The Venture Capital Coffin

SiliconBeat (and DealBook) are parroting the silly idea that the Google deal for Writely is another nail in the venture capital coffin:

And poor VCs. This is another example of the big three (Yahoo, Google,
Microsoft) swooping in to buy cool companies before venture capitalists
can even invest. Are VCs getting shut out from making money on the best
Web 2.0 features? Beginning to seem so.

Be serious. At a supposed $7mm exit price, even assuming you participated in a $1mm pre-money Writely angel round, this would only move the needle on a sub-$50m venture fund.  And that is not the same thing as saying that venture funds are therefore too large. Sure, some are, but there are still plenty of places where you can useful invest in a $200mm venture fund (i.e., life sciences, energy, security, materials, nano, etc.).

Anyway, while there are legitimate complaints about the current structure of the venture business (e.g., cascading funds, succession issues, etc.), a few tiny non-VC deals getting done at the fringes of the software market does not an epitaph make.

Related posts:

  1. Pouring, Drinking, and the Allocation to Venture Capital
  2. Flight to (Perceived) Quality & First-Time Venture Funds
  3. Newbies Flood Venture Capital (Again)
  4. Skewness in Venture Capital Returns
  5. Schumpeter and Venture Capital

Comments

  1. brian says:

    With the exception of a few big deals (Myspace, Skype) most Web2.0 buyouts have been for well less than $100m. I bet more money was sloshing around in the last three months of 1999 than has been spent on these Web2.0 companies in the five year since (again Myspace-Skype excepted).

  2. Nail in coffin? I just said they’re being shut out of the “features,” not that VC industry is about to disappear. Take heart!