If venture capitalists can’t exit from their current deals, they have no capital to roll over into new companies.  Moreover, if VCs are forced to support their portfolio companies because no public market exists to supply fresh capital, they will have to make hard choices about who to keep and and who to kill.  This will result in even lower levels of capital formation and economic activity.  Not good.

From Business Insider:

Liquidity flowing into venture-backed companies fell 57% from Q2 2008 to Q2 2009, from $6.48 billion to $2.8 billion, according to Dow Jones Venture Source.

That’s the lowest quarterly amount since 1999, and according to a Polachi Inc. survey of 138 venture capitalists, it has the early investing class very, very worried about “exit markets — when will they return?”

VCs Topic Concern: Where Are Exits?