startups Pearls

Venture Capital is broken

VC is broken. We need more operators making faster, knowledgeable investment decisions and actually supporting innovation rather than coasting on reputation. LPs at big institutions allocate $200 billion of AUM to VC (in the order of magnitude of $20 billion a year). These LPs do not have enough context to judge who understand how to build businesses and foster innovative companies.

As a result, much of the total venture AUM ends up being captured by financiers or those who otherwise do not know how to create or properly grow innovation as operators and experienced founders do. They make sub-optimal decisions and capture rather than create value. This lamentable situation is especially acute outside of the US where VCs make almost no seed stage funding and have a corresponding dearth of startups. The growing number of accelerators in Europe, furthermore, are often run by non-founders.

Various new firms have started to appear in the last decade (including A16Z, Union Square Ventures, First Round, and even YC) who are moving toward a stronger more informed and entrepreneur-friendly model. We expect their returns to outpace those of the rest of the industry (which are negative). We need more. Much more across seed, A, and growth.

We believe strongly that we aren't fighting for a slice of the same pie, but that a focused concentration on properly fostering innovation at the earliest stages will grow the pie for everyone. We want to harness the $200 billion of institutional portfolio allocation and redirect it more efficiently.

over 5 years ago on October 10 at 11:46 pm by Joseph Perla in tech, startups

Howdy, my name is Joseph Perla. Former VP of Technology, founding team, Entrepreneur. Actor. Writer. Art historian. Economist. Investor. Comedian. Researcher. EMT. Philosophe

Twitter: @jperla

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