Venture investment crisis inevitable

Recently, among venture capitalists, opinions on the imminent crisis of the investment business are gaining momentum. Many of them share their thoughts on what is happening with the industry and its future. So Paul Martino (Paul Martino) believes that in the coming years, the crisis is inevitable and its results for many of the companies involved will be completely disappointing.

Paul is the CEO and one of the founders of Aggregate Knowledge . Previously, CTO and founder of the Tribe Network , acquired by Cisco (one of the co-founders of the Tribe was Mark Pincus from Zynga). He has held business development leadership positions at Intertrust and SkyPilot.

In 2011, when we opened Bullpen Capital , there were about 30 microventure funds and everyone knew them. Today, four years later, there are more than 220 of them and this number is growing.

This situation is reminiscent of the bubble of 2000, when there were more than a thousand of such funds, and currently just under a hundred of them, are still active. The rapidly growing number of venture funds is already the bell of the impending micro venture crisis, which will be a shock for many small funds.

How do we get into it again? An aggressive hunt for "unicorns" leads to venture "big money", which can greatly erode the capital of small funds in investments, which unequivocally assesses the prospects for many of them predictably gloomy. Now the “boom” is still ongoing, and about a hundred more funds are expected to appear this year, and possibly another one next year. It is difficult to predict when this will all end, but the end will certainly be.
')
As a result, many of these micro-venture funds, which do not have many “hits” in their portfolio, necessary to survive, will die a slow death. Different funds may have completely different problems: models of funds may not allow to take a lot of property in invested companies; they may not have the right capital to get the right share; Funds may face structural competition from larger funds.

Today, the amount of money in the sowing stage is potentially four times more than it was five years ago, which creates a tremendous climate for the founders, but this is worrying among investors.

The moment will come when only the deliverable results will matter, not the logos on the wall. When this happens, consolidation will begin, and only truly differentiated firms will survive. Despite this, many are confident that there will be another stage of this bubble and continue to work, but the smartest keep their finger on the pulse.