<p>Listen hmom5: I'll tell you what is a fact..you claim to be non PC and fact oriented.. You are 50+ years old, you have posted 1000s of messages on this board, have developed a thick skin over time, and trying to convince yourself that your sons are doing great. So you don't really give a da*n about other young people getting hurt by your comments. So with all due respect, let me bow out of this thread..and you can go ahead with your participation. Have a great day.</p>
<p>Wow, aren't you in you 30's?! People who can't handle truth shouldn't post on message boards.</p>
<p>
</p>
<p>And most VCs would not have stood a chance at MIT and Caltech. Different skill set, not a superset as you seem to be painting (or adulating) it. </p>
<p>VC is approximately halfway between engineer and trader in its requirements and orientation.</p>
<p>
[quote]
And that's a very small percentage of engineers. Yet there is nary a VC on the planet who could not get an engineering degree or job.
[/quote]
</p>
<p>I'm sure lots of VCs are in the IQ range to get some sort of engineering degree, just as most people with engineering degrees can get an MBA if they wish to. The top VCs are smarter than the average engineers, but are not smarter than the top engineers and scientists. It would be interesting to compare them to the top traders; a less intellectual job but with harsher selection process for the top positions.</p>
<p>
[quote]
I think you may be right in saying it but the second statement of your last post is condescending
[/quote]
Pot calling the kettle black?</p>
<p>Look, for whatever reason, you seem to (rightly) value the intellectual and intelligence horsepower of engineers but (wrongly) devalue the same in VCs, investors, and businessmen -- without realizing that there are various types "smarts". Most engineers are simply brilliant when it comes to creating a product -- but simply can't sell, market, or monetize themselves out of a wet paper bag.</p>
<p>
[quote]
I am a research and consulting engineer who has been thinking of mba.
PE/VC seems to be one of the most desired (although highly selective) job for MBAs from tops schools. But, all PE/VC people i have met or observed look like the most paranoid, miserable, creatures who seem highly superficial and not very intellectually oriented at all.
I simply have no clue why top MBAs such as from HBS will ever take such jobs. I mean, think of it: as a VC you are really interacting mostly with 3-4 team members of yours working on deals every weekday. you may get to interact in a highly formal setting with people (whose money matters you handle), but thats pretty much it. It can get boring pretty quickly after an year or so.
[/quote]
</p>
<p>Backtoschool, let me put it to you this way. What else were they going to do? Let's face it: few if any post-MBA jobs are 'intellectual', the way that you've defined the term. </p>
<p>
[quote]
My main point is: a technical entrepreneur's first love is technology - he eventually makes millions not because he loved money to begin with. he loved technology and money followed.
[/quote]
</p>
<p>I don't know about that. Larry Ellison has freely admitted that he founded a company because he wanted to become rich and powerful. Bill Gates may not love technology as much as he loves competing. One legendary story regarding him is his bet amongst his friends to see who could leave for the airport at the latest possible time and still catch their flight: Gates won by illegally abandoning his car at the departure curbside. Even now, you can see Gates's competitive drive now being channeled not to Microsoft, from which he has largely retired, to his philanthropy work. </p>
<p>
[quote]
First, I am not sure if you fully read what I posted - i never claimed VCs dont have "any" intellectual component. Sure they do - deep enough to understand relevant business or technically general idea of what a PhD from MIT in parallel computing is saying, and wide enough to understand various such general technical ideas to identify good business opportunities. But "not" deep enough to fully understand even one of these PhD in CS from CMU/MIT.
The tone of my post may have seemed a little harsh only because I was trying to draw a line between two different kinds of people: intellectual engineers vs in my opinion, slightly-intellectual, VCs.
Second, I think there is a clear difference between an "intellectual" and "intellectual stimulation". Many ordinary folks may derive intellectual stimulation out of a general conversation about something new, something novel, something even as ordinary as travelling to a new place and enquiring about those new surroundings with the locals. Just because someone likes this every once in a while does not make him or her an intellectual. Calling someone an intellectual is a question of "depth" and not "breadth". An intellectual in any space will relish through and through conversation in depth about that space - be it a specific science or art.
If you want technicalities, you will find the term "intellectual" applied to people of the mould of paul krugman (economist), knuth (programming guru)...
You tell me the name of one VC whose name appears as an "intellectual" in reputable print media.. will you ever see something along the lines of "Mr John Doe who heads XYZ ventures is an intellectual" in such media. I guess not. On the other hand, in sciences and engineering, you do see this. There is a big gulf between having an intellectual bent, which I am sure many VCs do, and being an intellectual.
[/quote]
</p>
<p>Sure, I agree, VC's are probably not 'intellectual' the way that you've defined the term. But so what? They're not trying to be intellectuals. They're businessmen. They're out to make money.</p>
<p>Besides, think of it this way. The vast majority of tech entrepreneurs are not 'intellectuals' either. Larry Ellison freely admits that plenty of people know more about computer science than he does, and in fact the first thing he did when he originated the idea for his company was to bring in his friends Ed Oates and Bob Miner as cofounders, who he felt knew more about the technology than he did. Michael Dell is similarly hardly a computer science 'intellectual'. His true expertise is in salesmanship and production/operations management. Dell's competitive edge is not that it actually designs better PC's than everybody else does (as they're all basically the same), but that the firm figured out the direct sales model that bypassed the retailer to sell directly over the phone and later the Internet, combined with the 'negative cash cycle' in which Dell gets paid by the customers before they pay their suppliers. But that's not a scientific innovation as it is a business innovation. Bill Gates is similarly not a true computer science 'intellectual' as he is a business and management visionary. After all, people don't really study Gates's work in order to glean insights into better programming language design as they do to learn technology strategy and management. You want to devise an innovative software algorithm to calculate some heretofore unsolved problem? You go to Knuth, not Gates. On the other hand, if you want to learn how to manage and lead a highly successful tech firm, you go to Gates, not Knuth. Even Sergey and Larry would probably admit that there are people at Google who are better computer scientists than they are. </p>
<p>But again: so what? Business success is not determined by who is more 'intellectual'. It is defined by who can create and effect a business strategy that is profitable. The vast vast majority of businessmen are not intellectuals, nor are they trying to be. </p>
<p>Now, maybe your point is that intellectualism should be more rewarded financially than it is today. Perhaps. But that's an entirely separate discussion.</p>
<p>Good post Sakky. There have been threads about kids that are intellectual vs. ones that are not on several boards. Why are kids at Chicago and Reed intellectual while kids at some schools harder to get into not, for example. Those threads have also begged the question: what is intellectual?</p>
<p>Is intellectual a smart person who wants to be seen as such wearing their intelligence on their sleeve? Are the kids at the ivies who play pong till they drop most nights lacking something in their intellectual makeup?</p>
<p>It also reminds me of studies showing that 'geniuses' with IQs around 135 are most successful in the world. As IQs go higher the individuals become less able to function successfully in real life. </p>
<p>So I still don't know what intellectual is, but I do know what it isn't. It's not by a long shot the average engineer. It's not most PhD's. And it's not those who possess elite jobs.</p>
<p>What those who possess elite jobs like VC's are, are people who win competitions at the highest level. They have made it through 20 odd or more years of life and emerged in the top .2 percent of jobs and salaries because that was their goal.</p>
<p>When I read that the OP was Indian and a grad of IIT, I understood where he's coming from. In his Country he won that competition. And the prize wasn't a high paying job, it was an engineering education. It would be a booby prize for most ambitious American kids, but that's what the best of the best get and prize there, while they get and value a completely different thing here.</p>
<p>Does that make him an intellectual? I suppose it does if he chooses to be one.</p>
<p>I think an intellectual is one who prefers to spend available free time discussing academic subjects instead of playing ping pong.</p>
<p>vossron, i only hope you're being facetious when you infer hmom is referring to "ping pong"</p>
<p>:) No, it's my inability to read, corrupting her "play pong" into something I did at that age. ;)</p>
<p>IMO</p>
<p>I would argue that an intellectual is motivated by discovery; not fortune, fame, or power. Driven by curiosity to uncover truths, to answer the questions that have plagued the human race since its conception. An intellectual seeks knowledge above all else.</p>
<p>This is a great thread - from all participants - despite some insecure whining here and there.</p>
<p>A wise man once said that "An intellectual is someone who has found something more interesting to think about than sex." By that definition, many successful businessmen are intellectuals, especially by middle age! :)</p>
<p>
[quote]
But again: so what? Business success is not determined by who is more 'intellectual'. It is defined by who can create and effect a business strategy that is profitable. The vast vast majority of businessmen are not intellectuals, nor are they trying to be.
[/quote]
it sounded to me, sakky, as though backtoschool was attempting to argue that engineering or more 'intellectual' career paths are somehow nobler or of more value to society than the greedy money-changers he sees VCs as being. What he looks to be convinced of in his first post (at least nominally looking, anyway) was (1) the intellectual caliber of a VC job, and (2) what they do all day that is so darn interesting.</p>
<p>what I think we're seeing is a classic disconnect between the priorities that really smart kids are raised with, and the priorities they see the real world impose on them once they hit the ground running. I'll explain: when myself and all of my similarly bright friends were being brought up in the cushy, highly-intellectual suburbs of Boston, what was most prized was academic success as illustrated by an ability to absorb academic information, process it, make insights with it, and do all of this very quickly. Among the things not prized:</p>
<ul>
<li>Innovation</li>
<li>Real-world applicability</li>
<li>An understanding of how organizations work, how they are built, or managed</li>
</ul>
<p>Fast-forward to college graduation, for myself and various friends at top schools, and for the lucky among us a transition had begun at the start of senior year. We began to perceive what the world was valuing, and being smart and motivated we learned the tools of the trade to make ourselves valuable to the world, having already beat, as hmom puts it, the college "game". Those who were really good at reshaping ourselves, gaining skills quickly and marketing ourselves to companies ended up at top consultancies and investment banks. The unlucky among my friends still haven't adjusted to what the real-world 'values' and thus are unemployed, are pursuing a career in academia, or are profoundly unhappy with their careers thus far.</p>
<p>
[quote]
I simply have no clue why top MBAs such as from HBS will ever take such jobs. I mean, think of it: as a VC you are really interacting mostly with 3-4 team members of yours working on deals every weekday. you may get to interact in a highly formal setting with people (whose money matters you handle), but thats pretty much it. It can get boring pretty quickly after an year or so. To continue any further in that career, you either have to be a total number cruncher desperate to make money with no taste for other things in life. i mean you are just handling money for other people thats it.
[/quote]
backtoschool, what I think you are missing is the background to how a lot of these industries (and ventures) are started and financed, and - not to get too condescending, really I'm trying hard here - a few key cogs in how the world works.</p>
<p>To simplify horrifically, money is a token that represents how much value you have brought to society, or at least to specific individuals. Since you can trade it for other things of value to you (like, say, food), people only give it away for things of value to them. A fundamental aspect of sales is thus figuring out how you and your products are going to help the client make money, or do their job more efficiently at the very least.</p>
<p>That is a very HUMAN process and game. It is intellectual to the extent that perceiving other's feelings, forging bonds with others, using empathy, and sensing opportunities to add value require careful thought, judgment and experience. And nobody makes money without those impulses being behind it. Sure, you can be an employee, a grunt on whatever assembly line your industry employs, but you're doing so because in an office somewhere, somebody has figured out how to use your outputs to make somebody else money - to give them something they value.</p>
<p>How the hell does this apply to VCs? They are handed constraints - a limited supply of money, ruled not just by mercurial institutional investors but also by the politics of capital calls and the vagaries of the market. They are flooded with opportunities, perhaps 100 business plans for every one that they finance. And they are asked to be judge, jury and executioner of the next generation of innovation. Pick correctly, and not only do they make money, but valuable new products and ideas are brought to society and everyone benefits. Pick poorly, and not only do you lose money, infuriate investors and possibly get fired, but money has been wasted on goods and services that are not, in hindsight, valuable to society.</p>
<p>They are thus charged with efficiently allocating capital to the places most deserving of it. It's a hard job requiring not just people skills but incredible perceptions about what will and will not work, with respect to:</p>
<ul>
<li>Product concepts</li>
<li>Development schedules and plans</li>
<li>Marketing strategy and prioritization</li>
<li>Team-building and finding the right people for a management team</li>
<li>Pricing and sales engineering decisions</li>
<li>Market readiness for a product and adoption prospects</li>
<li>Scalability and growth potential</li>
<li>Funding requirements and capital efficiency</li>
<li>Barriers to entry</li>
<li>Exit opportunities</li>
</ul>
<p>I could go on. But basically, every VC operating in a given industry is an expert on that industry. Their ears are to the ground every hour of every day, learning what the new ideas are, who the market players are, where the opportunities lie, which way the wind is blowing. Nowhere do you get a faster education in business than working for a venture capital firm, because your very survival depends on it.</p>
<p>And it is that challenge, that education, and that opportunity to match the BEST new ideas with the money needed to bring them to the world, which is so exciting to the prospective MBAs and successful entrepreneurs who go into the Venture Capital industry. An HBS MBA could have practically any job they wanted, in any field. And a great number want to go into VC, because they view it just that way - as a challenge, an education, and a chance to add tremendous value to the world.</p>
<p>I hope that's close enough to a good answer for you.</p>
<p>Wow Denzera, great post. I love threads where so many smart people who have a different way of viewing the topic write thoughtful posts. While 'what's my chance' threads can be entertaining, the value is here for those wanting to have a critical look at life and careers.</p>
<p>If I have any pause about the banking career I pursued and love, it's why I didn't look at VC. What those folks do on a day to day basis could not be more fascinating IMO.</p>
<p>
[quote]
The unlucky among my friends still haven't adjusted to what the real-world 'values' and thus are unemployed, are pursuing a career in academia, or are profoundly unhappy with their careers thus far
[/quote]
</p>
<p>Allow me to defend the lifestyle of academia for a moment. I would hardly call those who choose that lifestyle and succeed, i.e. win tenure, as being unlucky, especially if they succeed at a top university. In fact, I would argue precisely the opposite - they are among the most lucky in the world, and certainly luckier than the vast majority of businessmen. The appeal of the academic lifestyle is especially apparently today, when companies seem to be racing to see who can lay more people off, when businesses are going bankrupt, when many VC/PE/hedge funds are going bust. Even many universities are laying off staff, but who are they not laying off? The tenured faculty, for the simple reason that once you have tenure, you have lifetime job security except under extraordinarily unusual circumstances, i.e. the university decides to eliminate your entire department. It is practically impossible for a tenured faculty member at a top university to involuntarily lose his job, and in the highly rare cases when that occurs, that person will surely find a tenured position at some other university with little difficulty. I would hardly categorize these people as being 'unlucky' by any stretch. Contrast them with regular people who can lose their jobs at any time and for any reason, or for no reason at all. </p>
<p>Couple that with the fact that the academic lifestyle for senior faculty is quite laid back. Granted, most of them continue to work hard on their research. But they don't have to, for there are very few obligations that force them to show up. They are therefore generally required to be on campus only about 30-35 weeks of the year. They get the summers off. They get a month off during the winter break. They get spring break off. They get periodic sabbaticals. Even on the days when they have to be around, their responsibilities are generally quite light. Teaching takes up probably no more than half a day, especially if you are teaching courses that you have taught numerous times before, and especially if you don't really care about your teaching evaluation (as many senior faculty don't). Faculty meetings and seminars also take up little more than 5-10 hours a week. It's a relaxed lifestyle that has been deemed to be ideal for those who are raising families. One of my friends is a son of college professors and who probably visited over 50 countries by the time he was 18, as, every summer, his entire family would take a 2-3 month vacation to travel somewhere in the world. He can't even remember a single summer of his childhood where he even stayed anywhere in the United States, much less in his hometown. Other than perhaps being a schoolteacher, what other kind of job provides the sort of time flexibility that allows you to take a 3-month trip overseas with your family every year? </p>
<p>Now, I can agree that plenty of academics don't get tenure or can't even land a tenure-track job, and they may be considered to be 'unlucky'. But to that I would say that it's all relative. Let's face it. Most people do not have highly successful careers, regardless of which career path they have chosen. And certainly very few of them will enjoy the sort of career success equivalent to earning tenure at a top university. The vast majority of people hold regular jobs for regular pay, and they can lose those jobs at any time. </p>
<p>
[quote]
They are thus charged with efficiently allocating capital to the places most deserving of it. It's a hard job requiring not just people skills but incredible perceptions about what will and will not work, with respect to:
[/quote]
</p>
<p>
[quote]
I could go on. But basically, every VC operating in a given industry is an expert on that industry
[/quote]
</p>
<p>Well, I'm far less sanguine about the topic than you are. What you seem to be describing is the ideal of the VC industry, but not really the reality. </p>
<p>The fact is, not every VC is an expert in the industry in which they are operating. Some are, but some aren't. That was particularly clear in the last few years when a lot of 'green energy' VC's were just repackaged IT/Internet/software VC's who actually knew very little about green energy. Similarly, during the dotcom boom, a boatload of investments in the Internet and telco space were made by VC's who knew nothing about those industries. Yes, many of them got crushed, but some of them did indeed become rich despite not really understanding what they were investing in. Mark Cuban and his VC investors made billions by selling Broadcast.com to Yahoo, and the fact that Yahoo took a total bath on the whole investment is not their concern. They got rich and that's all that matters to them. </p>
<p>Which gets to my other point. It would be ideal indeed if VC's did indeed allocate capital efficiently. But numerous studies have confirmed that they don't really do that. Instead, they engage in a lot of herding behavior. One VC firm, usually a 'high status' firm, makes a successful investment, and then they all pile into the same space. How many online pet food stores were funded during the dotcom boom? How many social networking Facebook knockoffs have been funded? Paul Graham has compared the VC community to that of a bunch of high school girls, all carefully watching each other and jockeying for popularity, which is why the most important questions that any VC wants to know is not what your idea is, but rather which other VC's have you pitched to and how interested are they? </p>
<p>
[quote]
An HBS MBA could have practically any job they wanted, in any field. And a great number want to go into VC, because they view it just that way - as a challenge, an education, and a chance to add tremendous value to the world.
[/quote]
</p>
<p>Well, I tend to actually agree with a previous post in that most of them are probably interested in the money. The fact is, during the boom times, VC, frankly, is pretty easy money. Even now, when times are bad, VC's still enjoy a pretty cushy lifestyle, relative to almost any other job out there, and certainly relative to being a tech entrepreneur, who are vastly underpaid for the risks they are taking, as the VC's will diversify financial capital across a portfolio of investments, whereas the entrepreneur cannot diversify his human capital, and so if the firm goes down, the entrepreneur ends up with nothing, whereas the VC only takes a small hit on his overall portfolio. </p>
<p>It is for that reason that I partially agree with backtoschool: I think the power between VC's and entrepreneurs is unbalanced. There really are a lot of VC's making a boatload of undeserved money by screwing over entrepreneurs. Just think of it from the standpoint of legal contracting. An entrepreneur, at the very most, might be funded once per year. However, a VC firm might make 15-25 investments per year (across all of the partners). So, who's going to know more about how to properly structure the deal in their own favor, especially when mysterious and threatening financial terminology such as 'full ratchet anti-dilution' are thrown around, and particularly when you consider the fact that most entrepreneurs aren't lawyers or investment bankers. They're engineers. They don't really understand the legal or financial system. The literature, both academic and practitioner, is replete with examples of ostensibly successful entrepreneurs getting screwed over by their VC's and being left with relatively little payoff from their otherwise successful companies. </p>
<p>But that also answers backtoschool's question of why would MBA's choose VC? If it's easy money - that is, if the odds are unfairly stacked in your favor - then why wouldn't you choose it? After all, if the world is unfair, you want it to be unfairly biased for you, not against you.</p>
<p>Sakky, I disagree with a lot of what you say above but I'll just address structuring the deal fairly for now. That's what the lawyers are for!</p>
<p>entrepreneurs always have b'd and moaned about what they have to give up to VC's yet they line up to take the money and connections for a reason.</p>
<p>
[quote]
Allow me to defend the lifestyle of academia for a moment. I would hardly call those who choose that lifestyle and succeed, i.e. win tenure, as being unlucky, especially if they succeed at a top university. In fact, I would argue precisely the opposite - they are among the most lucky in the world, and certainly luckier than the vast majority of businessmen. The appeal of the academic lifestyle is especially apparently today, when companies seem to be racing to see who can lay more people off, when businesses are going bankrupt, when many VC/PE/hedge funds are going bust. Even many universities are laying off staff, but who are they not laying off? The tenured faculty, for the simple reason that once you have tenure, you have lifetime job security except under extraordinarily unusual circumstances, i.e. the university decides to eliminate your entire department. It is practically impossible for a tenured faculty member at a top university to involuntarily lose his job, and in the highly rare cases when that occurs, that person will surely find a tenured position at some other university with little difficulty. I would hardly categorize these people as being 'unlucky' by any stretch. Contrast them with regular people who can lose their jobs at any time and for any reason, or for no reason at all. </p>
<p>Couple that with the fact that the academic lifestyle for senior faculty is quite laid back. Granted, most of them continue to work hard on their research. But they don't have to, for there are very few obligations that force them to show up. They are therefore generally required to be on campus only about 30-35 weeks of the year. They get the summers off. They get a month off during the winter break. They get spring break off. They get periodic sabbaticals. Even on the days when they have to be around, their responsibilities are generally quite light. Teaching takes up probably no more than half a day, especially if you are teaching courses that you have taught numerous times before, and especially if you don't really care about your teaching evaluation (as many senior faculty don't). Faculty meetings and seminars also take up little more than 5-10 hours a week. It's a relaxed lifestyle that has been deemed to be ideal for those who are raising families. One of my friends is a son of college professors and who probably visited over 50 countries by the time he was 18, as, every summer, his entire family would take a 2-3 month vacation to travel somewhere in the world. He can't even remember a single summer of his childhood where he even stayed anywhere in the United States, much less in his hometown. Other than perhaps being a schoolteacher, what other kind of job provides the sort of time flexibility that allows you to take a 3-month trip overseas with your family every year? </p>
<p>Now, I can agree that plenty of academics don't get tenure or can't even land a tenure-track job, and they may be considered to be 'unlucky'. But to that I would say that it's all relative. Let's face it. Most people do not have highly successful careers, regardless of which career path they have chosen. And certainly very few of them will enjoy the sort of career success equivalent to earning tenure at a top university. The vast majority of people hold regular jobs for regular pay, and they can lose those jobs at any time.
[/quote]
I'd have to agree. A tenured position in academia is a really good career.
Even moreso for tenured positions in a professional school. I could never do it but I know many professors who do extremely well.
One of the clinical professors that I've had teaches 3 55min classes a week, doesn't have to do any research, and everytime when I see him in his office (if I ever do), he's just relaxing. Guess what his salary is...$200+k/year.
He is also a Director of the Pharmacy Department in a hospital and that usually pays $150k/year.
That's not bad at all: $350+k/year with nearly 100% job security and working less than 50 hours a week total.</p>
<p>
[quote]
Sakky, I disagree with a lot of what you say above but I'll just address structuring the deal fairly for now. That's what the lawyers are for!
[/quote]
</p>
<p>Lawyers are yet another part of the problem for they illustrate another aspect of the asymmetry of power and information. Again, the established VC firms have long-standing connections with many of the best law firms in the world, because they're always structuring deals. Entrepreneurs have no such comparable experience. They don't know who the best lawyers are. They don't know who they should hire. They don't know what to ask. They don't know what they should pay for the legal advice. In fact, many of the Silicon Valley law firms that specialize in deal structuring will themselves often times request to be paid in equity/warrants in lieu of cash. </p>
<p>
[quote]
entrepreneurs always have b'd and moaned about what they have to give up to VC's yet they line up to take the money and connections for a reason.
[/quote]
</p>
<p>Or not. The best entrepreneurs are now realizing that they probably shouldn't take VC money at all - an option that has become increasingly possible in the Internet space as serving/hosting costs not only drop but are now available on an a-la-carte mode (no need to buy your own server anymore) and cheap offshore coding services have become available. </p>
<p>Besides, the real problem is a matter of returns. The academic literature has confirmed that VC, as an asset class, does not provide significant above-market returns, especially when you factor out risk beta. The 2000's in particular have been lamented as a lost decade for VC, with perhaps only 1 year in the entire decade probably being profitable. Even before the financial crisis and the resultant barricade of the IPO gates, many observed that the VC model is 'broken'.</p>
<p>venture-capital financing as practiced today in the U.S. is a broken model</p>
<p>Why</a> The Venture Capital Model Is Broken - Forbes.com</p>
<p>*One of the oldest venture capital firms in the state will not raise a new fund, a decision that Northwest Venture Associates founder Tom Simpson said was driven in part by the tough economics now facing venture capitalists.</p>
<p>"I think the fund model is very broken for a variety of reasons," Simpson said. "One, there is just too much money out there. ... As a result, valuations are getting bid up.</p>
<p>"Number two, you are seeing a huge number of 'me, too' companies being formed. ... Thirdly, the exits, quite frankly, just aren't there. How many IPOs have there been in the Northwest in the last year and a half?"...</p>
<p>...One area that Simpson thinks is completely overheated is the Internet space, which he believes is littered with unproven business models that are destined to fail.</p>
<p>..."Does the world really need yet one more early stage technology fund focusing on Web 2.0? No. But that is the mentality of many institutional investors."*</p>
<p>Venture</a> Capital: VC veteran says fund model 'is broken'</p>
<p>The boom was followed by a bust post-2000, sort of. Normally you would expect investors to run from the venture capital asset class when the class posted negative rates of return for several years in a row. But this is what is broken. Capital continues to pour in, perpetuating the abundance that makes capital cheap, despite the poor performance of the asset class.</p>
<p>EarlyStageVC:</a> Traditional Venture Capital Sure Seems Broken - It's About Time</p>
<p>The main problem seems to be that there are simply too many mediocre (and worse-than-mediocre) VC's around with too much money, hence driving up both the valuations and the competitive costs for everybody else. Most VC's, frankly, do not provide good connections and are not intelligent purveyors of capital. Numerous studies have confirmed that the lion's shares of the returns are taken by only the very top VC firms, and that the vast majority of VC firms are earn below-market returns for their LP's after subtracting out management fees.</p>
<p>But, like I said before, as an MBA deciding where to work, none of the above really matters. As long as VC firms continue to (stupidly) offer very high pay - because LP's continue to (stupidly) invest with them despite the weak returns - then you might as well take it. They're paying you well for relatively little work (compared to the Ibankers) and that's all that matters to you.</p>
<p>Lawyers are anxious to work with entrepreneurs that have genuine VC interest and represent them well. If they do a good job they stand to add another potential Google to their roster for lots of billings down the road.</p>
<p>I'd say VC's are more likely to be needed by entrepreneurs than ever. There used to be a lot of angel investors floating around and various loans were possible, but them days are gone for now.</p>
<p>As a LP in several VC funds over the years, the returns, long term, have been remarkable and bested hedge funds and other high return investments many years.</p>
<p>I do fully agree with your last point. Too many jokers have managed to raise huge funds. A sign of the former times and lots of investors with oodles of money and not much business savvy. These jokers are mostly not able to make capital calls anymore so the economy may fix the model. </p>
<p>The flip side of course is that it's become hard for good companies to get money.</p>
<p>
[quote]
Lawyers are anxious to work with entrepreneurs that have genuine VC interest and represent them well.
[/quote]
</p>
<p>With all due respect hmom5, but this seems like a gross generalization and misrepresentation of reality at best... I mean Tinkerbell would write stuff like this...</p>
<p>Do enlighten us Wildflower......</p>
<p>Here's just one article I pulled up about Silicon Valley law firms competing for start up business. </p>
<p>If you care to Google you'll see many, many more. After the sudden death of Brobeck 2 years ago, the firms more than ever have a very deep understanding of their need to get new clients in the door early.</p>
<p>Google itself is another reason the VC industry has come under pressure.</p>
<p>GOOG has a dedicated in-house acquisition team of experienced professionals with industry experience just as impressive as any top VC -- they've effectively created their own mini-VC boutique within the firm -- and its global. From Google's prespective, they don't have to outsource the relationship building / valuation work outside of the firm, they can identify opportunities to get in on the action at the "ground floor" and most importantly, their team always has GOOG's best interests in mind.</p>
<p>If you look at the major tech acquisitions over the last few years from the big (YouTube) to the obscure, GOOG is in the thick of it: <a href="http://en.wikipedia.org/wiki/List_of_Google_acquisitions%5B/url%5D">http://en.wikipedia.org/wiki/List_of_Google_acquisitions</a> And why not? They are definitely pursuing a "growth by acquisition" strategy, they have a war chest (cash and stock) to rival any VC firm and more importantly they are not gun shy.</p>
<p>From an entrepreneur's perspective, an acquisition has always been the "cleanest" exit solution anyway (as long as the valuation was reasonable) and now with the equity markets / IPO exit all but shut down, leading acquisition candidates are falling over themselves to get in front of GOOG.</p>
<p>Here is an interesting article on GOOG and it's VC "role" in BusinessWeek:
Google's</a> New Role: Venture Capitalist</p>