Do You Really Want An Efficient Venture Capital Model?

There is a meme out there at the moment that the venture capital model is broken.

For the most part it’s an old, but recurring argument – one that’s rolled out whenever there is a shift in the markets, and usually by successive generations (who may not have seen the previous shift).

Could venture capital be done better. Hell yeah. Could it be done more efficiently – I doubt it. Much of the game is played on experience-based gut feel and, unlike in other asset classes, cold-hearted algorithms will not replace this.

Fred Wilson sums things up brilliantly: venture capital is dead, long live venture capital.

Union Square: Open Venture Capital

Fred Wilson of Union Square Ventures, a New York venture firm, has done a great job opening up the financial drivers for VC firms. For other venture guys his comments may be nothing new, but for most entrepreneurs they represent an excellent and somewhat rare insight into the VC black box.

Why is this important? Entrepreneurs can greatly improve their prospects of getting venture funding and of a good relationship with their VC partners post funding by taking the time to understand what motivates a VC.

Read Fred’s posts on the venture model behind Union Square here and here.

The Big Picture: A Vision For Social Media

Imagine a world in which:

every single human being is posting their thoughts and experiences in any number of ways to the Internet.

This is the world that New York-based VC, Fred Wilson, sees within his ‘grand vision‘ for social media.

I applaud Fred’s simplicity. All too often the bigger picture can become obscured by over complication. If we take a look through his firm’s portfolio, we quickly see that he is pulling together a mosaic that will progress us towards achieving his vision:

Twitter – microblogging

Disqus – distributed comments

Oddcast – conversational chararacters

Tumblr – microblogging

Zynga – social gaming

There are a bunch of other companies in the Union Square Ventures portfolio, but these are the stand out ventures that speak to Fred’s simple vision.

Turning this vision into reality will take a lot more determined effort by all of us. Besides supporting the right technology pieces, achieving standards (think what Gears is doing for HTML5), and gaining wide user traction there are regulatory and plumbing issues that will need to be solved.

Currently we see a lot of infighting and an almost continuous bitchmeme, at present this seems to be over whether Friendfeed is better than Twitter. And this within the context of a world in which millions are unable to express themselves, a world in which millions are dying because of oppressive regimes.

It is high time the social media industry rallied together. By focusing on this simple end goal, by setting a target we can come together around, we can achieve so much more.

[Picture courtesy of hellomartin]