PARTYING like it’s 1999 might be unwise, but venture capitalists have reason to open a few bottles of Dom Pérignon. In the first three months of the year American VC funds invested $13.4 billion, continuing their best run since early 2000, before the dotcom bubble burst (see chart). The comeback has fuelled an already heated debate about whether the technology sector is foaming again. It has also attracted competition from a host of alternative forms of financing. Could VC, which has fostered so many disruptive companies, itself be disrupted?
The VC industry has not changed much since it emerged in America in the late 1950s. Most VC partnerships are as low-tech as it gets. They are best understood as brotherhoods (only 6% of partners are female) that invest money in high-risk ventures. Ideally, their cash comes with two even scarcer resources: advice in the form of experienced board members and access to VC firms’...Continue reading
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