
Venture Capital's Coming Collapse - Forbes.com - jkopelman
http://www.forbes.com/technology/forbes/2009/0112/066.html?partner=technology_newsletter
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tokenadult
"Many investments have been marked down significantly. Investors would have
been better off buying the S&P 500 index, which is down 0.4% annually in the
same period."

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Allocator2008
I think I agree and also disagree here.

Richard Dawkins talk about how genes suited to doing well "in average"
environments tend to be the ones preserved. In other words, evolution produces
people good at whatever the average tasks are in their environment, so "super
heroes" are unlikely to emerge from evolution, but, say, "cubicle drones" are.
Mediocrity, or being able to "fit in" in the "mean" environment, is a good
survival-predictor for genes.

So, to VC. "Super hero" VC's will indeed go away. Meaning the "I'm investing
in the latest dotcom craze and I am getting 25% or more annual returns" sort
is indeed perhaps nearly extinct. But the VC types that looks at the market
demand and diversifies his investments for more modest (average) returns, is
going to survive. For example, a VC firm heavy in high tech could well
collapse in a tech recession. But a diversified VC firm that invests in
"essentials", like say, natural gas, that is still going to be needed even in
a recession, is probably going to ride out the recession.

So, if I am in VC, which I am not, but if I were, I would look at building a
diverse portfolio heavily weighted towards things like natural gas, utilities
in general, that kind of thing, stuff that won't go away easily. I would, in
other words, try to be an "average gene", not a "super hero gene" because per
Dawkins, the average gene will be more likely to survive. Stay diversified,
stay conservative, tack towards utilities and "essentials" if in a recession,
and you might be "mediocre", but at least you'll survive as a VC firm.

In a word Superman may be dead, but the selfish gene of mediocrity is alive
and well. :-)

