Concerned Scientist/Engineer/MBA student

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    • Fri Jul 11th 10:18 AM
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      The 'Crisis' in Venture Capital
      The "big money" fund VC model works well when their are ample opportunities for VC firms to exit their investments. In my opinion there are two many "big money" funds chasing too few deals, which are overinflating valuations and exerting pressure on firms to exit more investments in order to achieve their IRR goals. Large institutional VC funds have become more and more risk averse and funding has continued to move further and further upstream in the development lifecycle. Perhaps this cyclicial economic downtown will force VC firms to rethink their fundraising goals and capital deployment thresholds for investment. One cannot deny the fact there is a current shortage of exit options, but an even greater crisis is the lack of institutional venture capital funding in the seed/pre-seed stages of development. This is why the industry will continue to see more microequity funds spring up in order to help address this funding gap. The alternative exit strategy of merging companies is only stifling innovation. Companies that IPO and exist as standalone entities need to innovate to survive. Simply merging a company upstream into a larger affiliate provides no incentive for companies to innovate. The latter model is flawed and imperils this country's economic development.
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