It’s not often that Wall Street strategists notice the tiny semi-asset class otherwise known as venture capital. But that’s what happened today as Merrill’s Richard Bernstein wrote in a contrarian strategies report that it may just be time for investors to take VC more seriously again:
There may be two areas of alternative investments that seem relatively attractive in the current financial environment. In both cases, these are areas that might benefit from the tightening of global credit. The first is early-stage venture capital. … If return-on-investment does indeed tend to be higher when capital is scarce, the significant tightening of traditional credit funding to smaller companies seems to make early-stage venture capital strategies more attractive.
Granted, Bernstein is making some big assumptions, like that there are things worth investing in, that VCs will find exit markets receptive (the NVCA said recently that we have gone through the first period with zero venture-backed IPOs), and that investors have adequately starved the asset class for money, but it’s still good fun to see VC get picked as a contrarian play.
[Merrill via Brad]
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