Blodget Posts bad news for Startups

Update:  Henry Responds below.

Henry Blodget of Silicon Alley Insider has written a discouraging post about the state of the venture market.  If it’s true it should soar and stay on the front of Techmeme all day long.

In short, Henry says Limited Partners are starting to default because of the liquidity crisis.  This will force venture investing (primary or secondary) grind to a halt over the next couple of quarters.

Read the entire post here.

My questions for Henry are:

1.  Are you absolutely sure that some venture firms have had limited partners default on commitments?  As you know, the penalty for these defaults are severe.

2.  Are your sources from any of the firms in even the top two quartiles of funds?  In other words, are these peripheral funds or do we think of them as established venture capital firms?

Aaron,

Thanks. Sources are from top-tier firms. To stress, however: The sources are not seeing defaults themselves. They are hearing about them elsewhere in the industry.

Common sense suggests that if LPs starting to cut back, they would start with weakest firms first, so this makes sense.

Also, source stresses that LP’s not just cutting back because cash-strapped. They are rationalizing that they’ve put 20% down and the fund will lose more than that so better to cut losses now than throw good money after bad.

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2 Responses

  1. What kind of impact with this have on TechAviv’s ability to raise its fund?

  2. […] Blodget Posts bad news for Startups […]

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