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Back in Black

The VC industry is fattening up again--but what does this mean for your business?

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This story appears in the May 2005 issue of Entrepreneur. Subscribe »

Wondering what happened to that looming shakeout in the VC industry you were hearing about a few years ago? The VC industry has weathered the storm and is now entering a new funding cycle with increasing momentum.

There are currently two prevailing schools of thought on the phantom shakeout. The first and more optimistic view holds that fears were greatly exaggerated and the state of the VC industry was never as bad as was rumored. "I never believed the doomsday scenarios for the VC industry," says Mark Heesen, president of the National Venture Capital Association. "We heard the number of firms was going to be cut in half. Where we have seen a decline is in the number of VC professionals. Because the fund sizes are smaller today, VC firms don't need as many partners. As a result, many partners have gone out and started smaller, regional firms, so the number of firms has remained relatively constant."

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