Tuesday, January 31, 2006

With all the talk about the potential 'disruption' of the VC business i thought i'd add a couple of anecdotes given my experiences. A VC: Don't Be An ATM Is a pretty good take on the discussion. Although Freds final comment is a bit obvious and can apply to many situations beyond this particular one, i can vouch personally for the value that one Venture Capitalist can bring over another. I have met Studs and Duds from all the firms - Duds at Bessemer, Studs at polaris and the reverse. It all comes down to personalities - strip away the $$$ and the Academic qualifications - is this person gonna be with you at the first hurdle, or clawing back the moment you slip up? From an Industry perspective, and i see it with the private equity guys more than ever - there is a tremendous amount of secured and available capital in the private Equity asset class - alot of this is due to the SOX fallout, and the attempt to create pockets of liquid markets privately. If you listen to Swartzman of blackstone - he's off raising the first $22 billion dollar fund! what's happening in more abundance is buyout firms selling to buyout firms - liquidity behind the curtain - free from the constraints, costs, and challenges associated with a re-configured SOX induced public market. Why deal with SOX when we can trade amongst ourselves, take advantage of debt market fluctuations, sophisticated financial engineering, and so on? Moores law could have told us all that we can build twice as much for half the price - and maybe there are elements of this in the VC market today, but there will always be capital, there will always be investment professionals seeking to manage, and there will always be demand - at what point in a company lifecycle is capital required? what is the currency used? these are constantly shifting challenges. VC as a business is not going anywhere - change? sure. Disruption? minor. An abudance of very smart people guiding this boat? definitely.


At 2/21/2006 10:19:00 PM, Blogger Fraser said...

Hi Mark,

A nice grounded post - forcing certain dreamers back into the atmosphere :)

I agree that the VC industry is going nowhere - there will always be a need for it. I even think that only certain elements of it will change from the current course. What I meant in my post on disrupting the VC industry is that there is an opportunity for a new VC firm to use a disruptive strategy to penetrate into the market.

I think many confused the use of disruption in the sense that Christensen used it with a groundswell that would be better described by "revolution".

On another note: it will be interesting to see what happens within the private equity market in 1 year, 5 years and 10 years. It's a hot space, but can it remain like this for an extended period of time?


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