The Future of VC Continued

Fred, I think Adeo’s slides (however incomplete and perhaps inaccurate) did spark an important debate. When you couple this presentation with Roger’s post about the Pyramid structure and the comments on the thread from you post yesterday you can see that the broader AVC community is thinking about ways to improve the venture process. This really gets me excited.

As for serving the entrepreneur vs. the market — I would love to believe in this as an absolute framework. I think there are some challenges with it. First, as you point out, funds — like businesss — go through different cycles with fundraising events that invariably shift their focus to selling LPs and, as a result, at least hinder customer focus if not change who the customer is for some period of time. Second, and again like any company, some customers are more important than others. Roelof Botha claims he spent 30 -75% of his time with YouTube during its final year as an independent company. I think this is really done in the interest of shareholders more than the other customer/entrepreneurs in your analogy. To me, this blurs the line between customer and shareholder.

Some venture capital firms talk the talk about entrepreneurs as “raw material”, but use a classic Porter model analysis to determine whether the entrepreneur’s business plan makes sense. To me this makes the entrepreneur more of a supplier than customer in the venture capital Porter diagram. This may be one cause of the “sector” “fad” or “me2” investing phenomenon. There tends to be a lot of portfolio theory within firm cultures and that limits which customer/entrepreneurs a firm can serve.

Like many industries over the next couple of decades, change is coming to the venture asset class. The first change appears to be shrinking the size of capital under management. The next phase appears to be new companies/models that don’t use the 2/20 framework or the LP/LLC legal structure to invest. I think this phase has a long way to go.

What I can’t figure out is how the recession helps or hurts the emergence of these new models?

Originally posted as a comment by aarondelcohen on A VC using Disqus.

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