BusinessWeek: Private Equity Trumps Venture Capital by Alex Yoder
Core to the traditional model of Venture Capital (VC) is the assumption that, through investment in a large number of disparate, disruptive technologies, losses can be limited to the initial investment, while gains can be ridden out and, ultimately, the significance of the winners will far outweigh the losers. By their nature, VCs are looking for a big win on some and cutting losses of most. Accordingly, their investment timeframe is typically shorter. The model is built on momentum in the broader market generated by demand for more, newer ways to do things, thus requiring rapid adoption of disruptive technology by consumers (read: willingness to accept risk). This entire cycle, from inception to completion, is based on the broad willingness to assume larger risk positions. From inventor to consumer, demand for risk tends to be higher.
