Venture Capital’s Size and Influence

Techcrunch puts Venture Capital into Wealth Perspective.

broken glass
“Venture capital is a single star amid the entire Milky Way of capital, and it is truly a rounding error of the total wealth of the world, or even the wealth that is managed by investment firms.”  Find full length article here:

The Googles, Facebook’s of the world  are no doubt significant success stories aided by capital infusion and strategic advice, but there are indeed few and far numbers of them in between.

Top Points Raised:

Reality #1: Venture Capital is a Small Star in the Massive Galaxy of Capital

In 2013, venture capital firms raised $16.9 billion according to a survey conducted by Thomson Reuters. To put that in perspective, the wider private equity industry raised $216.56 billion in the same time period according to DJX LP Source. Venture capital plays a very important role in the front-end of the investment spectrum, but it is in no way, all encompassing.

Reality #2: Venture Capital is Weird, and thus, so are the Limited Partners

Entrepreneurs that form relationships with venture capitalists without getting to know their limited partners are being myopic. Limited partners fortify the investment backbone of their funds, and as such can be influential to their strategic direction and influence.

Reality #3: Venture Capital Performance is Pretty Much Opaque

A subject that has been debated, in and out of the courts, and is subject to interpretation. Suffice it to say, Venture Capitalist are cautionary in dispersing their funds and earn-outs occur over time making it hard to interpret valuations over time, and in totality. This makes it hard for investors, particularly LPs, to see the sources to use value of funds, along the investment cycle.


Previous post:

Next post: