GenuineVC David Beisel's Perspective on Digital Change

April 28, 2005

The following are links to two great posts on the business of venture capital:

The first, from Bill Burnham, insightfully explores the issue of whether or not the industry is currently heavily over-funded. He concludes that

“…[while] venture capital may not be wildly over-funded at an aggregate level, anyone on the ground will tell you that there are clearly localized pockets that are highly over-funded.”

His unique approach to the aggregate level view states that “It’s all relative” and compares the amount of venture capital under management to the market capitalization of the NASDAQ. He states,

“One way to create such a context is to compare venture capital to the public markets on the assumption that venture capital is closely tied to the public markets because public markets are the primary source of VC liquidity.”

The only question I would raise is: because a start-up’s liquidity event most likely occurs in a three to five year time-horizon, would another meaningful figure be a comparison between the current venture capital under management and a metric based on the anticipated future value of the NASDAQ? In the fall of 2002, I think that there was more talk about over-funding then than there is now, partially because the anticipated future value of the index was probably lower then, not just because the current index was lower.

The second post from Paul Kedrosky begins to make a case that while raising a first-time fund is becoming increasingly rare, perhaps a first-time fund isn’t such a bad thing. He concludes,

“If traditional strategies are looking tired, then what better way to find people with access to different deal flow, different stages, different geographies — or different anything — than by going against the flow, say to people promoting first-time funds.”

I also personally wonder how many of the so-called current first-time funds raised in the past year are really experienced investors regrouped under a new fund.

  • happyttyy

    Post very nicely written, and it contains useful facts. I am happy to find your distinguished way of writing the post. Now you make it easy for me to understand and implement. Thanks for sharing with us.

About Me

  • avatar
  • I am a cofounder and Partner at NextView Ventures, a dedicated seed-stage venture capital firm making investments in internet-enabled startups. Read More »



Rob Cho Go

Lee Hower


NextView Twitter Stream

  • Lee Hower
     - 18 minutes ago
    how to think about "seed" these days, some thoughts by @robgo
  • Rob Go
     - 1 hour ago
    Some thoughts on the idea that "Seed is the new Series A"
  • David Beisel
     - 1 day ago
    Thanks to everyone who made the #WebInnoTurns10 event so special last week. @PrettyInstant took great photos:
  • Rob Go
     - 1 day ago
    RT @joshk: 1/ There’s been a good discussion recently about the state of tech startup/venture market recently. Our thoughts:…