An interesting report predicting that venture capital asset class will make a strong revival over next 10 years. Key reasons: public markets are finally rewarding value like never before (interesting information on IPO valuations and multiples of some iconic tech companies), the demand-supply equation within venture asset class has swung to being favorable with only the strongest players surviving, discontinuities like internet and mobile have reached critical mass, and companies have a potential to go global sooner than ever.
Quigley Report: A Venture Capital Revival is Upon Us
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Why did he stop short of explaining what is needed to fix the broken VC model…?
Here’s my three cents –
1. VC Investments should be based more on innovations that truly are game changing, rather than driven by `hunchy’ prospects of multi-bagger exits.
2. Higher risk aversion in the system fueled by recent meltdown is for real and will linger longer. A fair chance of rewarding investors should be a firm determinant of selection parameters. Cleantech is a great example of ideas that hold a lot of promise, but where returns still elude.
3. Don’t just stick to theme based investing – Internet and Mobile may hold a lot of promise, but those are where differentiators have been hard to come by. Innovation does not just mean a new process or a new gadget, it also would mean process improvements resulting in significant value addition/cost reduction – Ex. why not fund meaningful operations research projects in areas viz. Defense tech, Healthcare and Education that gobbles up a lion’s share of most national budgets…?