Is the Venture Capital Industry Shrinking?

fundraising-chart1.jpgHere is a short blurb that I found at VentureBeat (via Digg.com) which claims that the venture capital industry may be shrinking. Check out the graphic. While I don’t want to spend too much time on this two thoughts come to mind a) part of this is cyclical as institutional investors sometimes choose different types of investments (ie private equity, packaged sub prime mortgages, real estate, etc.) and b) does this mean that business plan competitions (which are based on VC models to a degree) will drop in popularity. BTW, I don’t think so. I think that the applications for business plan competitions are large and I see their continued growth.

3 thoughts on “Is the Venture Capital Industry Shrinking?

  1. This may be a part of the evolution of the venture capital firm. I also recently read an article which talks about how VC firms are focusing more on the background of founders, rather than the specific product or service that they are attempting to deliver. The idea is that some founders are just more likely to be successful. So, a company started by one of the YouTube founders is more likely to be funded by Joe who works at a local accounting firm. Joe may have a killer product, but it seems VC’s are trying to be more selective and use profiling to limit their dogs. In my opinion, this creates an opportunity for a VC which targets these unknown founders. Here is one such company that is trying to take advantage of this void:

    http://www.dailyslop.com/a-new-breed-of-venture-capital-firm/

  2. Ryan,

    You are spot on. When I took a class in business school on new venture strategy… the quality of the team was crucial to analyzing an opp. We actually had score cards and would give +s for experience, quallity education, etc… It is crucial. That said, no matter who the team is, if the size of the opp is not big enough (each investor has their own criteria), it doesn’t matter what the team is b/c the opp is not there. thanks for your insights and the link

  3. Sorry for catching this a week later — I was traveling — but I’ve judged more than a dozen venture contests and wished they’d accommodate non-venture models, such as bootstrapping and smaller SBA-backed commercial financing. The venture model puts a premium on exit strategies and discounts the value of building a strong new business without as much outside financing. I’ve shared this thought with organizers but the mainstream grad-level contests (e.g. Moot Corp, University of Oregon) are still setting the rules to approximate venture investing.

    Tim.

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