...growth-industry investors with a large amount of capital, and they will find it appealing to invest in smaller companies because valuations will be lower.
Early stage investing also doesn't typically require investment banking or M&A support. But for later-stage financing or mid-cap buyouts, when deals get more complicated, that's when tech M&A bankers show up. With deals that require multiple bankers, all parties involved are likely to exercise more caution.
"M&A transactions take a period of time to get done, and if anyone at all is concerned about the financial strength of any of the parties, those transactions will be harder to get done," Blaydon said. In the past three weeks, Lehman Brothers was pushed out of several transactions it was selected to be a part of, for example.
Short term, venture experts don't expect much fallout to venture investing, which typically hits between $7bn and $8bn each quarter. Despite the IPO market, investment dollars have held steady. But analysts say that over time, as these companies can't go public or get acquired, early-stage companies could suffer because venture firms must put extra dollars into late-stage companies.
The US is already in the midst of an IPO crisis, and Monday's events added to the problem. According to the NVCA, only six venture-backed companies have gone public so far this year; and for the first time in 30 years, no VC-funded company went public in the second quarter. In a good year, about 100 venture-funded companies go public.
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"What would have happened if Dell or Google or Amazon or eBay didn't go public? Think of all the jobs that would have been lost. From an economic standpoint, we'd like to see many more IPOs and fewer acquisitions," said Emily Mendell, vice president of strategic affairs at the NVCA.
As a result, the NVCA wants to encourage the growth of small boutique firms such as Jeffries or Piper to help save the tech IPO. The trade group is meeting this autumn with industry leaders to discuss options.
Geoff Yang, a partner at venture firm Redpoint Ventures, said problems at the investment banks will affect capital markets and investor confidence. He said he's already seen some buyers put buyout deals on hold because their company stock prices are down, causing some of the more capital-intensive deals to seize up.
"For a lot of these internet businesses that don't take much capital, they're less affected," said Yang. "But for anything that is capital-hungry like the energy market, they're definitely going to feel the effect. For those companies to succeed, we need a vibrant capital market."
