Editor’s Note: This post was originally published on Seattle 2.0, and imported to GeekWire as part of our acquisition of Seattle 2.0 and its archival content. For more background, see this post.

By Gerry Langeler

You may have seen reporting on a recent Q3 Venture Capital Outlook Survey commissioned by the Washington Technology Industry Association.  In it, there are some worried comments by our local peer group about the current state of the economy, notice of shifting to later stage investments, and a general “no-change” expectation about deal quality and quantity.  I’m here to tell you that the survey results are wrong! 
 
That’s easy to say, because just like business plans, ALL forecasts of the future are wrong…it’s just a matter of degree. 
But in this case, what I find more troubling is putting a quarter to quarter barometer on an industry that moves much more in multi-year cycles.  It always puzzles me when the press either touts the “big increase in venture capital investing this quarter” as a sign of something important, or when they decry a quarter of lower numbers a similar way.
 
So, the survey results are not just wrong, but irrelevant.
 
Here’s the straight truth.  Any VC investor who is using current economic conditions to drive their investment decisions in start-up companies is brain dead.  When we make a new company investment, we’re looking for success and liquidity in five years if we’re lucky, seven years if we’re likely, and nine years is not out of the question.  If anyone can tell me what the economy will be like in five years, I’ll quit my job today and buy (or sell) public securities to match that model.  Oh wait, I just said all forecasts about the future are wrong, didn’t I? Never mind….
 
Surveys are always fun to fill out (we do), and fun to read.  They make us feel like we suddenly have some new, secret insight into a slice of our world.  But venture capital by its nature is very hard to survey.  The industry, especially when segmented to just Washington VCs, is very small.  As any researcher will tell you, small sample size can make your numbers vacillate wildly.  In Washington State, we have small sample size as a given.  One or two VCs who happen to fill out the form in a given quarter (or don’t) can skew everything.
 
Venture capital investing is certainly not immune to economic cycles.  But it should be immune to quarterly instrumentation.  
 
Here’s the take away:  If you have a truly great idea and team, there is funding available now, regardless of the economy.  If you have an idea and team that is not as great, this is a tough time to get funded.  That should always be the case.  True VCs only worry about the present when it comes to the firms they invested in years ago.  The same should hold for true entrepreneurs.
 
 
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