VCs Don't Invest In Ideas

SiliconBeat looks at the overhang in venture capital because interest rates have led to a general glut of capital, and wonders if all that supply benefits demand... time for VCs to start pitching entrepreneurs, because Bloglines and Topix have been able to go it alone. But again, the people who don't need the money in the first place are the other half of the supply/demand story. And as may be stolen, and you have lost the option to focus on customers and execution. If you are still at the kitchen table stage, your side time is better spent developing relationships. VCs invest in real businesses and the criteria today, even in the consumer internet, is still relatively high. When VCs start funding nobodys based on ideas alone again, its time to cash out and move to Montana. My sense of the private equity market is it is exactly the same as a year ago. Further confirmed by how VCs lag the NASDAQ by a year. The one exception is M&A has taken off, a market with even greater false incentives. Large companies saved cash during the bust, furthered by low interest rates. Someone rang the consolidation bell. Now public equity investors are investing in larger companies because they don't want to own acquired public companies because their price declines in the transaction. Large companies increase their market cap, they start buying with less cash and more equity. They cycle perpetuates until there are greater perceived returns for sellers by going alone. My guess is in a year or so we may be talking about IPOs more than M&A. Socialtext, an emerging provider of Enterprise Social Software that dramatically increases group productivity and develops a group memory.