Columbia's Private Equity and Venture Capital Club had their conference last Friday. One of the Venture Capital panels addressed the question "Is the Venture Capital Model Broken?" The panel was comprised of one angel investor, 2 mid-stage venture capital firms and one growth equity firm. Each of the firms invests primarily in IT technology firms such as the internet and software companies that have been discussed in our class.
While the participants disagreed on whether the model is broken, they did agree that the returns from funds originated during the 2001 - 2004 time frames have underperformed. One theory for the lower returns was that the economic downturn cut the exit window prematurely short. While this makes sense, a more interesting alternative was also presented that theorized that the IT technology in general is further along the maturity model and thus the growth equity stage represents and captures the best value.
Lastly, one of the participants, a well respected and famous individual in the vc world, did say that the model is fundamentally broken. The video of the panel with his thoughts will be posted on the Columbia PEVC website.
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