The Changing Structure of the VC Industry

Much of the discussion on the changing structure of the venture capital industry in the past few years has focused on just one element: the rise of crowdfunding platforms and new entrants to the earliest funding stages of our market. Yet a broader look will show that changes are afoot in the entire value-chain of the financing of startup companies shifting more dollars and more value captured from public financings to private financings and creating new competition in late-stage financing.

A look forward, not backward

Just a few years ago the narrative in the venture capital industry was that performance over the past 15 years was poor and that venture wasn’t an asset class worthy of limited partner’s investment. As I pointed out in presentation with much data, these analyses were flawed in that they considered only rear-view mirror data. The data set only considered only a period at the peak of Internet hype, with the launch of many over-capitalized businesses against a limited market size of consumers and businesses, and a venture capital industry that had tripled in size in just three years.

Where are we today?

• We have 2.4 billion Internet users, or 50x more than before.
• Online connections are 180x faster at 10.5 Mbps.
• 164m US smartphone users gives us “always-on” mobile connectivity
• We’re all socially connected, so great businesses spread faster.
• We all have one-click purchase power through Apple, Google, Amazon and eBay.
• The VC market has right-sized, returning back to mid 90’s levels with less competition.
• The cost to start a business is 95% lower, meaning many more companies are created and funded by angel and seed investors.
• It still takes venture capital to scale a business, which means large amounts of capital go into industry winners like Uber, Airbnb and Snapchat.

It doesn’t take a huge leap to see how well the VC industry is positioned for the immediate future. LPs have taken notice as 2014 is by all accounts the busiest year for LPs since the Great Recession began as it is forecast that between $25-30 billion to be invested in some 200 venture funds. Where will these dollars go and how is the industry changing?

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This BLOG  looks at pensions and their impact on what are called Public Private Partnerships or P3’s these are not really about private funding at all but about two streams of public funding, pensions and government with private capital a third partner.
We will also deal with other pension matters, such as Defined Contribution Plans (DC) vs Defined Benefit (DB) PLANS, the weakness in private plans, the need for pension reform in public pensions to have shareholder rights, directorships and ethical investment directives and policies. 
Finally taking the long view we will show how these funds are forms of evolving social capital that is dominating private capital as we evolve into socialization of capital. 
Click HERE to read more....