“The best entrepreneurs want less from VCs today”
Posted by: ecpm blog on: July 9, 2009
From True Ventures today: Welcoming Andreessen Horowitz.
The best entrepreneurs want less from VCs today: less capital and fewer constraints in order to take more risk earlier. The best are demanding new products, services, attitudes, and business practices from their investors. This means new expectations around board roles and responsibilities, more flexible deal structures, broader syndicates that amass the resources and participation of multiple groups and multiple angels. This means innovation in venture capital.
If this is right, it means there will be a selection bias for traditional VCs that are optimized to do bigger deals.
The other thing I realize is that while money is flowing out of this “asset class” (in quotes because I hear many reputable VCs refer to it as a cottage industry rather than an asset class), there is still a flight to quality in the space. Not surprising since we see a flight to quality in other assets like hedge funds. Capital flows out of badly performing funds. Some of that capital flows out of the industry, while some flow to the high quality funds.
2 Responses to "“The best entrepreneurs want less from VCs today”"
July 9, 2009 at 2:06 pm
Agree– and the numbers back that up.
It’s not surprising that the firms that are embracing this early stage revival are also the most excited and passionate. As the industry becomes smaller, you start to weed out the people who were only there for the money.
July 9, 2009 at 1:51 pm
I think venture is best as a cottage industry, but over the past 15 years or so it’s grown into large asset mgmt business. Lager funds pursuing larger deals. What’s exciting about the revival in very early stage is that there is a bit of a “return to the roots” feeling behind all of these new firms. Most funds are small (on a relative basis) and most of us are doing deals as small as $50K or more routinely $250K-$1mm. These are deal sizes that haven’t been seen at the institutional level since the ’80s and early ’90s. Back to the future (maybe).