Great post by Union Square Ventures' Fred Wilson at A VC today. Because of the basic risk/reward ratio, private equity and particularly venture capital received compounded effects from market changes:
I guarantee that there are some financings happening right now that are getting done at valuations which would have made sense nine months ago but don't make sense right now, at least to the uninformed observer. I also guarantee that there are some financings happening right now that are getting done at valuations at half or even less of what they would have commanded nine months ago, even though the public markets have only gone down about 33% year to date.A VC, Oct 2008
Fred goes on to state that capital in general is more expensive now than it was last month (trending back to late last year). Companies need to tighten both their belts and their operating plans, while investors need to realize that we may have officially entered a buyer's market for early-stage companies.
