Despite the crisis of confidence that has engulfed the VC industry, Atlas Ventures, an international firm that manages $2.5bn (£1.6bn) in capital, says that the VC industry has recently been able to make considerable profits on backing young companies.
This is promising news for Britain’s entrepreneurs, who can often struggle with raising cash.
“The big trend is that venture capital is better with small firms; small funds; better capital efficiency,” says Fred Destin, a partner at Atlas, who has been involved in some of the firm’s stronger investments such as property portal Zoopla.co.uk and ticket exchange website Seatwave.com.
“There’s a number of things that we need to reinvent,” he says. “We need a new social contract with entrepreneurs – it’s broken between entrepreneurs and VCs. We need a more passionate and hungry VC industry itself. This is a fairly pivotal moment.” It remains to be seen whether the wider VC industry shares his views.
Although Atlas recently stirred considerable debate in the industry when it decided to move its investment team out of London, and into Boston (Massachusetts), Destin promises, that his firm will continue to invest in “young, high-growth companies” looking for their first or second round of external finance.
The VC industry has been hit by declining profits in recent years, with a lot of money caught up in VC funds not being returned. “Right now the industry has too much capital – it needs to shrink and needs better practitioners,” Destin adds.