Thoughts on Venture Capital & the Current Market

I have been meaning to write something about this topic for a while and finally decided it's time. I think the kicker was definitely from reading this blog entry.

If you scroll down towards the readers' comments after reading the blog entry, you will see an individual commenting on the fact that NWVA is failing because of its investment strategy. I am not dismissing that there's the possibility of that being a partial cause of failure but I am more supportive of Simpson's explanation. Here's why:

The market is saturated and full of failing ideas because:
1. There are too many individuals with great ideas "playing business" when they are blatantly not ready and haven't the slightest idea about what they are getting into.
2. Most of these same individuals described above are extremely outspoken and can easily manipulate investors even though they have no viable execution plan.
3. Simpson is right in that, there are too many "me too" companies. Everyone seems to think "I can do better." Face it, it's not that easy.

This is largely fostered by an influx of venture capitalists as described by Simpson who are just throwing money left and right. When the supply of funding became greater, the natural market reaction was that the minimum quality of what investors demand decreased by a mile. I think most of you would agree with me that some of the business ideas that were funded in the recent years are just absolutely ridiculous.

In my opinion, everything is interrelated. There's always a cause for every effect. In this case, I would say the current business trend caused by many of the factors mentioned above has created a broken down economy. The only reviving chance is if more realistic and experienced entrepreneurs step up to supply us with some breakthrough businesses to stimulate our downward curving economy.

By break through, I mean business ideas that are less trend aligned. I have never really been a big believer of business ideas that are heavily aligned with the latest hype such as a good number of the web 2.0 businesses out there. Sure, they make money and I am definitely not denying the success of trend catchers. However, I truly believe that a great business idea is something that's timeless. Of course, maybe this is most likely derived from the fact that I am more or less a traditional and conservative businessman.