Venture Capital, the Web, and Job Opportunities

In this article, Linda draws attention to Venture Capital and the mediums that seem to interest big money. In the process, she points to resources outside the ordinary to find job opportunities.

Mashable Points to VC Recovery

I hope you read Mashable on a regular basis, as their stories are credible, thought-provoking and useful. In one story generated this past Friday, Jodie O'Dell points to Venture Capital (VC) recovery after the 2008 market dive. The money part of this story interested me, because I write a finance column. The Web portion of the story fascinated me because my work is totally Web based. To combine the two topics – money and the Web – is to find me in a state of blabbering bliss.

Why is this story important? Because Web content, much like actual real estate, has its cycles. No matter whether or not you are interested in money, if you are involved with the Web for any reason – such as blog content, design, app development or software – eventually you and your work may be considered for purchase. Sound ominous? Sound delicious?

No matter how you feel about those statements, you are in a public venue, creating social media. Therefore, your work is going to be noticed, even if just to be dismissed. In fact, you may be watched for a long time before you even realize the eyes that are on your work. Or, you may not be noticed at all until you put your work up for sale or for auction.

The Mashable article is important, as this piece points to the "merchandise" that big money holds dear at the moment. I'll cover those aspects and point you to other clues that show the value behind your Web development and content. 

What is Venture Capital?

I'll point you to some other links to understand Venture Capital, but the first link is the most understandable and the easiest to read quickly. How Stuff Works provides an overview about Venture Capital firms and funds (see the second page). In sum, VC firms gather money from wealthy individuals and from companies, pension funds, etc. that have money they wish to invest. The firm will raise a fixed amount of money in the fund -- for example, $100 million...

"The VC firm will then invest the $100 million fund in some number of companies -- for example, 10 to 20 companies. Each firm and fund has an investment profile. For example, a fund might invest in biotech startups. Or the fund might invest in Dot Coms seeking their second round of financing. Or the fund might try a mix of companies that are all preparing to do an IPO (Initial Public Offering) in the next 6 months. The profile that the fund chooses has certain risks and rewards that the investors know about when they invest the money."

Note in the paragraph following the one above that the VC firm will expect their investments to turn over within three to seven years. In other words, those investments will be sold or will go public. When the whole process is done, the goal is to have made more money than the $100 million originally invested. The fund is then distributed back to the investors based on the amount each one originally contributed.

This is called a Long-Term Investment

In the financial world, this is what is called a "long-term" investment, or one that consists of an investment with a return after one year. The reason behind this terminology lies in how taxes are collected in the U.S. Any investment with a gain or loss is not counted on an individual's taxes unless that investment was sold within that tax year. Additionally, any other investment, such as day trading or short-term investment (less than one year), means that the investor is taking a huge risk, as the investor is penalized by paying a larger percentage to the government for that short-term investment strategy. The U.S. Government smiles upon long-term investments.

While the hope is that all the 'businesses' the VC firm invests in do make a profit, reality is that many investments won't make the grade. But, some could take off and those investments, hopefully, will cover the losses. A VC firm that has a good track record of high percentages within each "portfolio," or list of Web investments in this case, will also gain credibility and status as a knowledgeable and trustworthy investment firm.

If you are a blogger who isn't invested in building an audience through social media or who doesn't care about numbers or ad revenue, this article may seem boring to you at this point...but please stay with me, as you might be surprised at what VC firms find interesting as investments...

What Are VC Firms Buying?

The Mashable article may seem written in Greek, especially if you are not familiar with business financial lingo. For example, the article points to the trend that most VC deals favour more mature companies (in the Web world, this means a Web venture that is about five years old at most). These maturity factors make up "44 percent of Q4 deals, a 5 percent YOY increase, while early-stage investments in startups were down to 32% from 35% in Q2 2009."

What does that last sentence mean? It means that mature Web ventures were most interesting to VC firms during the last quarter of 2009 (Q4 being September-December 2009) and that this interest increased five percent year over year (YOY). On the other hand, early-stage development investments were down to 32 percent from 35 percent in the second quarter of 2009 (from May-August that year). Still, VC deals for startups that were "consumer-facing" (meaning interactive with readers and viewers) show that 57 percent of this sector's deals went to early-stage companies (a four percent year-over-year or YOY increase).

Ah, so that's the story – that early-stage consumer-facing start-ups still hold vast interest for the VC investment firms. Additionally, IT, or Information Technology, is responsible for the largest number of deals this quarter. By this time, you should be able to comprehend this: "This year, software companies accounted for 156 deals and $908 million — 24 deals and about $150 million more than in Q2 2009." Sadly, software is taking the biggest hit – still, software deals accounted for 156 deals and $908 million — 24 deals and about $150 million more than in Q2 2009.

This news seems very optimistic for anyone involved in the Internet with financial gains hopes.