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Bits of Destruction Hit the Venture Capital Business

Source: ReadWriteWeb

Nov 06, 2009

Summary

Venture capital (VC) funds like to invest in disruptive change, but what they really love is the stable, change-resistant nature of their own business. That is about to change. "Bits of destruction" spare no one. (The term bits of destruction was coined by Fred Wilson, of Union Square Ventures, a top-tier venture capitalist who has not been afraid to criticize his own industry and who always innovates.)

Risk capital, of which VC is sometimes a part, is critical to innovation, which is critical to healthy economies. Therefore, this does matter to all of us. In this part 1 of a series, we will look at the four big secular waves of change hitting the VC business.

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Two Things to Understand About VC

This post does assume some basic knowledge of how VC funds work. For those who need an ultra-fast primer, here are the two main things you need to know:

VCs are intermediaries.

They take money from Limited Partners (LPs) and invest it in ventures run by entrepreneurs. The principals in the deal are LPs and entrepreneurs, but they never get to meet. Entrepreneurs meet

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