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Michael Gracie

VCs pouring cash, just not into Colorado glasses (yet)

Fortunately, I think happy hour should be longer, even if it does have to start a little later.

According to yesterday’s report from E&Y and DJ’s VentureOne, venture capital investing hit its best quarter since the first of 2001. That’s great for startups. Unfortunately, the party doesn’t seem to be happening in my neighborhood.

You could provide the standard reasoning that local funds are more mature, and they are doing more follow-ons and portfolio consolidation right now. You could also go out on a limb by saying there is a “right brain drain” going on, so there are less ideas floating around. I don’t buy any of the notions, and I think the phenomena is actually a good thing.

First, less capital floating around means only the choice opportunities get funded, and the chance of success of any given deal should jump a notch or two. Getting more wins (and less fiascos) under the belt will attract additional capital over the long term. And it’s the “left brain” that usually keeps the books anyway.

Second, I suspect a big part of the local economy has been real estate driven, at least that’s my guess based on the impression that all people seem to want to talk about is their new houses, and all everyone seems to be doing is getting real estate licenses. Time to wake up there – the housing party looks like it is ending, and while it could actually get really ugly, at least that will prime a lot of people to get down to the business of creating value instead of waiting for someone or something to conjure it for them.

In summary, a little restriction of liquidity gets the juices flowing. We’ll see more bootstraps, more ideas popping up out of the woodwork (I love those kinds of surprises) – more ingenuity, and less waste. And that is really the entrepreneurial way.

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