What Goes Up, Must Come Down –

Try as you might, you simply cannot defy the law of gravity. Everything the goes up must come back down, whether it is a ball you toss up in the air or the Nasdaq busting through the 5000-point mark only to come crashing down months later, losing half of its value on the descent.

When things were going great in the market, venture capitalists were raking in more money than ever before, happily sending portfolio companies out into the public market and looking for the next big business plan to back. The furthest thing from their mind was the possibility that if and when the market turned sour, they might be sued by the very entrepreneurs they were funding.

In this month’s cover story, Senior Editor Alistair Christopher talks with VCs and private equity lawyers about the potential legal issues involved in the funding process. The story discusses matters from down rounds to control person liability issues, and what VCs can do to protect their firms and themselves. As one lawyer so eloquently put it, “the venture process is not over until your investment has been liquidated and you have not been sued.”

Amid this downturn in the VC market, when capital is not flowing quite as fast and freely as it had, Senior Editor Carolina Braunschweig talks with some entrepreneurs that found salvation in the debt market while clambering for the next funding round.

Lastly in this issue we take a preliminary look back at the year in fund raising. Even with all the trials and tribulations in the market, VCs appear to have squeezed out another record breaker by raising more than $76 billion in 2000. While this figure is certainly impressive, it’s important to note the total was helped along by the increased amount of so-called mega funds, because everyone that could, raised a billion dollar fund.

Fund raising was not the only record breaker. VC-backed IPOs also managed to top 1999’s capital raised totals. Last year saw 239 companies go public raising $22.85 billion compared with 263 companies in 1999 raising $20.47 billion.