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VC firms may return funds to members

Venture capitalists may feel compelled to return funds to investors in the coming months because of a lack of investment opportunities.

A leading entrepreneur believes that venture capital companies may start returning funds to their members over the next six to nine months, The Financial Times reports. The move would be made because of a lack of credible investment opportunities.

Larry Levy, founder and CEO of Protege, added that in the aftermath of the dot.com fallout, which has devastated the market value of many VC funds, participants are once more valuing companies using traditional methods. He told the paper that he believes market values will only begin to climb in the third or fourth quarter of the year.

Levy was speaking to an invited audience at the City offices of Berwin Leighton, the law firm. He was also critical of the UK government's role in encouraging entrepreneurial activity, which he said was “rather pathetic”.

Levy founded Protege 1996. The company specialises in accelerating the growth of Internet companies and now has 280 employees with offices in the UK, the US, Germany, France and Australia. It has launched 31 companies in Europe including AvantGo, >Virage, Vignette and FaceTime Communications.