Investors' concerns and cash arguement

There are comment on the optimistic article http://vsocial.livejournal.com/110700.html

 Dag Syrrist of Vision Capital identified other impediments to the entrepreneurial economy, explaining “Spending, housing, expanding employment and investments – are all lagging the stock market rally and until there is sustained progress on these fronts, the venture community is going to hesitate and seek to hedge on deploying new capital. Only a handful of funds are investing with a forward market perspective, and while they are active and deploying capital, the majority are reacting slow to deploy new capital in absence of more robust economic data. Compounding this, is the uncertainty of institutions committing capital to funds, which makes funds with capital to deploy recognize they may have to be much more cautious with rate of new commitments.” Pointing to a possible future hazard to the venture business model, a respondent who remained anonymous voiced concern over potential new tax treatment, stating “Congress’ proposed increase in tax rates for venture capital carried interest is a threat to the venture economy.”

And Igor Sill of Geneva Venture Management reasoned “I don't believe we'll experience another 90s bull market cycle for some 24 - 36 months from now given the current economic and political uncertainties affecting the broader markets. I believe those valuations will be sustained in 2011 and beyond barring any further US or global crises. Risks include the premature withdrawal of our trillion plus dollar economic stimulus since it directly impacts the return of an IPO market (critical for venture investment exits/realizations) and the possible raising of Fed interest rates. I believe we'll see venture investors seeking value-based investments (later stage startups with real revenues) while funding value creation in current, strong portfolio holdings.”

In conclusion, the prevailing sentiment is that of guarded but increasing optimism. Concern over possible future hits to the macro economy and the limited supply of institutional finance available for venture funds has constrained the flow of investment capital to promising start-ups. However, the slow return of the exit market is bringing a sense of normalcy back to the venture business model with major acquisitions occurring alongside a growing IPO calendar.

Major corporate acquisitions ultimately drive further acquisitions out of competitive necessity.This strategic acquisition mandate accompanied by a pent-up supply of efficient, innovative, and private ventures, higher value stock currencies, and low interest rates will spawn more acquisitions and drive up valuations. This long awaited return of liquidity will be a balm to the venture industry and will bring into balance its business model. A tepid consumer, uncertain regulatory policies, and limited inbound capital notwithstanding, a rational sense that we are on the verge of something much better is emerging. The first half of 2010 should confirm this stabilizing trend in the venture environment, and when that base is formed, a powerful spring back to vibrant entrepreneurial growth and investing later in 2011 may be in the cards.

So whose view is more relevant?
 
Let's see. Among the optimists, we have such a visionary like Peter Thiel.
In addition to Facebook, Thiel has made early-stage investments in numerous startups (personally or through his venture capital fund), including Slide, LinkedIn, Friendster, Rapleaf, Geni.com, Clickable Inc, Yammer, Yelp, Inc., Powerset, Vator, Palantir Technologies, Joyent, Rypple, and IronPort. Slide, LinkedIn, Yelp, Geni.com, and Yammer were each founded by colleagues of Thiel’s from PayPal: Slide by Max Levchin, Linkedin by Reid Hoffman, Yelp by Jeremy Stoppelman, Geni.com, Yammer by David Sacks and Xero by Rod Drury. Fortune magazine reports that PayPal alumni have founded or invested in dozens of startups with an aggregate value of around $30 billion. In Silicon Valley circles, Thiel is colloquially referred to as the "Don of the PayPal Mafia"

But Igor Sill - Managing Director and co-founder of Geneva Venture Partners,
he is also good VC. He was a direct private investor in Salesforce.com, Tumbleweed, Callixa (SAP), Siebel Systems, Cohesiant, eBenefits.com, Extricity(PRGN), Finjan, NetGravity, Rubric ( KANA), Weblogic ( BEA Systems) and iWitness ( ZANTAZ), and was an early investor in Powersoft, Microsoft, Sapiens, GigaNet ( EMLX) Ingres, Oracle, and SmartStar Corporation. 

I believe that excess liquidity would take his own!

 U.S. companies had cumulative cash holdings of about $1 trillion


2011 M&A outlook according to vc