Reuters recently had an interesting analysis on knowing when to sell tech stocks.  In "Analysis: For tech investors, it's hard to know when to bolt" the article identifies a couple of signs of when it might be time to consider selling shares in a tech company:

• It "makes acquisitions outside of its main area of expertise to move into new product lines."
• The company experiences "a succession of management changes"
• It has a successful core business that begins to look tired.

It's an interesting article and worth a read.

Link:  
http://www.reuters.com/article/2012/12/27/us-investing-tech-idUSBRE8BQ0HG20121227

Ahh, the end-of-the-year lists.  VentureBeat has today published its "Top 15 Venture Capital Deals of 2012."  According to the article, the largest venture deal of the year was the $277.3 million financing of Fisker Automotive.  Fisker is reportedly in financial trouble, and it reminds me of one of my opinions about venture capital:  I believe that venture capital works best in cash-efficient business models.

When I was an investment banker, I worked on several financings for telecom and media businesses that had massive capital needs.  What I found was that companies with capital-intensive business models calling for build-outs requiring hundreds of millions of dollars had additional elements of risk due to the size of the capital needs and nature of the projects.  Projections are by their nature optimistic, and capital-intensive projects can cost more and be delayed (or fail) for a variety of factors, including execution issues, supply chain issues, cost overruns, and delays in obtaining governmental financing, approvals, permits, reviews, etc.  These issues make future funding risk higher.  All in all, I prefer to see venture capitalists focus on capital efficient business models.


Link to VentureBeat article:  
http://venturebeat.com/2012/12/28/top-venture-capital-deals-2012/view-all/

Links to articles on Fisker Automotive's financial problems:
http://www.digitaltrends.com/cars/fisker-automotive-rules-out-bankruptcy-looks-to-wall-street-for-investor-aid/
http://www.latimes.com/business/autos/la-fi-hy-fisker-karma-cash-crunch-20121207,0,753069.story
http://www.foxnews.com/leisure/2012/11/30/electric-car-company-fisker-stalls-looks-to-future/

Leverage is increasing in buyout deals according to a recent WSJ.com article.  In "Debt Loads Climb in Buyout Deals," the article explores how leverage is increasing in these deals.  According to the article, since the beginning of 2008 buyout deals were funded with 42% of equity, but this has dropped to 33% in the past 6 months, getting closer to the levels seen in 2006 and 2007.  In addition, the average debt in buyout deals in the second half of 2012 has been 5.5x EBITDA, which is also close to pre-crisis levels.

Here's a link to the WSJ.com article:  http://online.wsj.com/article/SB10001424127887324296604578179343631127394.html

Bill Gurley, general partner at Benchmark Capital and author of the excellent blog Above the Crowd was recently interviewed by Om Malik of GigaOm.  The video of the interview is broken into several sections.  Bill is very insightful with he provides dozens of useful take-aways.  The video is definitely worth watching.  Here's the link:  http://gigaom.com/2012/12/11/bill-gurley/

There's an interesting article by Sarah Mitroff on Wired.com today called "Hardware, the Ugly Stepchild of Venture Capital, Is Having a Glamour Moment."  The article explores some of the historical reasons that hardware investing has not been especially popular for venture capital investors (capital intensity, market demand identification, sales issues, etc.), as well as why some venture capitalists are becoming more attracted to hardware investing (costs coming down, it's becoming easier to determine market demand, etc.).  It's an interesting article and worth a read.  Here's the link:http://www.wired.com/business/2012/12/hardware-funding/

There have been a number of interesting posts recently about the changing environment for consumer Internet companies:

Fred Wilson's "What Has Changed" which provides his thoughts on the changing funding environment for these companies.  He lists three developments that have made it harder for consumer internet companies to get funded:

• The consumer web has matured,
• The consumer is moving from to the desktop/web to the mobile/app, and 
• The momentum/late stage investors have moved from consumer to enterprise.

Another post, "R.I.P. Frothy Times, A Return To Normalcy" by Alexia Tsotsis on Techcrunch.com, also discusses the increasingly difficult environment for consumer internet companies.  According to the post (citing Dow Jones), investment in consumer internet companies is down 42% in the first nine months of this year compared to the same period last year.

These posts echo what I've been seeing in the industry.  I would add that the public markets have been especially harsh on companies that disappoint (Groupon, Facebook, Zynga, etc.) and that IPO buyers are more scrutinizing, making it harder for consumer internet companies to go public.  Another impact is that under FAS 157 (ASC 820) guidelines, funds may need to mark down some of the consumer internet companies in their portfolios based on the poor performance of public comps.

Links:
"What Has Changed" by Fred Wilson:  
http://www.avc.com/a_vc/2012/11/what-has-changed.html

"R.I.P. Frothy Times, A Return To Normalcy" by Alexia Tsotsis:
http://techcrunch.com/2012/11/30/i-see-a-glass-thats-twice-as-big-as-it-needs-to-be/