Listing options are drying up, venture capitalists have the money, but aren’t giving it away like they used to, and the media is full of doom and gloom stories about companies in the internet sector. Not a good time to be an entrepreneur, you might think. 

But if events like Internet World 2000 in Hong Kong and the recent Gorilla Asia dotcom retreat in Thailand are anything to go by, it is actually a great time to be an entrepreneur, providing you have the right business. Those companies that do get funded are likely to get more money and more long-term support from their investors. But those who can’t get the cash, and there will be many, will either die out or be forced into consolidation.

As a result there will be less overnight millionaires created through overhyped IPOs. While this idea might appeal to cynical observers of the internet industry, it is also having an effect on the institutions that make their money through taking companies public.

“In terms of this trend we’re unhappy because we’re in the underwriting side, but we’re also happy because we’re on the M&A side as well,” said Brooks Entwistle, co-head of the Asian High Technology Group at Goldman Sachs, at an Internet World panel discussion. “From a business level standpoint it feels as busy as it did this spring but in a very different manner.

“The dialogue is changing dramatically. Now we’re very focused in many ways on how to clean up the mess we’ve made collectively here in Asia over the last year,” he adds.

David Porter, managing director of Asia Venture Capital Journal, is a long time observer of the venture capital industry in Asia. He has noticed a pattern that might offer some hope to entrepreneurs with internet dreams. “They [venture capitalists] are beginning to spend much more money on the investments they make,” he says. 

Speaking at Gorilla Asia’s Thailand event, Johnny Chan, CEO of techpacific, echoed this observation, saying that most VCs are now putting $20 million to $50 million to work in each investment. Twelve to 18 months ago, he said, there were many more deals for much smaller amounts.

And it’s not just the traditional venture capital funds following this trend. The investment money available from the global investment banking community is also coming less frequently, but in larger parcels.

“We’re doing bigger ticket investments and really putting that money to work,” says Entwistle. “We’re not just writing $5 million cheques for every business plan that comes through the door.”

An example of this is Goldman’s recent participation in a second round of funding for Pihana Pacific, a data centre company based out of Hawaii. As lead investor for the round, Goldman wrote a cheque for around $100 million of the $190 million Pihana raised. It seems that this kind of infrastructure play is popular at Goldman Sachs, as it was also involved with iAsiaWorks, which has a similar business model. Goldman managed the recent iAsiaWorks IPO along with Morgan Stanley and Salomon Smith Barney.

But not all investors are spending more less often. Some, like the conservative Pacific Group, headed up by William Kaye, are spending less, less often. Not that this is a new thing. Pacific Group has always avoided capital intensive investments and its strict guidelines for investment have seen it avoid some of the spectacular failures seen in much of the VC industry, particularly in the US. “We’ve done two deals in the last year, and luckily exited before all hell broke loose,” says Kaye. “The whole industry (VC) is now coming to where we always have been.

“If we don’t see a business being cash flow positive in the next 18 months we don’t invest,” he says. "We’re now seeing a lot of companies that have run out of money and run out of hope. So I’d say we’re as much vulture capital at this point as venture."