[p2p-research] big does not necessarily innovate: the current VC model is broken

[Michel Bauwens]

This goes against the argument that 'big concentrations of capital' are
necessarily more innovative

research points to the absolute opposite: the growth of vc sizes has been
detrimental to innovation:

see http://redeye.firstround.com/2009/10/company-math-vs-vc-math.html

note that this research and debates come from within the vc community
itself, not from some wild-eyed social-democratic economist:

in fact, research shows the exact opposite of what was argued here recently:


These "requirements" are a direct result of the mathematical model that
venture funds are optimized for.  And as fund's have gotten larger, their
math has gotten more difficult.  We're now witnessing the conclusion of a
"10 year experiment" where money invested in venture funds has exploded and
fund sizes have more than tripled in size.  A decade ago, 75% of all venture
funds raised were under $100 million.  In 2007, fewer than 25% of all
venture funds raised were under $100M.  And I don't think it's a
co-incidence that *VC performance has fallen off a cliff during this time
period*.  Indeed, we're approaching a point where *the 10-year return in
venture capital is negative*.  Paul Kedrosky recently authored a
paper<http://www.pehub.com/wordpress/wp-content/uploads//usventcap061009202.pdf>for
the Kauffman Foundation which discusses this in great detail and
proposes that the venture industry needs to be "rightsized" -- and suggests
a 50% reduction<http://paul.kedrosky.com/archives/2009/06/right-sizing_ve.html>.


-- 
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http://www.asianforesightinstitute.org/index.php/eng/The-AFI

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