Venture Capital: Technologists vs. Bankers

Published: 4/18/2011 10:09:09 AM

During boom of the late 1990s, so much money was made by institutional venture capital firms that the industry attracted a large number of new participants. Many of these new participants at venture capital firms had primarily a banking background, rather than a technology background.

This development, combined with the flood of money that continued into VC firms until the end of 2008, conspired to effectively "dumb down" the venture capital industry as a whole. These banker VC partners focused more on financial engineering rather than making the necessary risky bets on world changing technologies.

In the process, the venture capital industry suffered from a bad image problem between partners and entrepreneurs due to bad behavior on the part of some VC partners. We have been seeing the fruit of this as entrepreneurs in certain segments look to Angel funding or secondary/private market funding to avoid having to deal with venture capital firms.

However, due to the inevitable feedback from the entrepreneurial market, I believe we are seeing a reversion back to a more technologist-oriented venture capital firm membership.

If I'm right, I think this will result in a generally more balanced, entrepreneur-favorable environment.




Don Jones
CEO, VentureDeal

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