Venture Capital: A Part Of The Ecosystem, But Not The Ecosystem
from the understanding-vc dept
Still, it's pretty popular in Silicon Valley to knock VCs, and TechCrunch has a post from Vivek Wadhwa pouring on the VC bashing, complaining about VCs taking way too much credit for innovation. Now, I'm a big fan of Wadhwa and his research on startups and innovation, and I'm among the first to bash VCs when it's warranted (and, yes, there are plenty of times when it's very, very warranted), but I think Wadhwa's piece goes too far. He's right that it's a little silly that the the National Venture Capital Association (NVCA) seems to be taking credit for all of the revenue and jobs created from any startup that has ever taken any venture money, but that doesn't mean that venture capital is meaningless in innovation.
While I'm actually a huge fan of building companies without venture capital (and am doing that myself), I think what people need to realize is that venture money is quite useful in enabling certain types of businesses. The problem is when people (very often Silicon Valley people) get into the mindset that raising venture capital is an end goal in itself, rather than looking at the overall business and seeing if it even needs venture money. During the dot com bubble, there was a time when people looked at venture capital like revenue -- the more you raised, the better you were doing, rather than recognizing that it really meant you just had a bigger hole to dig yourself out of. However, in some cases, where a company really does need investment capital to take a business to the next level, smart venture money can be a great help.
The nice thing today is that more and more businesses can be started, built and can scale without that need. That doesn't mean that there's anything wrong with venture capital. In fact, it's better if it's easier to build businesses. But that also doesn't mean that VC is somehow bad or isn't really a key part in accelerating certain innovative businesses. Venture capital is a part of the ecosystem, and that's a good thing. There are times when people give it too much credit, and there are other times when it doesn't get enough credit, but the real trick is just in understanding where and when it makes sense.