Some savvy comments on how it is not your parents’ VC business any more, from a recent HBS venture capital conference. Persistent asset allocations to the venture category has created a stable fund supply, which means that some funds (and ideas) get funded, even when they shouldn’t:
Sahlman noted that in the history of venture capital, the money that limited partners made available for investment has ebbed and flowed. That phenomenon seems to be shifting, he said.
“One theory is today the money doesn’t go away. The limited partner community has defined venture as an asset class; they’re going to stay in the market no matter what. If they can’t get an allocation at a top-tier fund, they’re going to go further down the food chain…so I think there’s no equilibrating mechanism right now,” Sahlman said. “Is that a problem?”
“There’s a lot of capital out there now trying to be placed,” noted Mullen. “The statistics are almost overwhelming.”
He said estimates indicate there are about 700 venture capital or private equity firms currently active, and it is expected they will raise more than $230 billion this year.
“I heard somebody say recently that the position on whether the glass is half-full or half-empty depends on whether you’re pouring or drinking,” Friend said.