07_InClassActivity_SomethingVentured - ACC 333 (Farrell)...

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ACC 333 (Farrell) Class 07 Fall 2011 Page 1 of 2 In-Class Activity – Something Ventured: VCs Asked To Put Mouths Where Money Is Janet Whitman, Dow Jones Newswires September 4, 2002 NEW YORK -- Venture capitalists are getting a lot more requests these days to put their mouths - and their signatures - where their money is. With hundreds of cash-strapped companies ailing, and in many cases failing, more and more bankers and prospective customers are checking up on the health of start-ups by telephoning the fledgling companies' venture-capital backers. Although the practice was not unheard of over the years, the number of calls and the list of questions and demands have increased dramatically in the wake of the dot-com crash. Instead of simply asking venture capitalists whether they still support the companies in their portfolios, nowadays prospective customers, bankers and others with potential liabilities to start-ups want guarantees. Before agreeing to buy a product, some companies are asking venture capitalists to sign contracts vouching for their financial commitment to a particular portfolio company. Some banks, meanwhile, are refusing to provide bridge financing * to struggling start-ups unless venture capitalists agree to back the loans. "It used to be that customers would call a well- known venture capitalist and say, 'Are you behind this company?' And they'd say, 'Yeah, we're there.' And the customer wouldn't ask for anything more,"
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This note was uploaded on 03/19/2012 for the course ACCACC 333 taught by Professor Anne during the Fall '11 term at Miami University.

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07_InClassActivity_SomethingVentured - ACC 333 (Farrell)...

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