The Venture Company :: Venture primer

Venture Primer

To improve the performance of the venture business and empower a meritocracy, all participants should have a solid understanding of how it functions. From Limited Partners down to Entrepreneurs and Entrepreneurs back up to Limited Partners. No stone left unturned, with marketplace transparency at its bedrock. That is why we provide this brief primer supported by a diagram.

Venture Capitalists are derivatives without assets, trading money from Limited Partners for ideas from Entrepreneurs

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Venture Capital rhetoric

While Venture Capitalists tend to give themselves a little too much credit for the spawning of innovation, the real accolades belong to the Limited Partners who deploy their assets, money and the Entrepreneurs with their assets, groundbreaking innovation.

Venture Capitalists merely identify the match between those two assets in a "marketplace". A highly in-transparent marketplace that operates with the characteristics of a financial cartel and produces sub-prime and mediocre results to Limited Partners.

Venture Capital reality

Regardless of its rhetoric the venture business has produced over the last 10 years no more than 10% IRR and - more pungent - no more than 3% of total moneys invested in public value (by way of IPO), while technology adoption grew 7% (even in the worst of the current recession).

Together with truckloads of commitments from Limited Partners and more highly skilled global entrepreneurs were available than ever before, and more entrepreneurial activities (according to the Kauffman Foundation) than in the last 14 years, and more than 80% of the world population remains void of essential technology applications.

Clearly external factors are not the cause of debilitating Venture performance.

The fix is change

Supply and demand in the venture business are unwavering, yet the governance (Venture Capital) is not doing the job it was employed to do. And we know how to fix it, for the sake of Limited Partners and Entrepreneurs and a vibrant ecosystem of monetizable innovation.