In a July 24th story, the New York Times reports that according to a survey of venture capitalists (VCs) by tax and advisory firm KPMG, VCs expects the current Initial Public Offering (IPO) doldrums to stretch until at least 2010. As a measure of this pessimism, only 9% of those surveyed think it will pick up next year and only some 12% think the IPO market will ever reach its historic highs.

This dearth of IPOs and successful exits has some dire consequences for startups. Where there’s no exit, VCs are forced to invest any new money into their current portfolio of companies to keep them going, rather than invest them in new ventures. This is consistent with an earlier post where I reported that VC activity was down during the first quarter of 2008.

If you are just starting up and looking for money, then you should consider approaching angel investors. As previously posted, angel investors appear to be taking up the investing slack.

If you are a startup that has money in the bank, consider yourself lucky. But with the current market conditions, its time to tighten the belt just a bit and perhaps conserve your cash. Hold off on any big purchases; after all, maybe the team can do without those brand new notebooks until next year. You never know how long it will be before VCs’ purse strings will loosen up….

© Eye on Startups & The Startup Guidebook