Friday, February 13, 2009

Light in the tunnel

The WSJ unsurprisingly noted that, as investors react to an altered state, a shake-out appears to be happening amongst venture backed companies.

After being involved in my fair share of 'heroic' efforts attempting to save/rescue young technology companies, I am an advocate of taking a spoon-full of medicine and refocusing investor, and entrepreneurial efforts away from failing companies. The grand yarns, told around worn conference room tables, about how the last minute purchase order, big sale, or business development agreement launched a company on the path to riches unfortunately obscures the long-odds of this happening.

Interestingly, on the same day this article appeared, Guggenheim Venture Partners announced the sale of one of their portfolio companies, CICLON to Texas Instruments.

Guggenheim concentrates its investment efforts in an arena that is complementary to the trend noted in the WSJ, and seems timely to be exploited. Their investment focus is dedicated towards acquiring equity positions in technology firms/divisions where the initial venture backers no longer have adequate capital to pursue the market opportunity, or in buying positions in spin-outs from corporations seeking to trim their focus. The targets have management teams in place, product developed, and participate in growing markets. Everything but the capital to make it work.

Every ecosystem needs scavengers (here it's a compliment). With many venture portfolios suffering from investment constipation (many deals made, few exits) this just may well be a once in a lifetime equity building opportunity.

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