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Get ready for venture capital 2.0

in Opinion by . .

Real Business columnist and Huckleberry Ventures founder Matthew Crowe gives us his predictions for the evolution of the venture-capital industry.

Money stack Money stack - Venture-capital industry: ripe for change

When I first become an entrepreneur in the late nineties, venture capital was the holy grail of Silicon Valley where, if you had so much as a pulse and an idea, you were made a millionaire overnight. Since then, the dotcom crash and the global financial crisis has dramatically changed how VCs go about business. Venture funds grew to an astronomical size, entrepreneurs and VCs got massive egos, and more than disappointing returns have prepared an industry to evolve, whether it likes it or not.

Sure, there will continue to be legacy firms like Sequoia, Kleiner Perkins and the like continuing to do what they do because they hit the jackpot with companies like Google and Yahoo.  But the real innovation in an industry that hasn’t changed much in the past 20 years is going to come from smaller and more innovative firms.

So here are my predications for the evolution of the venture industry:

First off: Funds sizes will be smaller. VCs know it doesn’t take much to start a company these days and, as around half of all funds out there today will be gone in the near term, only the strongest will survive.  That means smarter general partners who make wiser decisions on investments, not just throwing money at something they think is a cool idea, but are backed by believable revenue models, massive market potential, and a team with the ability to execute.

Secondly: Entrepreneurs need to wake up and get real. They need to check their egos at the door and get their head out of the sand. Too many entrepreneurs carry around this notion that “My idea is the greatest thing since sliced bread and no-one else has anything like is”. Well, that’s bull sh*t.  I have met so many entrepreneurs who are completely oblivious when it comes to their company, competition, and what they really have. I understand it’s a challenge to balance promoting yourself and your company with being realistic – but it’s human nature to respond to authenticity and confidence so focus on your candor.

Lastly: I believe that technology will completely revolutionise the way venture capital firms operate in the future. “Venture Capital 2.0” will start to emerge. We live in a world where we can gather insight real-time from consumers and that data can – and should – be used to make better investment decisions. Companies such as GrowVC and my firm Huckleberry believe we are on the forefront of a whole new movement within the venture industry.

I guess if I could sum everything up in one sentence I would like to leave you with this:

Entrepreneurs need to learn to think and be more like VCs. And VCs should start to think and be more like entrepreneurs.

Who knows, maybe there will become a new breed of “ventreprenuers” will start to emerge.

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