Venture capitalists to be more cautious

VENTURE capitalists will continue to invest on Internet projects in Asia but this time, they will exercise more caution, said Eric Ramirez, Country Representative of Walden Investments.

26 May 2000 (Manila Bulletin) - Walden is an affiliate of Walden International Investment Group, an international venture capital firm based in San Francisco. In a presentation before the 4th AsiaPacific Regional Conference of the Young Entrepreneurs Organization (YEO), Ramirez said, "There's still a lot of cash in the system. Venture capitalists are looking for dot-com exposure particularly in Asia but they will invest with greater selectivity."

YEO is the world's largest nonprofit group dedicated to helping young entrepreneurs. The conference was attended by 200 entrepreneurs from Australia, Malaysia, Indonesia, Japan, Korea and India.

Ramirez warned Internet entrepreneurs that funding will be harder to come by particularly for seed investments. Because of the rush to invest on tech stocks in recent years, most dotcoms went to market through the strength of their business plans alone. This time around, ventures capitalists will aim for more realistic valuations. Ramirez said that the fundamentals as well as revenues and profit projects would mater more. Strategic alliances will become more important and the recruitment of top quality people with the promise of stock options will be more difficult, he added.

Ramirez said the recent meltdown of tech stocks was a culmination of longstanding over-valuations. He said, "It has been a crazy market. In 1999, a record $46.6 billion was raised in the United States as compared to an annual average of $12.4 billion in the past three years."

However, he said that there are still a lot of opportunities particularly in the area of Internet access platforms. Ramirez said, ""The hypergrowth of recent years will translate to sustained growth and it's already happening in some sectors. There is a need to identify and focus on new ways to leverage the Internet for big wins."

He said, "We still believe in the market. Internet will continue to revolutionize the world."