I can tell you from the front lines that a few VC-backed companies will see the rug pulled from underneath them in the next 3-6 months… I won’t name anyone (but feel free to do so in the comments), but you don’t need to be a genius to figure out that a lot of companies raised wads of cash and won’t see any exits near those amounts (1x), let alone worthy of those amounts (target of 3, 5 or 10x).

From Fred Wilson:

The forcing function is usually a bad market when nobody wants to write a check. Then the existing investors are forced to look hard at each other and decide if they want to keep investing. And then, if the company is really not making good progress, the answer is usually no.

Indeed. In fact, I’d add that what defines “good progress” has changed quite a bit. Traffic or user growth is meaningless if you don’t have real revenues and a path to profits. So many companies I interact with are on their 5th or 10th iteration of their business model, one more pathetic and ill-fated than the next.

VCs have already moved from social networking to online video and they’re now largely chasing things like clean tech and whatever else that seems like a big pie in the sky. Facebook’s coming down to reality won’t help social networking projects, and eMarketer’s slashing of online video revenues forecasts and NBC’s paltry windfall in online video won’t help video.

The best part is: companies that have avoided VC altogether or raised a little bit of money and will see merit in continuing to build a sensible business will win, just as they did coming out of the 2001-03 nuclear winter.

• Digg this Blog
• Share on Facebook
• WatchMojo on Twitter
• WatchMojo on YouTube
• Add to Favorites
• WatchMojo Newsletter