Reading the WSJ this weekend I saw an interesting Social Media article entitled: A Have and Have-Not Venture World. Top venture capital firms like Acccel Partners and Kleiner Perkins Caufield & Byers are all riding the “frenzy” around companies like Facebook inc. and Groupon Inc. to raise billions of dollars in new funds.
These Venture capital firms have to ride the Social Media bubble because there are not many bright places in the economy to invest.
Venture capital firms have been hit hard by the current financial predicament. In 2010 only 119 new venture funds were raised, totaling $11.6 billion in assets. That is down from 215 new venture funds totaling $40.1 billion in 2007, according to research firm Venture Source.
“Today’s fund-rising marketing is about a have and have not market,” says Christopher Douvos, co-head of private –equity investing for the Investment Fund for Foundations, an organization that invests in venture-capital funds on behalf of non-profits. “The capital is really focused on accessing the best-performing funds.”
Like always venture capital firms are trying to focus on the best performing funds. And low and behold Social Media ventures are returning big for venture capital firms. For instance Accel, the Palo Alto, California, venture firm alone has raised four new funds based on Social Media. These finds alone have been targeted at more than $2 billon.
Reading the whole article one can see that the best performing funds are those that have anything to do with up and coming Social Media companies similar to Facebook, Twitter, Four Square, and Groupon…
Not only is Social Media driving the Venture Capital market. Social Media is also driving the mobile phone market. My next blog post will discuss how social media communities like Facebook and Twitter are influencing cell phone development.