Adeo Ressi’s HBS presentation that claimed that the VC model is broken has been discussed over and over in the last few days. Here is the slideshow of his presentation and while I agree that all his arguments are not acceptable, there is definitely merit to the question he raises about the current VC model. GigaOm disagrees wtih:
Have there been too many funds created, too much money poured into finding the next Facebook, Twitter or YouTube? Undoubtedly. But the VC industry is subject to the same economic forces and laws of supply and demand as any other industry — in other words, if some funds are making money, others will emerge and try to duplicate that success, even if they know the odds are against them. The same dynamic can be seen in plenty of other businesses, including the mining industry: When gold is hot, everyone wants to be (or invest in) a gold miner, even though they all secretly know that too many miners means less gold for everyone.
Like everything else there are always two sides to a coin, but the recent years have seen very little in terms of VCs making big and bold bets to truly spur innovation. In fact the entire web 2.0 space has been filled with highly funded me-too plays and others that are products and features (not companies) that do not need or merit VC. But considering the fact that we are where we are, I think there is a severe need for someone or some model to come up that puts a bet or allows entrepreneurs to bet on pie-in-the-sky ideas that stand a chance to bring about a disruptive change. We are taking a tiny step in that direction and so are YCombinator, betaworks, Techstars and others. There may be other models that might evolve too, but there is no doubt that traditional VC must evolve from where it stands today.
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