The most important point in your article is essential for new entrepreneurs to understand: almost all good business opportunities aren’t VC-fundable because they can result in good profitable companies but can’t evince the kind of manic growth the VC model requires. In fact, VCs have boxed themselves into a dead-end, increasingly dependent on a small group of mega tech companies (to acquire portfolio companies) and the periods of stock market exuberance (for overpriced IPOs). As more and more VC-backed companies are essentially financial black holes, sucking in ever-more capital in pursuit of ever-less-likely scenarios, it’s clear this game isn’t going to end well.
I’ve often wondered if VCs could raise funds from LLPs on the basis of a model that said, “Hey, instead of accepting that 70% of our portfolio companies will sink without trace and another 25% will at best one day return their original capital, and frankly we’re gambling everything on the last 5% which we can’t actually predict and which is entirely dependent on forces far beyond our control, maybe, just maybe, we should consider a more rational model? One that has us invest in solid companies that can turn a profit within a short number of years and be acquired or IPO for around ten times the original investment? That way we could reliably return maybe 15% or 17.5% on a typical fund, which even during times of stockmarket exuberance is enough to out-perform more traditional investments and which during downturns is WAY BETTER than traditional investments. And this way we wouldn’t keep pouring money into black holes in the increasingly desperate hope that some sucker will come along in time and acquire all the debts and risk while we ran away with our gains…”