Poor Sevin Rosen. The mean old VC business won’t cut it any slack even though it has been around for 25 years. The firm wrote a two-page letter to LPs in October explaining why it took the “radical step” of returning their commitments. It gives a laundry list of reasons why VC isn’t a good business to be in right now. Too much money, too many deals funded, too few exits.
This is a revelation? We’ve all known since the bubble that there is too much money in the venture business. A great asset class produced some stellar returns for select funds, prompting too many institutional investors with hordes of cash to back any fund with “Venture” in its name. The result is too many people who shouldn’t really be VCs dispensing money to too many people who shouldn’t be entrepreneurs.
This isn’t a unique situation. When Major League Baseball over-expanded the overall quality of play deteriorated. But even in MLB, where an owner can outspend his rivals to create a great team (Yankees), you can still find ways to be competitive (A’s).
The same is true in VC. Too many firms crowding you’re home turf? Try another geography. Too many deals getting done in your area of expertise? Become an expert in a new technology. Too many investors funding late stage deals? Do seed.
In every case, of course, you’re assuming a heck of a lot more risk. And that means there is a much bigger chance that you’ll fall flat on your face. But isn’t that part of the allure of VC, the thing that gets your adrenaline pumping?
So, Sevin Rosen, quit complaining about the cards you’ve been dealt and try a new game.