VC Slump Is The Worst In Three Decades

from the welcome-to-the-risk-side-of-risk-capital dept

With another awful year behind us, those who invest into venture capital funds are complaining that after another year of very negative returns the twenty year return on money invested in venture capital has dropped below 15%. Of course, isn’t the point of “risky” investments that the returns aren’t always going to be so positive? I can understand that people are upset, but if they couldn’t take the potential losses, then why did they invest in risky venture funds in the first place? The investors don’t deserve much sympathy for forgetting that “high risk” comes before “high reward”. However, they’re going to start complaining, so the VCs are going to feel obligated to return some more cash, suggesting more weak returns for this year. I still believe that now is the time that VCs should be investing in lots of companies. They have plenty of cash, everything is much cheaper (real estate, people, technology), and it sets them up to be ready years from now, when it’s appropriate for those companies to go public. Instead, the VCs are waiting until the next (hopefully smaller) IPO bubble comes along, and then will feel the need to rush out more half-baked companies so they can get the money out before the bubble collapses. That’s not how to build strong companies.

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