— Newsweek highlights a new diligence among the VC’s: Silicon Valley Reboots
Post-bubble Silicon Valley tries hard to avoid the harebrained excesses that led to dot-bomb disasters. “We’re still doing deals, but now they’re well thought through,” says Accel’s Breyer. For instance, Accel recently took a month’s worth of technical and marketing analysis before funding a wireless play called Woodside Networks. “Two years ago we would have done it in a week,” says Breyer.
Gee, Woodside sounds like a great company, as this article in the Wall St. Journal shows:
Still, some investors are braving the risks to get in early at new companies. For example, the past quarter saw several relatively massive infusions for new companies — often called A-round financings — such as Woodside Networks Inc. and Cedar Point Communications Inc., which raised $20 million and $19 million, respectively.
Todd Dagres, a general partner at Battery Ventures in Wellesley, Mass., which put some of the money into Cedar Point, says the deal was the first new one he had done in more than a year. “I stopped [making new investments] a year ago because you had to take care of the portfolio,” he says. “You had to make sure your companies were in a survivable mode.”
And even though both Cedar Point and Woodside were classified as A-round deals, neither fits the traditional profile of an early venture investment. By one venture rule of thumb, companies get about three rounds of financing, an A-round to fund product design and development, a B-round to fund producing and selling a product on a small scale, and a C-round to expand sales and get to profitability.
But Woodside is hardly just a couple of entrepreneurs and a business plan. The Palo Alto, Calif., company, which is making semiconductors that will help computers and other devices connect to wireless data networks, was founded back in January last year. It raised an initial $8 million from the founders and some tiny venture firms and expects to have product ready for commercial delivery later this year.
I’m glad we have high-quality startups taking wireless LANs forward, but Woodside isn’t one of them. Once again, we have VCs touting things they don’t understand, investing in low-quality deals with poor prospects, and bragging about it. This kind of thing doesn’t help investor confidence in the market.