

The good, the bad, and the ugly of the current economic environment for startups - prakash
http://www.alleyinsider.com/2008/11/yes-most-of-you-are-toast

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nostrademons
"An LP may have seen the percentage of his/her assets in venture capital
increase from 10% to 14%, leading him to pull away from the very asset class
that is likely to provide the best returns in this environment. The magic of
this math is that it encourages LPs to invest more in the most troubled asset
classes, not the healthiest."

It's funny that when consumers do this, it's called "dollar cost averaging",
is generally considered a good thing, and assumes that assets that are priced
low are good values. Apparently when VCs do it, the assumption is that assets
that are priced low are "troubled" and this is a bad thing.

Then again, if you take this out to meta-assumption level, it makes perfect
sense. Consumers assume VCs are idiots, and so when assets are priced low,
it's because the institutional investors are irrational and there are bargains
to be had. VCs assume institutional investors are geniuses, and so when assets
are priced low, there must be a good reason for it.

