The VC Asset Class Crisis Thing

So, the venture capital "asset class" is in crisis. Or at least that’s what the NVCA is saying today as it rings the alarm bell asking for politicians, regulators, venture capitalists, entrepreneurs, dogcatchers, presidential candidates, philatelists, etc., to do something — anything! — about it.

Of course, readers of this blog won’t be surprised at news that this is the first quarter in recent history in which there have been zero, zip, nada VC-backed IPOs. I wrote about that fact here last week, and the story was picked up over the weekend by the good folks at the NY Times. So, no surprise.

Anyway, some quick points on the crisis claim:

  • Venture capital is not in crisis. It is a cyclical, bubble-driven business, and it is between bubbles.
  • Sarbanes-Oxley hasn’t helped, admittedly, but that is not the core issue. Among other things, the industry hasn’t been able to find enough companies about which Wall Street can get excited.
  • Venture capital still has too much money under management.
  • Average fund size remains too large. Adjusted for inflation, and based on pre-bubble 1994 figures, the median VC fund size in 2008 would be $100m, not the current $200m figure.

As an aside, I’m fond of the claim from entrepreneurs cited in the release saying that they don’t want to go public anyway. Damn straight! That’ll teach those Wall Street bastards! We don’t want your million of dollars. We don’t want to be rich. We don’t want … wait, maybe we do.