Todayâ€™s W$J has an article on venture capital â€œpre-emptive financing,â€? a term I had not heard before. As the article describes:
Pre-emptive financing happens when a venture capitalist seeks out a promising start-up business and offers it money out of the blue, before the company tries to raise a second or third round of cash. If the offer is good enough, in theory, the venture investor will snag a piece of the company quickly, thus avoiding a costly bidding war that could erupt later once the company says publicly it is looking for cash and attracts several suitors.
The article gives the impression that pre-emptive financing is raining on Silicon Valley start-ups (it has a picture to this effect). But I wonder how widespread the phenomenon actually is. A quote from a general partner with IDG Ventures refers to â€œvery high-quality opportunities.â€? And as I blogged about last October (here), many early-stage start-ups have struggled to get funding. So maybe its only high-quality later-stage start-ups that are seeing the rain.