With the initial public offering (IPO) market continuing to languish, a report released Wednesday by IDC advises venture capitalists that the current economicclimate makes it more important than ever to maximize the attention theyprovide to each firm in their portfolio.
“For venture capitalists, understanding some of their portfolio companies’most acute operational challenges and needs is critical to their success,”said IDC senior analyst Nicole Weber. “Now that the economy is slowing, itis imperative that venture capitalists work longer on projects and help withmore value-added resources.”
As part of its report, IDC interviewed 300 recipients ofventure capital funding. Among the top operational challenges cited by the respondents were recruiting talented employees, building a brand and turning anidea into salable product.
IDC said that venture capitalists can help ease these concerns by havingrecruitment and partnering programs in place that can be tailored to eachcompany’s needs.
In addition, IDC found that venture capitalists must be more proactive,identifying the types of resources and services recipients would like themto provide.
For instance, 80 percent of those surveyed that didnot receive help with relationship development would like their venturecapital firm to provide such assistance in the future.
The respondents also indicated that theywould like more assistance with top-level recruitment, but are not interested in receiving marketing or infrastructure services from their venture capital firm.
Overall, IDC said that venture capitalists need to set expectations, enactmentoring programs, and become more specialized and technology savvy.
“It’s okay to be a visionary, but venture capitalists should stick to theareas in which they have or can quickly acquire strong domain expertise,”said Weber.
VC Funding Slows
A separate report released earlier this year by National Venture CapitalAssociation and Venture Economics illustrated how the current e-commercedownturn led to a slowdown in venturecapital investments during the fourth quarter of 2000, after a nearlyfive-year run of strong growth.
The quarterly report found that investors shelled out US$19.6 billion duringthe period, a 30 percent decline from the third quarter of 2000.
However, the trade group said investors sunk $103 billion into emergingcompanies in 2000 overall, a new record and 73 percent higher than in 1999, when$59.4 billion was invested.