Georges van Hoegaerden, a serial entrepreneur, writes that "The Silicon Valley emperor has no clothes."

...Silicon Valley has become the emperor who wears no clothes. Many Venture Capitalists (VCs) like the emperor will hold their head high and continue their procession for the sake of protecting their management fees.

...the simple fact remains that very little disruptive innovation is born. And without disruptive innovation (and the risks that such innovation incurs) it is just a matter of time before the Limited Partners (LPs) recognize that the emperor's procession is coming to an end.

Mr Hoegaerden says that the fault is with the VCs -- many don't have the entrepreneurial experience to do their job. And they will always look to blame others and never themselves.

He writes that "innovation is not the problem," the problem is ineffective VCs

Entrepreneurs should refuse to work with investors that improperly assess business risk, money from the wrong investor is a dead-end street anyway. But most influential will be the immediate action from LPs who should close their underperforming commitments (instead of flee), reset their fund requirements and require more relevant operating credentials from General Partners (Venture Capital requires more relevant early-stage credentials and vision than other Private Equity sectors).

The naked Emperor procession will continue for a while.

The sheer size of LP commitments outstanding to the VCs will keep the emperors procession going for a while, and the VCs refusal to criticize themselves is a sign that it is incapable of recovery and self regulation. We need new VCs, with a new mindset and a different DNA to get there.

...We are after all at the beginning, not at the end of technology innovation.

Foremski's Take: I agree with much that Georges van Hoegaerden writes, especially with the fact that we are in the early stages of a long period of new innovation -- but I don't see many signs of things changing regarding the VC industry's malaise. Industries only change when there is a considerable amount of pain and there's not that much pain (yet) on the VC side of the innovation equation.

The problem is in funding and guiding the next generations of startups and creating that "seed corn" for the future. There is little of that going on.

And the reason is lack of decent exits, especially the absence of the IPO market. Prospects for the IPO market opening up look very bleak. However, we mustn't project the present into the future because things don't remain the same. The IPO market will return and that will help restore the cycle of capital that powers innovation.

I'm worried that once the IPO market does return there won't be many companies to IPO because we haven't seeded enough startups.

Here is Judy Estrin, a serial entrepreneur, talking about Silicon Valley issues at the recent SDForum Visionary Awards: