Internet startups are so cheap to do these days that venture capitalists can't find enough companies to take their money — it's easier just to self-finance or raise the dough from friends and family (boingboing.net startup costs: $0.00).
"Right now, honestly? This time sucks for us," says Paul Kedrosky, a partner with Ventures West. "It's a bad time."
Savvy VCs are finding ways to compete. One gambit: doling out perks to entrepreneurs. San Francisco-based Founders Fund, started by ex-PayPal CEO Peter Thiel, lets entrepreneurs trade some of their equity for cash, something they usually can't do until their companies are purchased or go public. Other VCs are competing with angels by investing like them – with small amounts and at early stages. In 2007, the average VC-led seed round was less than $1 million. "Half of the deals we do are either seed or A round," says Roger Lee, a general partner at Battery Ventures. "The companies VCs are putting $500,000 into this year we might have been putting $20 million into in 2000."
