
Fred Wilson on Why the Collapse of Venture Capital is Good - olalonde
http://www.technologyreview.com/qa/428869/fred-wilson-on-why-the-collapse-of-venture/
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vm
I feel tricked by link-bait on this one. Fred Wilson makes no mention of the
"collapse" of VC. He doesn't even come close to the concept.

Tl;dr of the article:

-many VCs are having trouble fundraising because of mediocre returns

-Fred thinks it's good that there is a lot of early stage funding (angels). It should create more entrepreneurs

-Some VC funding is too concentrated in megafunds. If that $ was spread across funds, then there would be more diversity of ideas and companies

-Will Kickstarter/crowdfunding replace VC? Too early to tell

~~~
nacker
Even more succinct tl;dr:

\- It's a _diversity_ problem. Too much money in the hands of white guys in
suits.

"I don't think there's too much money sitting around. I think there's too much
money in too few hands. So when six white guys in suits control two and a half
billion dollars, that's not a good thing. Instead of being allocated just to
one firm, it would be better if that two and a half billion dollars was
allocated to 25 firms at $100 million each. It would lead to more diversity or
people trying more things: data sciences, urban sciences, transportation,
energy, materials science, and many others. "

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_delirium
Interesting to see a firm number quoted on the target returns:

> _What is a mediocre return?_

> _Anything less than three times your money over a 10-year period._

Fwiw, that's equivalent to around 12% annualized.

~~~
jakarta
You have to consider the risk/illiquidity that's taken on to achieve that
return.

It's my understanding that VC works in a manner similar to PE, where investors
are given their returns when the entire fund they invest in is run down. Each
fund has a vintage, so if you invest in the 2006 fund you might get paid back
7 years from then in 2013, that's kind of a long time.

For a liquid asset class to compare to, equities have done something like
6-6.5% real historically.

~~~
_delirium
Yeah, that makes sense. I wasn't meaning to imply skepticism, just that I
don't recall having actually seen a go/no-go number explicitly spelled out
elsewhere, that 12% p.a. is the rough threshold delineating whether VC is
worth it as an asset class, taking into account the risk/liquidity/etc.

I suppose going forward it mainly depends on what you think will happen to the
stock market. Will the next 20 years see the resumption of the
WW2-through-1990s performance level, or will they look more like the past 20
years, with middling to flat returns? If the latter, VC might become
attractive at even lower returns compared to anemic returns in "regular"
equity, but if the former, then it may become less attractive compared to a
more liquid and diversified stock portfolio.

