More on the Reality of Venture Capital

A recent piece on by Timothy Hay asks whether it is good news that web and software startups no longer need venture capital funds. Obviously it depends on the particular firm and market, but I have long believed this. As we recently discussed, the role of VC is often overrated by policy makers, the public, and would be entrepreneurs.

The venture capital model is likely appropriate for few campus ventures, as it is appropriate for only a small percentage of all new firms. Our capital system is broad and our markets are very welcoming to innovative products and services (especially in recessionary times).

The posting also includes some good links to others who have covered this topic from various perspectives. From the piece:

At the same time, global financial troubles have made it harder than ever for new companies to get funding from venture capitalists – who are, in turn, having trouble raising money from their limited partners.

This good-news-bad-news scenario for entrepreneurs has prompted some to ask the question: Do these start-up companies still need venture capitalists?

“VCs and founders are like two components that used to be bolted together. Around 2000, the bolt was removed,” wrote Paul Graham, a partner at start-up incubator Y Combinator in a December 2008 blog post.

“A sharp impact would make them fly apart. And the present recession could be that impact,” Graham wrote.

Indeed, strains are beginning to show in the relationship between founders and VCs as money problems loom.


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