The Money For Bubble 2.0

Venture Capital

from the it's-all-here dept

A few months ago, a banker was telling me that he couldn’t believe how many institutional investors were still pouring money into VC funds – despite the dismal returns out of those VC funds the past few years. While there had been some talk post-bubble about limited partners demanding money back from some of the billion dollar funds, the fact remained: those investors still needed some place to put their “risky” money. The only place they can find in venture capital. So, the money keeps on flowing into VC funds, and since few VCs were doing many deals over the past few years, it’s been adding up to quite a lot. That “overhang” is now helping to fuel what some believe will be Bubble (and Bust) 2.0. Too much money chasing too few good ideas (with too few good people running too few good companies). Still, some of this talk just sounds like VCs who can’t handle the competition, and don’t like that the companies they fund might actually have to go out and prove themselves in the market, instead of having it wrapped up for them. At the same time, as we pointed out recently, some are realizing that bubbles have a long term benefit, even if they can be troublesome to those too closely involved. It really depends on your position and your time frame. If you’re looking for new products, bubbles are probably a good thing. If you’re investing in specific companies, however, it’s much riskier.