Why Are Entrepreneurs So Angry At VCs?

Earlier this week I attended a meeting of the Village Ventures network, which is a group of small regionally-focused and/or sector-focused VC funds. Groups like Borealis Ventures, Greycroft Partners, Inflexion Partners, Point Judith, Highway 12 Ventures, Village Ventures itself and others. Much appreciation to them for having me.

One thing I discussed with a bunch of attendees – mostly VCs, but also a few CEOs – was this issue of entrepreneurial animosity toward venture capitalists. Almost a sense of glee (schadenfreude?) that the “VC model is broken.”

Most of this animosity has been made public via blogs, and perhaps it has been long-latent without such an easily-accessible bullhorn (just read through year’s old comments on TheFunded). But some of the folks I spoke with think that there has been a recent increase, driven largely by three factors:

1. Nearly a decade of lousy returns/exits, coupled with VCs getting rich anyway (via management fees).

2. Many of the VCs who have backed companies since 2000 are “new” investors who joined established firms without really knowing how to be VCs. As such, entrepreneurs could feel they got the brand without what the brand was supposed to represent.

3. Many of the arguments are coming from Web 2.0 types, whose visibility far surpasses their actual numbers in the entrepreneurial community. They also are a group of entrepreneurs who often don’t need institutional funding.

Please add your own explanations in the comment section… Interested to hear them.