Here is a very interesting blog post and presentation by Marc Suster of Upfront Ventures on why he thinks venture capital is facing an even brighter future than one year ago. This was in response to what he views as the "flawed" Kauffman Report which was critical of venture capital performance in general.
Suster makes the following key points:
"1. The opportunity set is much bigger than ever (50x more users, 10x time online, mobile, social, credit-card enabled, global) … when things work they work faster and at an unprecedented scale. Think Dropbox, Airbnb, Pinterest, Maker Studios, SnapChat, Tinder).
2. The costs to start are much lower than ever (90% reduction in infrastructure costs to start a company through open source & web services) and large companies being created in many geographies.
3. Time to massive revenue is the most compressed in history due to scale andDeflationary Economics.
4. Companies are now raising much more capital in the private markets now before they go public. This is the opportunity set for venture capitalists.
5. When companies DO IPO they are worth much more at IPO time than in the past. Thus is a key point. More value is captured more by VCs prior to an IPO. VCs used to IPO and then sell. Now they are funding & holding.
6. This has led a number of successful traditional VCs (and soon Micro VCs!) to raise “opportunity funds” to fund the prorata participation of their best early-stage investments. Other VCs have raised “growth funds” to back the companies that are scaling fastest."
Click here to see the full presentation:
Click here to read the full blog post: