Dave McClure's Guide To Disruption In VC Land
Dave McClure, (above) the successful founder/investor of 500 Startups, posted a great response to a post by Sarah Lacy in which she defends the need for traditional VC firms of Sand Hill Road against claims of a broken and disrupted VC model: A rare defense of venture capital classic | PandoDaily
Here's a lightly edited version:
While the opportunity to raise shitloads of capital to grow companies is never going to go away, the organizations they raise it from, the process they go through, and the dilution they take as a result are changing pretty dramatically.
- How many "traditional" silicon valley VC firms would bet over $250M on single company. (Google Ventures & Uber.)
- How many "traditional" silicon valley VC firms spend millions of dollars building out non-investment resources to help with biz dev, corp dev, recruiting, etc (Andreessen-Horowitz).
- How many "traditional" silicon valley VC firms create micro-funds aimed at funding college students (First Round Capital, Founders Fund).
- How many "traditional" silicon valley VC firms create online platforms in only 3 years that are facilitating $150M in transactions per year at ABSOLUTELY NO CHARGE and are growing over 100% per year (Angel List)
- How many "traditional" silicon valley VC firms help over 100 companies per year get funded, on less than $50-100K each, and help those companies achieve Series A level valuations (Y Combinator).
- How many "traditional" silicon valley VC firms have funded over 500 startups in only 3 years, with over 150 of them from outside the US across 35+ countries. (500 Startups)
Now some of them may look like traditional funds managing billions (A16Z), and some of them may look like seed funds (FRC), but they sure as hell aren't the same structure & approach to venture capital as the folks who started the business 40-50 years ago.
More importantly, they sure as hell aren't the same folks on Sand Hill Road who are doing the same old shtick for the past several decades.
Now there's nothing wrong with being a traditional $250-500M fund with smart, connected people who sit on board seats and write a few $5-20M checks every year. But to suggest that those folks are all our industry ever needs, and that these folks aren't facing substantial disruption themselves in the past few years/next decade...
10-Year Study Erases VC 'Smart Money' Claims -SVW