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

Michel Bauwens michelsub2004 at gmail.com
Fri Nov 6 22:00:28 CET 2009

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
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>.

Work: http://en.wikipedia.org/wiki/Dhurakij_Pundit_University - Research:
http://www.dpu.ac.th/dpuic/info/Research.html - Think thank:

P2P Foundation: http://p2pfoundation.net  - http://blog.p2pfoundation.net

Connect: http://p2pfoundation.ning.com; Discuss:

Updates: http://del.icio.us/mbauwens; http://friendfeed.com/mbauwens;
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