Washington, D.C. - The U.S. venture capital business has been slogging through a rough patch. The first quarter of 2008, according to the National Venture Capital Association, saw just five initial public offerings by venture-backed start-ups. Meanwhile, just 56 venture-backed firms were sold or merged, down from 82 and 104, respectively, in the first quarters of 2007 and 2006.
The principals of RedShift Ventures, a Washington, D.C.-area venture capital firm, don't gloss over the problems. "It was just brutal," says general partner Mark Frantz, of the first quarter. "I don't see a lot of indicators on the horizon that are going to change that," adds Richard Harris, another general partner and RedShift's founder.
But from RedShift's view, the tough outlook for making money on the back end hasn't dampened entrepreneurial activity on the front. "We see a tremendous amount of deal flow," says Harris.
Paradoxically, Harris suggests one reason for all this opportunity is corporate skimping on research and development. "In this economic environment," explains Harris, "large companies seem less interested in funding cutting-edge research than they are just shoring up their core businesses."
Full story at Forbes.com