VC Evolution

During the summer I found a great post from Dave McClure and I would like to share it with you. Dave gives a very interesting perspective over the forces that are shaping the present VC market, observing that the more significant evolutions going on are:

1) A shift towards operators vs. financiers as fund managers, along with growth of non-investment staff

2) The use of technology and scalability in how investments are made via tools, data, teams, and process

3) The emergence of branded guilds as dominant entities/communities that attract the lion’s share of new deals and talent

The three shifts are related and can be summed up simply as: Geeks are Taking Over Venture Capital. Dave also goes in to the details  of the names leading the change:

  • Full Service VCs: Andreessen Horowitz, which has invested considerable resources in growing its in-house recruiting and business development functions, Rocket InternetGoogle Venturesspecialized in several areas including design and data analysis, and  500 Startups focused on “Design, Data, & Distribution”. In particular some of the important  action taken by Dave’s fund are: 1) recruited hundreds of mentors around the world with operational expertise in these areas, 2) built close relationships with major internet platform companies like Google, Facebook, Amazon, Twitter, LinkedIn, YouTube, PayPal, and others, and 3)  created conferences on focused startup topics like DesignMarketing, and Monetization
  • Platforms: Venture Hacks, and Angellist started by Naval Ravikant, and Babak Nivi. And now Gust, CapLinked, Trusted Insight, Second Market, and many others now emerging as a result of the JOBS Act and financial services innovation
  • Communities of founders and geeks: the best example in this group is YC, started in 2005 by Paul Graham. YC has been able to create a virtuous circle of founders, that have gone through the startup building process, and now are helping new founders, with  operation, financial support, and are also helping YC to improve the selection process

A consequence of these new trends is that some US venture firms are starting to look for new areas of expansion. In an era where people are never been so connected to each other, is time for the VC market to scale out of the Silicon Valley.

In addition to Dave’s great article I’m adding 2 recent articles where the authors observe that maybe is also time for the VC market to be more ambitious in terms of economics transparency and types of technologies funded.

Do you agree with Dave’s perspective? Where you think is VC market heading?

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