The Problem with VC Capital

How to Fix Venture Capital by Umair Haque

That path is simple: true, durable radical innovation, backed up by something today’s venture industry is missing in spades: a deeply felt sense of purpose; the courage, hunger, and commitment to stay the course.

Let’s revisit the spectre haunting venture capital. Why aren’t there more Googles?

The answer’s very simple. Because every company that had the potential to be economically revolutionary over the last five years sold out long before it ever had the chance to revolutionize anything economically.

Think about that for a second. Every single one: Myspace, Skype, Last.fm, del.icio.us, Right Media, the works. All sold out to behemoths who are destroying, with Kafkaesque precision, every ounce of radical innovation within them.

Now, I agree with Fred. Equity capital markets are myopic, beancounterly, and soulless. But it’s not venture’s job to fix those problems. The real problem is internal: structural inertia and risk-aversion.

[…] There’s little turnover in the actual pool of venture investors or venture funds, especially relative to the pace of innovation. And, that, in turn, means that the venture industry is fast becoming an old boys club: one big boardroom mostly full of guys with the same perspectives, beliefs, and incentives.

And so what’s happening isn’t surprising. The dynamics of old boys clubs are almost deterministically predictable: they fight tooth and nail against risk, against the radical, against any kind of change to the status quo. They’re great at „monetization“ – cutting deals – but the last thing old boy’s clubs are good at, unfortunately, is sticking up, come hell or high water, for innovation. From music, to publishing, to food, to autos, the outcome of locked-down boardrooms has been innovation stifled and suffocated.

See also:
We Need A New Path To Liquidity

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