

Why do VCs care about the stock market? - grandalf
http://mlangner67.wordpress.com/2011/08/10/venture-capitalists-and-the-stock-market-why/

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wisty
Most likely, VCs are thinking about how much _their_ investors will give them.
If they could splash out in a recession, they would, but they can't. If they
don't have much money to play with, they may be better off protecting the best
startups that they have already invested in.

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mrl67
Yes, fund cycle considerations are realistic concern as a public market
downcycle does shift asset allocation considerations of LPs (a shrinking
public pie leaves them over allocated in VC), but that still doesn't explain
the behavior.

A.) Funds already earmark follow-on round funds for their investments - so
that doesn't change. To the degree that funds DON'T do this entrepreneurs
should be VERY wary (essentially VCs are exposing your business to their
business risks).... Think about how volatile the stock market can be when it
corrects - if a VC is stopping investment based on a market correction that
makes them concerned about raising the next iteration of their fund - then
what they are essentially saying is that right up to the crash they were more
than willing (to use a aviation term) invest past V1 (the point where there is
no abort of takeoff)... which is just reckless.

B.) This would only affect a portion of the VC universe at a time given the
length of an specific fund's lifecycle, overlaps between funds within a
specific firm, etc. And certain funds (e.g,. top decile performers) shouldn't
be impacted at all.

3\. Sorta validates my point about over reliance on the "splash" or home run,
and or pushing risk off to later stage investors to generate return.

