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Is VC industry decaying ? May 31, 2006

Posted by rajAT in entrepreneur, entrepreneurship, startup, vc, venture capital.

We normally hear VC's saying with lots of pride that we only write big cheques. And the bigger cheque in VC parlance normally means not less than couple of million dollars. If we look at today scenario, then we will notice that startups don’t need big money. Thanks to LAMP and open source software, burn rate of startups have gone down by an order of magnitude. To top it all, because of the stellar success of technology startups the whole ecosystem has matured quite a lot. At any tech hub you can find couple of technology entrepreneurs who have tasted success and are more than willing to advice young entrepreneurs. The presence of organizations like TiE can help you to connect to right kind of people.

So the two major roles, apart from funding, that VC's used to perform are being done by other agencies. Shouldn't that sound alarm bells to VC's. If you look a little more deeply into the VC industry then you will notice that the VC's are the one who understands the change the best as they invest in it. They are the ones who walk at the bleeding edge of change in any industry (technology, pharma etc.) But while chasing things elsewhere they forgot to take a stock of the situation at their own home.

In today’s changing scenario, when the capital requirements of startups have gone down considerably and other roles of advisory and networking are being performed by other agencies, VC's should take a fresh look at their position.

I think for some of the reasons stated above we are seeing such kind of events happening quite regularly.

In coming years it would be very interesting to see the changes that will take place in VC business. Change is constant. Amen.



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3. Vinit - November 9, 2006

Fair enough discussion, but so very narrow.

Are VC’s only in business to invest in web-based startups?
Because, with LAMP and opensource, costs go down by so much right?

What about marketing (oops, Adwords, right?) ?
What about actual offices, employees? research, product development, sales networks, ..
And the assumption that every new startup team already knows enough of other experienced entrepreneurs is inaccurate (I should know!)

The one point you do make that makes sense is that VC’s will have to adapt to the new ways and deal with new expectations of startup founders.

4. rajAT - November 9, 2006

Good point Vineet :). Thx

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