The future of the venture capital industry? With ten-year returns tumbling toward negative numbers, lots of people rightly wonder where the venture business goes from here.
My argument has been that its future needs to look a like its decade-plus ago past. We will see more small funds, fewer large ones, and less capital committed in total. And those are all good things.
Josh Kopelman of First Round echoes that view, with a post up that (in addition to saying nice things about me) has some great nuggets about the venture industry’s early days. Among other things, Josh points out “… that in the 1980’s there were just 12 venture funds above $250M. Today there are over 408 – and 30 over $1B. And most of this fund-size growth took place in the last 10 years.”
And one more nugget:
“the initial funds of Accel, Kleiner Perkins, CRV, Mayfield, Venrock, Greylock, NEA TA & Sequoia COMBINED were under $125M!“
Spot-on, Josh. Bringing the venture industry back to health doesn’t mean financial engineering, exotic funding options, or entrepreneur-unfriendly deal terms. It means, more than anything else, a return to its roots.