Nobody Studios Founder and Chief Nobody, Mark S. McNally talks about the venture capital midlife crisis and more in his article in International Business Times. Here’s a preview:
Venture capital is having a midlife crisis.
It had a good thing going for a long time, but in the last decade it has lost some of its identity and direction.
What happens to people at inflection points in their lives?
You start questioning who you are, whether you should be doing something different and if you can possibly keep up with a changing world.
Maybe you quit your job, cut unwanted obligations and chase every shiny object that catches your eye.
I believe venture capital is in a similar kind of moment. The system is no longer functioning as it once did, and it’s got a lot of people asking, “Where do we go from here?”
This is not a dig at VCs. I count many of them as friends and people I highly respect. I talk to them about these issues all the time and they nod their heads eagerly in agreement!
My goal is not to criticize, but to raise awareness so we can all work together to get the system running smoothly again.
What Happened To Venture Capital?
Several unfortunate trends have emerged in the startup world that we need to acknowledge and address, because they’re costing all of us in terms of a loss of checks and balances, overblown valuations and overly risky investments.
The Old VC Checks And Balances Are Gone
New companies used to have to prove themselves to progress through increasing rounds of funding. Series B investors counted on their Series A buddies to hand them deals that had gone through the appropriate hurdles.
That changed after Facebook went public with a $100+ billion valuation, starting a trend of high-valuation IPOs. Wall Street lost its former IPO “pop,” so it went to Silicon Valley and started pumping money into earlier-stage companies, counting on the power of big numbers to pay off.
These days, founders with nothing more than a PowerPoint are getting millions!
The median pre-investment valuation for a Series A round of funding has increased sixfold to $37 million since 2010. Too much money going into startups too soon is ruining companies, and it’s putting VCs in a tough position.