Whether or not there will be a “shake out” in the venture industry depends on how you define it. If it means that certain formerly prestigious VC firms will close up shop and wind down, then yes. If it means a sharp decline in the number of venture firms, then no.
I look to the hedge fund industry for an analogy of how an alternative asset class has dealt with turmoil. Back in 2006, my original thesis was that the hedge fund industry would begin to resemble a barbell (as measured by assets under management), with a bubbling cauldron of smaller start-up funds focused on alpha at small scale, while a group of large asset management titans with best-in-class compliance, control and reporting environments would reinforce their already strong positions. Firms in the middle would have a hard time, as they lack the resources to compete with the largest firms while having “alpha at scale” problems not felt by the smaller firms. While small firms have jumped to the mega-class and some larger firms have imploded, I believe my thesis has largely been borne out.
To read the full, original article click on this link: Will There Ever Be A Shake-Out In The Venture Capital Industry?
Author: Roger Ehrenberg
