Fred commenting on Fixing Venture Capital from Change This.
First congratulations to Fred on his constant ability to provide reasoned points-of-view to polemics. Which is what Fixing VC is.
In an attempt to follow Fred's example and provide reasoned answers, rather than my more natural; your wrong - idiot.
My greatest criticism is that the thesis is based on a false premise; namely that VC's are only interested in investing in the the 10% of the deals that make huge returns, whereas entrepreneurs have lower acceptance of risk and therefore would rather take more median returns. Just typing the explanation makes the whole premise seem unreasonable. Yes we would like each deal to be a Google, as would the entrepreneur and we all take outsized risks to achieve that goal. I think a statistical review of exits and returns would disprove the central thesis pretty quickly.
At the US-Russian Technology Symposium yesterday Pierre Lamond, Heidi Rozen, Robert Grady and Vladimir Bernstein discussed, inter alia, expected returns in the VC industry. Pierre in particular returned to a favorite theme; too much money in the venture industry. His premise being that companies are going to be sold at or around $50mn in sales. If the C Round was $30-$50mn not many people are going to be seeing great returns. So in answer to VC's are only interested in the top performers we have one of the the VC industries major voices saying the opposite. Specifically, he was saying expect mid-range M&A sales and when Google comes along be very happy.
From a Russian technology point of view I am happy to hear that exits are expected to be mid-range M&A. We will build our companies more cheaply and expect to sell in M&A deals from the outset. Our fund's economics will be built on achieving exactly that.
19 February 2005
Fixing VC
Fred commenting on Fixing Venture Capital from Change This.
First congratulations to Fred on his constant ability to provide reasoned points-of-view to polemics. Which is what Fixing VC is.
In an attempt to follow Fred's example and provide reasoned answers, rather than my more natural; your wrong - idiot.
My greatest criticism is that the thesis is based on a false premise; namely that VC's are only interested in investing in the the 10% of the deals that make huge returns, whereas entrepreneurs have lower acceptance of risk and therefore would rather take more median returns. Just typing the explanation makes the whole premise seem unreasonable. Yes we would like each deal to be a Google, as would the entrepreneur and we all take outsized risks to achieve that goal. I think a statistical review of exits and returns would disprove the central thesis pretty quickly.
At the US-Russian Technology Symposium yesterday Pierre Lamond, Heidi Rozen, Robert Grady and Vladimir Bernstein discussed, inter alia, expected returns in the VC industry. Pierre in particular returned to a favorite theme; too much money in the venture industry. His premise being that companies are going to be sold at or around $50mn in sales. If the C Round was $30-$50mn not many people are going to be seeing great returns. So in answer to VC's are only interested in the top performers we have one of the the VC industries major voices saying the opposite. Specifically, he was saying expect mid-range M&A sales and when Google comes along be very happy.
From a Russian technology point of view I am happy to hear that exits are expected to be mid-range M&A. We will build our companies more cheaply and expect to sell in M&A deals from the outset. Our fund's economics will be built on achieving exactly that.
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