The venture capital business is in the middle of a shakeout.<\/p>\n
For too long, venture’s been over-funded and over-staffed with homogeneity:\u00a0 the same kinds of partners, operating with the same fund model, looking at the same investments, in the same markets.\u00a0 It took an economic meltdown for LPs to finally realize they were putting money into an asset class that wasn’t generating a return commensurate with the risk.<\/p>\n
Because of the typical 10-year agreement terms in venture partnerships, everything happens in slow-motion.\u00a0 But there’s some early evidence things are breaking up:<\/p>\n
Partnerships getting hit the hardest:\u00a0 those without some recent distributions (some are rumored to have nothing in the past 7-9 years!), those with no previous funds beating T-bill IRRs (or even showing a positive return), and those with heavy university endowment LPs (which have gotten slammed).<\/p>\n
I don’t wish ill-will on any of my venture friends, but I think this is good for everyone in the long run:\u00a0 we’re flushing out a broken, over-capitalized, me-too industry.\u00a0 Hopefully we’ll see some innovative fund models, looking at new markets, and funding companies in new ways.<\/p>\n","protected":false},"excerpt":{"rendered":"
The venture capital business is in the middle of a shakeout. For too long, venture’s been over-funded and over-staffed with homogeneity:\u00a0 the same kinds of partners, operating with the same fund model, looking at the same investments, in the same … Continue reading