Fighting to Get in on the Next Little Thing (Venture Capital Rebound)

New York Times ^ | September 20, 2005 | GARY RIVLIN

[nickcarraway]

FOUR months to six months. Only a year or two ago, that was how long start-up companies generally had to cajole, fret and act nonchalant while waiting for venture capitalists to part with money - if they proved willing to write a check at all. Even during robust times, the period between a first pitch meeting with a venture capitalist and financing typically spans three months.

So imagine the surprise of those behind a start-up called XenSource when they started shopping for cash this summer on Sand Hill Road in Menlo Park, Calif. - the venture capital equivalent of Wall Street - and had seven firm offers within three weeks.

XenSource, which has developed software that runs several operating systems simultaneously on a single computer chip, is 18 months old. It has yet to book a dime in revenues. But so different is the current venture climate when compared with just 18 months ago that the company was able to raise $17 million. "If we had gone up and down Sand Hill, we could have had 25 offers," said Nick Sturiale, a partner at Sevin Rosen Funds. "There was that much interest in the company."

Not every company is that fortunate, of course. But XenSource is hardly unique, and scores of start-ups are finding that venture investors in recent months have been receptive. After several years of caution and hesitation, if not outright fear, the venture capitalists are again opening their wallets to the start-ups.

Technology companies are primarily the benefactors of the current venture boom, but if the past is any indication, that portends good news for start-ups of all shapes and types now that Sand Hill Road, a font of cash primarily for technology concerns but not exclusively, is once again pumping lifeblood into new companies each week.

[coconutt2000]

My unqualified opinion is that this company is being positioned to be bought out by a company like Microsoft. The venture capital firms would recoup their expenses plus some, and the developers will receive Microsoft stock and be absorbed into the company.