Fred Wilson says venture capital funds have gotten too big
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Fred Wilson says venture capital funds have gotten too big
1–10 of 28 posts
Re: Fred Wilson says venture capital funds have gotten too big
#2"Lately VCs haven't come close to generating the returns on their investments that made them stars in the 1990s."
That's because it was in the height of the internet bubble. Companies have to work harder and show real revenue. People may not believe it but the recent IPO's have shown this. Tech companies have to show revenue and progress other than traffic .
Companies are springing up that do more than social networking. In the 90's there were many of these crazy ideas but there were no consumers to use them so the valuations were out of whack. I think we're going to see some more ambitious companies coming out. Simple, Square and Uber are the first step.
Re: Fred Wilson says venture capital funds have gotten too big
#3VCs are not too big, they are (apparently) investing in the
wrong companies.
If humanity overall wins out, the next 20-30 years will see industries we can barely imagine grow to maturity. From electric driver-less cars, to new forms of power generation (even fusion), new building methods, new education, and vast mega-cities will spring out of nowhere.
In the West, in the rest of the world, we will see vast demand for things that are barely off the drawing board. And they will need support industries, innovating widgets and helpful doo-hickies.
All of which will take specialised knowledge, innovation and investment. Just what VCs are supposed to do.
(PS I strongly suspect Fred Wilson already knows this, is intelligent enough to be hiring clever VCs in India, China Sudan, and doing presumably cleverer things than I suggest.
But it annoys me that the article seems mostly - oh no! cloud is cheap, so there are no companies anymore anywhere in the world that need high risk investment. Gaaahh!)
Here is one that is a perfect example: http://www.ted.com/talks/donald_sadoway_the_missing_link_to_...
Edit: added link, minor fixes
Re: Fred Wilson says venture capital funds have gotten too big
#4VCs are not too big, they are (apparently) investing in the wrong companies. If humanity overall wins out, the next 20-30 years will see industries we can barely imagine grow to maturity. From electric driver-less cars, to new forms of power generation (even fusion), new building methods, new education, and vast mega-cities will spring out of nowhere. In the West, in the rest of the world, we will see vast demand for…
I don't think Fred's investors want to be sinking money in renewable energy. If you look at the returns to that asset class, they've been pretty bad.
It's great to do big things and change the world, but the pension funds backing Fred want to earn a good return.
Re: Fred Wilson says venture capital funds have gotten too big
#5VCs are not too big, they are (apparently) investing in the wrong companies. If humanity overall wins out, the next 20-30 years will see industries we can barely imagine grow to maturity. From electric driver-less cars, to new forms of power generation (even fusion), new building methods, new education, and vast mega-cities will spring out of nowhere. In the West, in the rest of the world, we will see vast demand for…
I don't think Fred's investors want to be sinking money in renewable energy. If you look at the returns to that asset class, they've been pretty bad. It's great to do big things and change the world, but the pension funds backing Fred want to earn a good return.
"returns to that asset class, they've been pretty bad."
Renewable energy assets have a pretty good IRR, in the mid-teens to low 20% - and even higher if you look at the 1995-2004 vintage.
To any LP that is an above average return, in fact, it is above any equity return threshold for asset manager incentives/carry.
Where did you get the data for you to say that "they've been pretty bad"?
Re: Fred Wilson says venture capital funds have gotten too big
#6VCs are not too big, they are (apparently) investing in the wrong companies. If humanity overall wins out, the next 20-30 years will see industries we can barely imagine grow to maturity. From electric driver-less cars, to new forms of power generation (even fusion), new building methods, new education, and vast mega-cities will spring out of nowhere. In the West, in the rest of the world, we will see vast demand for…
I don't think Fred's investors want to be sinking money in renewable energy. If you look at the returns to that asset class, they've been pretty bad. It's great to do big things and change the world, but the pension funds backing Fred want to earn a good return.
I wonder what the returns on social media and fiddly web apps will be looking back 10 years from now.
Re: Fred Wilson says venture capital funds have gotten too big
#7Earlier quoted context omitted.
I don't think Fred's investors want to be sinking money in renewable energy. If you look at the returns to that asset class, they've been pretty bad. It's great to do big things and change the world, but the pension funds backing Fred want to earn a good return.
"returns to that asset class, they've been pretty bad." Renewable energy assets have a pretty good IRR, in the mid-teens to low 20% - and even higher if you look at the 1995-2004 vintage. To any LP that is an above average return, in fact, it is above any equity return threshold for asset manager incentives/carry. Where did you get the data for you to say that "they've been pretty bad" ?
I always return to this bet with John Kay:
http://books.google.co.uk/books?id=6BLqprHdwygC&lpg=PA15...
returns for the most successful railroad companies were mere 5% - competition kept things down (although speculation in early years lead to phenomenal returns - if sold)
However, a moderate VC return is 3fold over ten years - which is ~12.5% YoY (unless my maths is bad). But then that is 12.5% of millions and millions not just one company.
Re: Fred Wilson says venture capital funds have gotten too big
#8Earlier quoted context omitted.
"returns to that asset class, they've been pretty bad." Renewable energy assets have a pretty good IRR, in the mid-teens to low 20% - and even higher if you look at the 1995-2004 vintage. To any LP that is an above average return, in fact, it is above any equity return threshold for asset manager incentives/carry. Where did you get the data for you to say that "they've been pretty bad" ?
I always return to this bet with John Kay: http://books.google.co.uk/books?id=6BLqprHdwygC&lpg=PA15... returns for the most successful railroad companies were mere 5% - competition kept things down (although speculation in early years lead to phenomenal returns - if sold) However, a moderate VC return is 3fold over ten years - which is ~12.5% YoY (unless my maths is bad). But then that is 12.5% of millions and millio…
I struggle to understand your point - I'd love to here a bit more to understand it.
The IRR numbers I mention refer to UFCF/equity, i.e. no exit (hence return) via company/asset sale.
Re: Fred Wilson says venture capital funds have gotten too big
#9Can one start a tech company anymore without Venture Capital?
Re: Fred Wilson says venture capital funds have gotten too big
#10Earlier quoted context omitted.
I don't think Fred's investors want to be sinking money in renewable energy. If you look at the returns to that asset class, they've been pretty bad. It's great to do big things and change the world, but the pension funds backing Fred want to earn a good return.
I wonder what the returns on social media and fiddly web apps will be looking back 10 years from now.
For the VCs and pension funds, or the investors at large that trust the IPOing banks?