« Hedge Fund Registration for All? | Main | Flickr Founder on Photobucket »
Latest Stories
- Excel Wankers and Recession Averages
- Sorry, New York is Closed. Check Back Later.
- Catching Falling 2009 Earnings Estimate Knife
- Survivorship Bias in Global Markets
- Talking Positions on a Lazy-ish Retirement Portfolio
June 23, 2006
Shrink the Venture Business by 50%
There is a great LP roundtable in the current issue of Venture Capital Journal on the broken venture capital business. The quotable quotes are everywhere, including the following:VCJ: So when does venture return [as a performing asset class]?If I can find a copy online, I'll link to it, but I don't think there is one.
Hirsch: As an asset class? I think that unless there is a dramatic shift in the public markets and the IPO window changes dramatically, the answer is that it will not.
Kester: There has to be a 50% reduction in the dollars being invested in the asset class in the United States. Committed capital for the last 15 quarters is running at about $20 billion per year. That has to drop to about $10 billion per year.
Sphere It
| 
Digg it
| 
Bookmark it
| 
Stumble it
| 
Facebook it
Paul,
While I'm not in the VC business, I am quite well versed in the technology innovation cycle as well as the underperformance of the VC asset class.
I am quite confident Hirsch will be proven wrong and Kester is going to get his wish. We are about to enter the second and likely final phase of cleansing of the excesses which are still so pronounced in the global system. This excess has made it difficult for the VC business to outperform the markets. In addition, we have not yet hit the stride of the next innovation explosion which I anticipate will hit it's stride around 2010.
Kester is going to get his wish because we are about to see tremendous capital destruction of over the next eighteen months. The net effect will be a significant reduction in the capital available to the VC community.
I could be wrong, but I am quite confident of my historical work in both the statements of the innovation cycle and the statement of wealth destruction. In the mean time, it will likely become a very, very difficult phase for the VC business.