Sequoia Warns Portfolio Companies to Slow Down

Sequoia Capital held a meeting yesterday for executives of its portfolio companies warning them that it was time to tighten the belt a little, reports GigaOM. The venture capital firm held a similar meeting before the dot-com bust, but many of its portfolio companies weren't around then (even if many of their lead entrepreneurs were). It's a sign of the times for anyone in the startup space, which includes most virtual worlds, but particularly relevant for Sequoia portfolio companies Unisfair and Stardoll.

GigaOM cites other investors warning that it will become increasingly hard to raise capital in the coming months and advising startups to look to "internal rounds" of funding by cutting costs wherever they can. Similarly, yesterday PricewaterhouseCoopers told Bloomberg that venture funding may fall this year for the first time since 2003. We'll be releasing our own numbers tracking Q3 investment in the virtual worlds space next week. I can tell you now, though, that there is still a fair amount of money going into entertainment properties, but investment overall is indeed a little down. [via GigaOM]

Comments

[nic mitham]

So of course the big question here is what does the downturn mean for virtual worlds?

For companies seeking funding (at any stage) one could argue strongly that it's going to be harder to find financing. Looking at it another way, perhaps the smart money actually moves into vw plays as an area to shift portfolios to and diversify.

What about the vw's themselves, the key element is obviously will users start/continue to pay for virtual access/items? Disposable incomes look like shrinking over the short-term, less money, lower propensity to spend virtually. looking at this the other way, perhaps the downturn and the context of kt&t worlds is actually a good thing. do i pay $20 to take my kids to the cinema for 2 hours or $5 for premium subs/virtual items which last at least a month?

So, maybe all the vw owners all throw in $50,000 each and do some colloborative industry advertising to raise awareness of virtual world low-cost kids entertainment. ;)