Capital Shortage? Hardly

In the midst of this credit freeze, I am routinely always asked, “Is there ANY one out there funding growing businesses?” My answer is, “of course!” Just like Warren Buffet is spreading his money around, the same can be said for SOME investors and specialty lenders and senior lenders. For every banker that is posting his resume to, there’s another banker/lender working 60 hours a week.

The real trick is knowing who is (really) doing what. But frequently talking to bankers/lenders/investors the truth is, some are very busy and others aren’t.

Not only do I know this from personal experience, but the macro data supports this too.

George Gilder in recent Forbes article, “The Coming Creativity Boom,” November 10, 2008, cites there are 741 VCs with $257 billion under management and another 10,000 hedge funds, private equity players and the like sitting on $2 trillion of additional capital. Today, VCs alone are investing about $30 billion a year. Which is down from $100 billion in 2000 but still significant. Why do they continue? Because each dollar they eventually invested turned into $7.90 per year in annual revenue (on average.)

While I didn’t take time to verify his sources, Mr. Gilder points to an obvious but overlooked truism in finance. There is ALWAYS more money to invest than good companies to invest in.