A word of warning comes out of Silicon Valley this week with the findings of a joint report by the San Jose Mercury News and Price Waterhouse LPP. The paper dubs the record $761m venture capital funding of startups in the second quarter of this year as the storm before the calm, as the report warns that a downturn is imminent. Despite the Java-fueled frenzy, telecommunications companies actually got the most with 43 companies getting a total of $248.5m, but that’s probably an indication of the higher costs involved, and anyway, much of it was internet-related. Software was second with 50 firms sharing out $147.8m. And 12 hardware and semiconductor companies got $100.5m between them. Nationally, telecoms and the internet accounted for 263 of the 565 venture capital deals reported in the quarter. Many VC firms are talking young companies into mergers, postponing offerings and even pulling deals completely, said the report. But it adds that this is due in part to VC companies not having enough people to handle all the deals, and so have to say no occasionally. It’s not all pessimistic though as the effect of the internet means there’s a market that doesn’t look like disappearing, even if things do hit a downturn, and the boom in telecommunications technology and markets means there’s plenty more business there to go around than there was ten years ago.
