Tag Archives: smallbizlabs.com

Is Venture Capital Gone Forever

Angel investment, Venture Capital, , , ,

I completely agree with Steve King of Small Business Labs, in Is the Venture Capital Industry Broken? He says:

The news here isn’t that the VC industry is broken. This has been actively discussed for years. The news is who’s saying it’s broken.

Which is, in the flap this month, the Kauffman Foundation.

The Kauffman Foundation has long been a close friend of the VC industry.  In addition to investing many millions of dollars with VCs, Kauffman’s mission of supporting entrepreneurs and high growth companies has resulted in them closely collaborating with the VC industry.

The foundation recently published We Have Met the Enemy and He is Us, a blistering critique of venture capital and its role in startups.

Here’s the problem in one simple business line chart (why I like business charts). It shows how the rate of return on venture capital looked great during the first big Internet boom. It’s not a pretty picture.

On the other hand, those low points in the last few years aren’t uncommon, are they? How is your industry doing since the great recession? The chart shows pretty much what Steve summarizes as follows:

Kauffman has many reasons why the industry is broken.  But the quick summary is the industry simply hasn’t performed well.  Only 38% of the funds Kauffman invested in over the last couple of decades beat public market small cap indexes.  This is primary due to the expensive fees VC firms charge.

So does this mean hard times for startups? I doubt it. I see is a shift towards smaller seed rounds and more angel investment as a web and software technology have reduced the capital needed by the average high-end web startup to get from nowhere to proof of concept and validation. In an oversimplified general sense, what took $2.5 million in 1998 takes probably $250,000 today.

Business comes in cycles. Suppose the huge camelback hump in returns in the late 1990s (the boom) were a temporary aberration. The hard times afterwards (the crash) are probably a temporary aberration too.

Steve recommends this story in GigaOm and this one by Fred Wilson of AVC for further reflections on the Kauffman findings.

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Tell the Truth: Where Are You Most Productive?

Personal Productivity, ,

Interesting post today where Steve King at Small Business Labs asks Is The Traditional Office the Least Productive Place to Work? He cites professional research and uses clear logic. But I still think there’s a catch.

survey

He starts with surveys indicating that people who work in coworking locations say they are more productive than working at home.

Which he follows with surveys indicating that people report working at home is more productive than working in company offices.

Which he takes to this conclusion:

This suggests that the least productive place to work is a traditional office.

But wait — coworking is working in an office with people who aren’t part of the same team, right? So working in an office is more productive than working at home, but only if those around you aren’t part of the same team? What’s wrong with this picture? I know and like Steve King and he’s a professional researcher, so it’s not a problem with the research. But could it be …

  1. People often answer surveys with the answer that makes them feel best about themselves and the choices they’ve made, so the home office worker is compelled to claim productivity and the coworking office worker is too, but the traditional office worker isn’t? That might explain the research.
  2. And for that matter, how well does any of us really evaluate our own productivity in different situations? I’m going to claim to be most productive at the place I most like to be.
  3. And productivity by location is an entirely new concept over the last few years. Even in the office, I’m located where my attention is pointing. I might look like I’m in the office in a traditional office mode when I’m on Twitter or instant messenger with my mind entirely out of the office, chatting with friends. And if, in that moment, a survey taker asks me about it, I’m going to say I’m really productive right there.

What do you think?