VCs Only Do Tech These Days
from the what?--no-patents? dept
VCs have been complaining lately that there’s too much money going into “me too” companies, making it more difficult for them to make themselves even richer. This is, of course, a ridiculous complaint, since those very same VCs go on to claim that their investment and their expertise makes a difference much more than money. If that were true, they wouldn’t worry about other, lesser VCs who couldn’t make quite the same difference. Of course, another reason this is ridiculous is because it’s a problem that VCs have created by themselves by rushing in to invest in the same space. It’s become a pretty common joke on Sand Hill if one of the big name firms makes an investment in a space, all the others need to place their bets as well. That means, of course, that businesses outside of the norm don’t get funded — which is nothing new at all — but, right now “the norm” is all about technology. If you have a non-tech business, don’t expect to raise venture capital. Of course, what the article here doesn’t say is that many non-tech businesses don’t need venture capital. It’s an unfortunate sign of the times that many entrepreneurs have been brainwashed to believe that part of the startup process is about raising venture capital (there are even those who seem to think that’s the entire purpose of starting a company, forgetting the whole “building a product and getting revenue” part of the equation). Many non-tech businesses simply don’t fit the type of business that a VC would invest in anyway, since VCs are looking for high growth opportunities. On the other hand, however, many VCs lately have gotten locked into this silly idea that patents are the only way to have a competitive advantage, without realizing that patents are a very weak, and not particularly sustainable form of competitive advantage. VCs who invest in companies who cite their patent portfolio as one of their strengths are deluding themselves. However, right now, tech companies are stockpiling patents, and it gives the VCs an easy number which they can use to keep score (“Oooh, we need to invest with this company, since they have 25 patents in this hot space that so-and-so just invested in”).
