In today's IT Blogwatch
, we look at "Venture Capital 2.0." Not to mention the new soon-to-be-cult TV sitcom set in your typical IT department ...
You've probably heard of Web 2.0.
Now people are talking about VC 2.0. Dave Winer's
been musing about how to reform the VC industry: "I have been thinking about this for many many years. It’s an exciting time because I think it might actually happen now. Here’s the rough outline of my plan to reshape the VC industry around the philosophy of the web ... disintermediate ... not actually a new idea ... honest, sustainable, and legal ... This thing will be public from day one. The purpose of the company will be to invest in promising young Internet companies, chosen by the users, nurture them through startup, get them liquid through acquisition or IPO and distribute dividends to the shareholders accordingly ... some of the money should be earmarked for funding open source projects."
» "Loonie" VC Rick Segal
rants, uh, I mean thinks, "Most disruption, in any industry, usually begins with the old school taking shots at the new school as they struggle to figure it all out ... A friend of mine (thanks, Ken) sent along a link to a New York Times
article ... Splattered all over this article is ... Dr. Paul Kedrosky
... He said 'most venture capitalist blogs were insincere' ... Yowsa, Dr. K, a little bee in that VC bonnet? ... take a quick look at Dr. K’s qualifications. He is not a lightweight so you might be better served to ignore me and listen to him ... Articles like this annoy me because broad, over reaching comments from 'experts' are damaging to my new profession ... All one has to do in order to put this rubbish in it’s place is simply read Fred Wilson
... Heck, for all my snarky comments about Guy Kawasaki
, he too appears to be sincere, telling the truth, and trying to be useful ... Of the last 60 companies that I've been told about via blogs, email or word of mouth, 40 of em have blogs and most of those [bloggers] are the CEO/Founders ... VC change. It’s coming, folks, it is totally coming. I predict that guys to watch are Fred, Brad and a host of other VC blogger types who get it."
» In fact Rick liked the topic so much, he ranted twice
: "There are a number of things happening which, in my opinion, require a re-think of the way things have been done ... The blogging community is the new rolodex ... Don’t need my money? Uh oh, time to think about this. That’s my point ... Eventually, we will see people leave Google to start new companies ... Most anti-VC rants tend to focus on a number of things, ownership, meddling, pressure to flip, etc. ... In order to invest in the Web 2.0 world, this model can’t work ... The new trick is finding the balance and changing the rules a bit so that is becomes more then money ... It does take skill and money to build something that will scale. You need some level of marketing besides total and complete word of mouth ... If you don’t need my money, the blogging world is your rolodex, and you could possibly be snapped up before you require capital which allows me to do my VC thing, what do I offer? I believe there is a different model out there that might work for the Web 2.0 type companies ... A universal statement on all of this ... from Fred Wilson
: 'Be the entrepreneur's partner. Help him or her. Be there for them. Support them. Counsel them. Share the risk with them. Have fun with them. Laugh and cry with them. And make boatloads of money with them. It's a time tested formula and it will work forever.'"
» Mark Evans
: "Web 2.0 may not be a bubble yet
but there are intriguing, if not troubling, signs that the inmates want to take over the prison. Dave Winer's
call to remove VCs from the formula has some merit but it assumes investors in a publicly-traded venture company will have faith that the people running it are smarter than VCs ... let's concede there is a role for VCs within Web 2.0 but it will have to evolve because many start-ups don't need much of what the biggest thing VCs bring to the table: money ... Rather than getting a 30% equity stake out of the gate, they would get 5% ... This new landscape would make competition for deals extremely competitive, which would be good news for start-ups who could choose their potential partners carefully. In other words, it could totally reverse the courting rules."
» Jeff Nolan
, Venture Chronicles: "There's a whole bunch of discussions going on about 'a new VC model' that supposedly fixes what is 'broken' about the current model ... After 8 years in the venture capital business, which I think still makes me a rookie, I have the following observations to share with you ... Venture capital is a cottage industry and whenever too much money comes into the system there is an imbalance ... The serial entrepreneurs are key to the whole mix and really have a lot of power ... The best venture funds are well ahead of the curve, case in point is Brad Feld and his investments in companies like Newsgator and Feedburner ... Venture funds work best when the limited partners are veteran investors ... I don't think we need to remake the venture capital model, the basic concept still works well, as it has for over 35 years ... My last thought has to do with the intoxication that many of the most exciting technologies today are capable of inducing, however just like I wouldn't make any important decisions while intoxicated, I don't think I would opt to 'reform' the venture industry on the observations of the last couple of years alone."
» Robert Scoble
starts on one subject then gets around to VC's: "The thing that's changed is the word-of-mouth network is far more efficient ... I don’t have to attend conferences anymore to hear the best ideas or see the newest products ... What IS cheap? People who tear down ideas. I see that all over the place. 'That idea won’t work because…' But I don’t meet many people who have consistently awesome ideas. They ARE valuable. Companies like Microsoft pay those guys big bucks for a reason. There aren't enough of them ... If it really is a better idea it's valuable ... Yeah, selling the idea is difficult. But, it’s not impossible. Just start a blog and explain why your idea is better."
» Jeremy Wright's
, Ensight: "After all, if the biggest weaknesses of the industry ... are that there isn't enough hunger, there isn't enough connection, there isn't enough training / equipping / mentoring and that there is too big of a disconnect between the VC's and the entrepreneurs, then perhaps these ideas go a small way towards turning those weaknesses into strengths. Again, I'm just a lowly entrepreneur, but if I were starting a new VC firm (I'm not), these would be some of the thoughts going through my head. I'm sure people far smarter than myself will have more, and bigger, issues they can see and more, and better, solutions to those issues. But that's fine. At the end of the day, though, I believe any company needs to focus on changing just a few things, and changing them with a purpose. Hopefully this stirs some ideas and conversations."
» Anne Zelenka's
comment to Mathew Ingram
: "Since VCs are in the middle, they influence both supply and demand. One reason there were so many dot-coms in the last bubble was the demand for them created by VCs ... I don't completely follow why you think Dave's analysis
was logically flawed, but hey, I'm no VC. It seems like some shake-up is going to happen for VCs just because start-ups can get by with so much less money these days and because it's so much easier to get noticed now without already having the right connections. I think the market will come up with a solution, but I couldn't predict what it might be."
And finally... The IT Crowd
Richi Jennings is an independent technology and marketing consultant, specializing in email, blogging, Linux, and computer security. A 20 year, cross-functional IT veteran, he is also an analyst at Ferris Research. Contact Richi at firstname.lastname@example.org. Also contributing to today's post: Judi Dey, our very own Antipodean.