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phil jones

You mean you'll be investing? Or this is something that Thingamy can take advantage of?

sig

Phil, I feel like Hugh M when I say "new evil plan" thus weaseling my way out of the question ;)

Boyd Mulvey

I have been linked to this site and so have never read your blog before but I have huge sympathy with this view.

By way of back ground, I founded my early stage venture firm 8 years ago and we are now earning out our best performers having stopped taking in new deals last summer. We are in year 6 of our fund. I am not proposing to raise another Fund in the current market.

I agree with most of what you say regarding life cycle of VC's. Also, as I am based in the UK, I can confirm early stage investors are very thin on the ground and getting thinner.

The main problem is life cycle. VC's are generally funded by long term investors (Pension funds, Fund of Funds, and some very large private investors). The problem is that who else has appetitie for this longevity? Corporates don't tend to have a corporate memory longer than 10 years and (in my experience) actually want companies with timelines/ product to market/ in less than three years unless they are doing the R+D themselves. Most want proof of sales prior to investment although there are very limited exceptions. So who else is there? High Net Worth individuals? You have to assume they are at least in their 40's and most likely 50's before they are financially able to tie up funds of several millions in high risk early companies for 10 years or more. Usually these people are hard to find and would rather personally run a small number of deals. Apart from family offices of billionaires with an appetite outside their core compentencies (which limits the number further) I suggest there are very very few investors who would not expect payback in 10 years. If you compare VC investors with most other forms of investment (public company investors have three month horizons) I think you will find the horizon is already as long as can be expected.
The second main issue is that early stage VC investment is extremely hard work compared to the returns generated. This is why almost all investors who makes a track record increase the fund size and move to later stage deals. This limits the number of successful investment managers investors can place their cash with for early stage deals.
Early stage investment is vital for many many reasons. If you find a better way - I wish you great success.

Account Deleted

There is no better company in the world than Google that shows you how to create an online business and earn money online. Really the business model of this company is extraordinary.

Sunil Malhotra

This is one of the most relevant and powerful pieces I have seen in a long time, Sig. Many of the reasons I did not choose to have Ideafarms funded by Vulture Capitalists are so lucidly captured in your post.

Exit strategy is something I pooh pooh at. Makes a money lender holding your home to ransom look like a saint! The VC community cannot even imagine the damage they have done to genuine entrepreneurship. Some of it will not be undone for generations.

I love your allusion to the investor being the passenger. How irritating to have a passenger sit in the back seat while you're driving, giving you instructions about when to step on the gas when he has never even learnt to drive.

I join you in wishing VCs farewell and hope they will never return. RIP

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