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Thursday, May 26, 2005
Venture Capital : Its Not Your Father's World Anymore!!
(Via Bill Burnham)"Deal flow" has been long regarded as the lifeblood of venture capital and the primary point of competitive differentiation between venture firms. Changes in the venture industry are making deal flow far less important and rapidly making deal flow-centric business models unsustainable for all but a few venture firms. The approach is premised on a passive plane to venture investing that essentially subscribes to a "build it and they will come" theory of venture investing. To grossly, but not inaccurately, simplify this view: all it takes to have a successful venture firm is to open an office on Sand Hill Road, stock the office with well known/connected former operators/financiers, wait for the entrepreneurs to come flocking to your door and then simply invest in the best teams with the best ideas. In this model VCs are seen as capable of doing a communications equipment deal one day and an alternative energy deal the next. They have no need to be experts in specific industries but instead pass judgment on the quality and pedigree of start-up teams with the belief that their connections and experience can help get any company off the ground.
Category : Venture Capital |
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