Why do articles this year seem to be so anti-VC, whether it's they are on the decline or there is no more capital to support? In listening to several webinars from VC Lab, it seems there is a huge disconnect between click bait reporting and reality of the industry. A follow up, what would be considered a true risk to the VC space?
There are number of factors that are contributing to this phenomenon, including:
- VC has number of different funds that invest at various stages. To make things more confusing, there are also a number of PE style investors that have entered the asset class as late stage investors. The later stage VCs have raised mega funds in the $1b+ range and they have a very different strategy then new managers with $5m funds. Though the market correction primarily affected large legacy VCs, folks that are not well versed on the asset class like journalists, lump the whole market as whole.
- There are a number of old VCs that primarily invested in very developed eco-systems like Silicon Valley who don't have access to new sectors like emerging markets, under-represented founders etc... These folks struggle to see or take advantage of the vast opportunities. Therefore, when journalists ask their opinions, they often will respond with a statement like: 'the market can't support that many VCs'.
- The VC asset class in general does not have a great reputation in areas such as diversity and ethics. However, during the market expansion, many of these issues were masked by the performance of VC portfolios.
That being said, there is a whole new breed of ethical venture capitalists who are abiding by the Mensarius Oath that are turning the VC asset class into a force for good in the world.
The biggest risk to venture capital are regulations that are not well thought out by the governing bodies like we see in Europe today, as well as global conflict.