To VC or Not to VC, That is the Question

Here is an excerpt from a post by Georges van Hoegaerden, managing director with the Venture Company (http://venturecompany.com/opinions/):

“Venture capital has failed to produce viable investor returns since 1998, produced negative 4.6 percent 10-year returns, performed below the consumer adoption rate of technology in the same period, is being outperformed by corporate innovation and capital, lost public trust because of bad past conversion from valuation to value and does not make a dent in the 80% greenfield of technology adoption.”

Ouch!

Way too much detail to go into here, but anyone considering investing in VC funds would be well served to read van Hoegaerden’s blog.

Your comments?

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3 Responses to To VC or Not to VC, That is the Question

  1. Hi David,

    Thanks for the reference. The question should not be “to VC or not to VC” as technology investing holds the largest and most promising future of any asset class, but one should not invest in VC using the current defunct economic construct.

    Best,

    Georges

  2. Rick Waechter says:

    David
    David Swensen (Yale endowment) has a similar but not identical finding. He concludes that the top 25% of VCs do outperform – that’s it’s the only category that out-performs (not pvt eq, not hedge, not mutual fuinds, etc.). It makes sense – they can create value / are needed by early stage co’s in a way no one else is. The other 75% of VCs (and close to 100% of all other managed money) underperform because they don’t add value

  3. Actually Rick, only 35 out of 790 (original) VC’s make any(!) consistent money for LPs, that is way less than 25%. Hence my diatribes that erode the perceived value of innovation.

    Best,

    Georges

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