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Vrijdag 6-11-2009 - Venture capital wereld - It baffles me how the representatives in Congress keep listening to, and some media stay enthralled with the self-serving circumstantial excuses of Venture Capitalists (VCs) that also still manages to keep some Limited Partners (LPs, their bosses) tuned in. I predicted five years ago, with my declaration of sub-prime VC that Venture Capital was at the brink of disaster, so what is the hot news now?

VC's continue to demonstrate their lack of foresight as they only now, when the statistics of their performance are rolling in, seem able to "predict" their demise with remarkable accuracy. And that while foresight should be one of the most important traits of early stage investors. They still do not understand that an underperforming artificial market leads to one of two outcomes: cannibalization or replacement.

The VC benchmark

News to me is that one of Silicon Valley's most renowned VC funds; Benchmark Capital is rumored to be the first and only VC firm scrambling to produce at least a 1x return on all of its funds. Is such best-of-the-worst really a crowning achievement to be proud of and listened to? Such top-quartile performance is not going to save the reputation of venture sector (even if it does Benchmark's), which relies on the deployment high risk to promise high rewards.

Let me juxtapose why VC should have performed much better than any other time in history: has moved from hardware, to software, to software services with immediate market recognition and impact, allowing for simple business model models and reduced risk with regard to customer adoption.

The Internet with its ever increasing penetration provides a boundless addressable market for technology that a successful proposition can tap into at almost no additional expense.

· Until this year (thankfully LPs are now waking up) there have been truckloads of support from Limited Partners to the Venture sector, allowing VCs to pick their preferred fund size and implement their ideal diversification strategy.

· We produce more highly skilled local students and have access to a much larger petri-dish of (global) entrepreneurs than every before, that should account for a much larger supply of disruptive ideas and development resources.

· The penetration of applications to vertical markets (healthcare, oil and gas, real estate, etc.) remains pretty much untapped, leaving low hanging fruit investment opportunities unserved.

· The deployment of macro-economic principles with the application of technology to drive more efficient marketplaces remains untapped, leaving winner-takes-all investment opportunities unserved.

Venture Company