I read the recent blog by Bryce Roberts of O’Reilly AlphaTech Ventures, ‘Are we reaching the Limits of Silicon Valley’s Venture Model?’, in which he questioned the validity of the model. As a Londoner with little connection to The Valley, I realised that it was only one of many hundred recent blogs I have read from Silicon Valley VCs that recognised that the model might be broken. It was refreshing to hear a VC actually take some responsibility for the current situation.
As an outsider, I would be a bit more blunt in my observation. I guess Mattermark could confirm that over the past 20 years, Silicon Valley has consumed by far the highest ever level of resource in human history. This has involved deploying trillions of dollars of capital in addition to concentrating some of the best minds from across the globe. And the result? A taxi app and a bed and breakfast app! Before you shout that I don’t understand. I do realize that Uber could be the basis for driverless cars and that VCs have been clever enough to spot this and pump in capital. However, it is still only a taxi app. and it is quite possible that Tesla or someone new will get there first. In the context of the trillions of capital and concentration of resource, is this really a great result and shouldn’t VCs take full responsibility for failing to invest in more significant opportunities? It’s your bubble guys. No-one else is to blame.
Silicon Valley VCs are hypocritical in their approach to investment. They dictate rules that they don’t observe themselves. They insist that businesses are scaleable but have done nothing to ensure their own businesses are. They still invest in companies an hours drive from the office and employ little in the way of automation. It’s an old story. Turkeys don’t vote for Christmas and VCs don’t wish to put themselves out of a job. They therefore insist that somehow VC is different from other professional services and can’t be automated by platforms or machine learning. They have been guilty of extreme groupthink which has lead to a bubble. Yes, sorry guys, it is a bubble. Just in case you haven’t noticed.
The bubble has been caused because of this groupthink. It’s always the same. It goes back to the tulip bubble and has caused every bubble since. This time around it has been caused by an inability to take true risk on innovation, instead chucking capital into ‘me-too’ marketplaces and ‘safer’ business models. This groupthink happens because of a lack of diversity and the exclusion of wide ranging opinions. There is life outside The Valley in case no-one has noticed.
The rest of the world has some justification in being unsympathetic to The Valley and in particular Sand Hill Road. You have sucked our resources for a few decades and risk spoiling our party too. You have given us the basis of our own startup revolution but any bubble threatens to take us down as well.
The solution? Silicon Valley VCs need to admit that they are myopic in their approach. They can no longer kid themselves that somehow a bunch of bright people can change the world through concentrating capital based on their decisions. The close-knit cluster has had its day. The internet will open it up, as it has the industries VCs invest in. We should strive to reach the point where a founder building a startup in Nairobi will have equal access to resource as the college kid from Stanford. As VCs themselves say, ‘platforms change the world’. This much is true.
Blog by Paul Dowling – Co-Founder of Dreamstake the world’s first tech startup platform to match founders with the most appropriate investors using a unique startup rating system. This allows entrepreneurs and investors to monitor startup progress and inject capital and support when most needed. Startup founders can create profiles on the platform and get direct introductions to investors. We are constantly looking for great early stage tech startups. Investors please contact [email protected]
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