VCs say industry is 'broken'

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VCs say industry is 'broken'

John Cook on Monday, June 29, 2009, 6:06am PDT

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Economy | Startups | Venture capital

The venture industry is broken. At least that's what the majority of venture capitalists think, according to a survey from executive search firm Polachi. PeHub.com has the details, noting that 52.9 percent of the VC respondents called the industry "broken," while another 60 percent said they are less confident today than they were six months ago.

Fifty three percent of the respondents also said that they are "very worried" about when the IPO and M&A markets will return.

What do you think?

There's been a lot of discussion about the effects of the economy on the venture industry, including the lack of IPOs and M&As. Also, some entrepreneurs say the value of venture capital has decreased in recent years as it became cheaper to start a company -- though that runs counter to SEOMoz CEO Rand Fishkin's recent essay.

Nonetheless, the venture business certainly is going through a radical transformation. And venture capitalist Paul Kedrosky recently addressed that transformation in his report -- Right-Sizing the U.S. Venture Capital Industry -- for the Kauffman Foundation.

He wrote:

It seems inevitable that venture capital must shrink considerably. While there is no question that venture capital can facilitate some forms of high-growth entrepreneurial firms, its poor returns make the asset class uncompetitive and at risk of very large declines in capital commitments as investors flee this underperforming asset.

[Flickr photo via Nesster]

About John Cook

John Cook is co-founder and executive editor of TechFlash. He has been covering the technology beat for nearly a decade, writing about startups, entrepreneurs and venture capital, most recently serving as a reporter/blogger at the Seattle Post-Intelligencer.

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