-to-business and back-to-consulting.
Just a year ago, when the salad days of venture capital were still in effect, probably the last thing VCs were thinking about was the legal and accounting “red tape” associated with deals. The intense competition among VCs, fueled by the Internet craze and a favorable IPO market, created an environment where investors seemingly acted first and asked questions last.
Now, of course, the venture world has flip-flopped, as many investments are going bust and general partners are sitting on mountains of cash rather than spending them. All of a sudden, the legal and accounting red tape that was treated like a mere formality a year ago has become glaringly important.
In last month’s issue, we outlined potential legal concerns involved in the funding process from down rounds to control person liability issues, and what VCs can do to protect their firms and themselves – an increasingly important topic in the current market.
And in this month’s cover story, Associate Editor Charles Fellers takes a look at certain accounting issues, such as liquidity discounts and stock options, that could have a real affect on VC firms and technology companies.
Also in this issue, Latin American Editor Holly Werner talks with Latin American private equity investors regarding their shifting areas of focus for the coming year, both in terms of industry and geography.
Lastly, this issue reviews the year in VC investing. In spite of the rocky fourth quarter, the VC industry still managed to dole out a record amount of capital to a record number of companies last year – 5,380 companies received approximately $103 billion, according to VCJ publisher Venture Economics.