The argument that venture capitalists lost their appetite for risky but potentially important technologies clarifies what’s wrong with venture capital and tells us why half of all funds have provided flat or negative returns for the last decade. It also usefully explains how a collapse in nerve reduced the scope of the companies that got funded: with the exception of Google (which wants to “organize the world’s information and make it universally accessible and useful”), the ambitions of startups founded in the last 15 years do seem derisory compared with those of companies like Intel, Apple, and Microsoft, founded from the 1960s to the late 1970s. (Bill Gates, Microsoft’s founder, promised to “put a computer in every home and on every desktop,” and Apple’s Steve Jobs said he wanted to make the “best computers in the world.”) But the Valley’s explanation conflates all of technology with the technologies that venture capitalists like: traditionally, as Gibney concedes, digital technologies. Even during the years when VCs were most risk-happy, they preferred investments that required little capital and offered an exit within eight to 10 years. The venture capital business has always struggled to invest profitably in technologies, such as biotechnology and energy, whose capital requirements are large and whose development is uncertain and lengthy; and VCs have never funded the development of technologies that are meant to solve big problems and possess no obvious, immediate economic value. The account is a partial explanation that forces us to ask: putting aside the personal-computer revolution, if we once did big things but do so no longer, then what changed?
Posted on: Tue, 18 Mar 2014 04:26:27 +0000
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